Pennsylvania Employment Lawyer & Attorney : Russell Krafft & Gruber Law Firm : Lancaster, York, Harrisburg

The Pennsylvania Employment Law Blog has experienced some change recently. Those who read our blog regularly know most of our content has been generated by Michael Moore. Mike has left Russell, Krafft & Gruber, LLP to pursue a position with another law firm. We are grateful for the time and effort Mike has put into our blog and we would like to continue to uphold the standard he has set for our readers. We wish Mike well but as they say, "the show must go on."

Our readers can look forward to content by Christina L. Hausner and Roxanne C. Garner. We also look forward to utilizing the expertise of other lawyers in our firm to help expand the information contained in our blog. For example, Matthew A. Grosh made his first appearance last week with his post Payroll Taxes for a Single Member LLC.

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So you finally did the right thing.   You converted your sole proprietorship to a single member Limited Liability Company so that you and your personal assets are protected from the liabilities of the business. Now you can sleep more soundly at night because your LLC is busy keeping your house, bed and pillow safe from evil creditors, right? If your LLC has employees, the Internal Revenue Service would say "not so fast - what about payroll taxes?"

Employers are generally obligated to withhold FICA and income taxes, the "payroll taxes", from an employee's wages and pass on those amounts to the federal government. Stiff penalties can result if those obligations are not met. Still, if your LLC is the employer, shouldn't those penalties apply to the LLC and not you personally? The IRS disagrees.

When you created your LLC, you were required to file a form with the IRS to obtain a tax identification number. To complete the form, you had to "check-the-box" to choose if the LLC will be taxed as a corporation, partnership or as a disregarded entity. Because you didn't want to be double-taxed on the business and personal level, you didn't choose to be taxed as a corporation, and because you are a single member LLC, you couldn't choose to be taxed as a partnership because there needs to be more than one partner. As a result, your single member LLC is categorized by the IRS as a disregarded entity for federal tax purposes.

This is where personal liability comes in. Through Notice 99-6, the IRS decided to hold owners of single member LLCs personally liable for payroll taxes. The rationale was that because single member LLCs are disregarded for federal tax purposes, they are ignored and the owner is the "employer" for federal tax purposes. While state law normally provides that LLC owners are not to be held personally responsible for their LLC's liabilities, the IRS trumps those laws with the Supremacy Clause of Article VI of the United States Constitution.

However, there is some light at the end of the tunnel, but it's a good-news/bad-news scenarios. The good news is that on August 16, 2007, the IRS finalized new regulations stating, among other things, that they will no longer ignore single members LLCs for employment tax purposes. As a result, owners of single member LLCs will not be treated as employers for federal tax purposes. The bad news comes in two parts. First, the new regulations only begin to apply to employment taxes effective for periods beginning on or after January 1, 2009, so relief is not immediate. Second, owners of single member LLCs are still personally liable for the "Responsible Person Penalty" under Section 6672 of the Internal Revenue Code.

The "Responsible Person Penalty", also known as "trust-fund recovery penalty" and the "100-percent penalty" generally penalizes anyone who willfully fails to collect and pay over employee income tax and the employee portion of FICA taxes. The specific penalty is equal to the amount of tax not withheld and paid over. The liability of the "responsible party" is independent of the LLC's liability, and owners of single member LLCs are generally treated as "responsible parties." 

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A lawsuit filed by the Greek Island of Lesbos wants to restrict the use of the word Lesbian. The island claims that Lesbians are the citizens of Lesbos and has no connection to the sexual orientation of a person. One plaintiff in the lawsuit claims that use of the word lesbian by the gay community is an insult to the identity of the inhabitants of Lesbos. While Andrea Gilbert, spokesperson for Athens Pride 2008 and a member of OLKE, told PinkNews.co.uk, "The claim is based in serious prejudice and hatred."

This is just one example of controversy surrounding issues of sexual orientation. On a local level, a recent poll in the Central Penn Business Journal revisited the House Bill 1400 and asked readers: Should Pennsylvania pass House Bill 1400, which would prohibit discrimination on the basis of sexual orientation and gender identity? Without providing the number of replies to the poll, the Journal reported that the reader response was 70% in favor and 30% opposed to passing the Bill. The reasoning and written feedback by readers in support of their position was widely varied.

House Bill 1400 proposes to expand the protections already offered under the Pennsylvania Human Relations Commission. The Pennsylvania Human Relations Act prohibits certain practices of discrimination because of race, color, religious creed, ancestry, age, national origin, handicap or disability and use of a support animal. House Bill 1400 proposes to include sexual orientation, gender identity or expression to the existing list.

This Bill defines "sexual orientation" as actual or perceived heterosexuality, homosexuality or bisexuality. "Gender identity or expression" is defined as actual or perceived identity, appearance, behavior, expression or physical characteristics whether or not associated with an individual's assigned sex at birth.

The Bill was co-sponsored by a record 70 members of the House, and in April 2007, the Senate sponsored a similar bill (SB761) with 22 co-sponsors. The Senate Bill remains in the Senate Judiciary Committee. The House Bill also counts among its sponsors Steve Glassman, Chair of the Pennsylvania Human Relations Commission.

Thirteen Pennsylvania municipalities have already enacted laws pointed at protections based on sexual orientation, gender identity or expression. House Bill 1400 was introduced on June 13, 2007, the matter was referred to the Committee on State Government on June 18, 2007, and the Bill continues to produce revolving rumblings from diametrically opposed factions.

Related Links on House Bill 1400:

Equality Advocates of Pennsylvania

Michael Mahler's Blog

American Family Association of Pennsylvania

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The Family and Medical Leave Act (FMLA) turns 15 this year and workers’ rights advocates, the Bush Administration and the Labor Department are weighing in on proposed changes to the law. According to an April 24 article in the Washington Post,

“...workers would have to tell their bosses in advance when they take nonemergency leave, instead of being able to wait until two days after they left. They would have to undergo "fitness-for-duty" evaluations if they took intermittent leave for medical reasons and wanted to return to physically demanding jobs. To prove that they had a "serious health condition," they would have to visit a health-care provider at least twice within a month of falling ill. What's more, employers would have the right to contact health-care providers who authorized leave.”

As I reviewed these proposals it occured to me that some of these changes may serve to blur the distinction between the FMLA and the Americans with Disabilities Act of 1990 (ADA). It is not uncommon for employees to bring claims under both the FMLA and ADA. Avoid getting tripped up in the similarities of FMLA and ADA by understanding the distinctions between the two laws.

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