REPORT FROM COUNSEL

WINTER 2005/2006 ISSUE

CGA PROFESSIONAL CENTER PROMOTES GROWTH

Since moving into the CGA Professional Center in January, 2005, CGA Law Firm has been able to enjoy significant growth, originally impeded by a lack of space. Five new associates have joined the firm in the past year, making this one of the most successful periods of growth the firm has experienced since its earliest beginnings. Richard Konkel joined the firm in February and has concentrated his practice in family law and estate planning and administration. Benjamin Pratt joined in June and concentrates in education/school law and employment law. And in the past quarter three new associates have also joined our growing team; CGA Law Firm welcomes:

Margaret Walsh Driscoll joined the firm in August, 2005. Mieke graduated from Dickinson School of Law in May, 2005 where she also earned a certificate in Alternative Dispute Resolution & Advocacy. Also, she was a member of the Appellate Moot Court Board, the Alternative Dispute Resolution Society, and was a Miller Center for Public Interest Advocate. She earned her undergraduate degree from the University of Notre Dame, where she graduated cum laude in 1998 and earned three varsity letters for cross country. Mieke is also a staff instructor at the YMCA where she teaches a cycling class.

Christian J. Dabb joined the firm in October, 2005. He is an experienced litigator, concentrating on civil litigation and employment issues. Prior to going into private practice, Christian developed his litigation experience working in the District Attorney's Office, both as an Assistant DA and a Senior Deputy Prosecutor overseeing the STOP Unit charged with prosecuting violent crimes. He is on the Board of Directors for the Victims Assistance Center. Christian graduated from Bucknell University in 1994 and completed his J.D. at Tulane University in 1998.

Michélle Pokrifka joined the firm in November, 2005. She focuses her practice on family law. Previously, she worked for the York County Domestic Relations Office. She sits on the Board of Directors for the Victims Assistance Center and several committees at Memorial Hospital. In addition to her family law practice, Michélle also serves her clients' needs in municipal, real estate, business and estate planning matters. She graduated for Georgian Court College, cum laude, in 1988 and completed her J.D. program at Widener University in 1992.

FLSA OVERTIME UPDATE

By Anne E. Zerbe

Unless an employee falls within an exempt category of workers, the federal Fair Labor Standards Act (FLSA) requires the employer to pay the employee overtime at a rate of one and one-half times the regular rate of pay, for hours worked in excess of 40 hours per week. To be exempt is to be ineligible for overtime. The exemption commonly called the "white collar" exemption is for professional employees.

Federal regulations in place since August 2004 have simplified the test for determining which employees come within the white collar exemption. An employee is a professional if each of the following elements is present:

(1) The employee has the primary duty of performing work requiring advanced knowledge, that is, work that is mainly intellectual in nature and which includes the consistent exercise of discretion and judgment;

(2) The employee has advanced knowledge in a field of science or learning; and

(3) The employee has advanced knowledge that is customarily acquired by a prolonged course of specialized intellectual instruction.

Recent Cases

In one recent case, a company refused to pay overtime to some of its employees who were licensed pharmacists. Much to the dismay of the employees, the company's reliance on the white collar exemption held up in federal court. All of the parties agreed that the second and third parts of the exemption test were met by the pharmacists, leaving a dispute only over whether the pharmacists' work required the consistent exercise of discretion and judgment. The court found that this element also was present.

The pharmacists, with little supervision, routinely made discretionary decisions about dispensing prescribed drugs to patients, and sometimes the process required consultation with the physicians who prescribed the drugs. The only factor suggesting a lack of discretion was the fact that the employees, as a rule, were expected to follow standard operating procedures from their employer. But this argument by the pharmacists was undermined by the fact that they regularly were asked to consult with the employer about the standard procedures and to review them for any suggested improvements. The pharmacists also had the employer's blessing to stray from the procedures if, in their judgment, it was necessary for a patient's health.

Assuming an employee is eligible for overtime pay, questions can arise as to what comprises an employee's regular rate of pay for purposes of calculating the overtime obligation. It is not always as simple as using an employee's base hourly rate or salary. For example, in another recent case, a federal court ruled that the regular pay of municipal firefighters included payments made to them under a city's sick leave buy-back program. A firefighter who had built up a certain amount of sick leave had the right to "sell" it back to the city for a lump-sum payment. Whenever this happened, the employer effectively was paying the firefighters a bonus for good attendance and for work they had already done. It was as much a part of the firefighters' regular compensation as their base hourly wage, so it had to be taken into account in calculating overtime wages.

Anne is the chair of CGA Law Firm's Employment and Labor Law practice. She regularly advises clients on such issues and encourages a preventative approach to employment matters. Please direct any questions or comments to her at 717.848.4900 ext. 102.

FIRM UPDATES

Events and Speaking Engagements

Lawrence V. Young presented a number of seminars on the implication of the new bankruptcy law to the York County Tax Collectors Association, the Pennsylvania Bar Institute and the York County Paralegal Association. Mr. Young is the only Board Certified Consumer Bankruptcy Specialist in York County.

Peter R. Andrews spoke at the Seminar on Tax Free Industrial Development Bond issuance sponsored by the York County Industrial Development Authority on October 5, 2005 on the subject of qualified industrial development projects. The audience was composed of York area bankers and CPAs.

Anne E. Zerbe presented a number of seminars recently. She was a Guest Speaker at Penn State York on the topic of Legal Issues in the Workplace. She spoke to the Medical Office Managers Association of Hanover on Employment Issues for Health Care Providers. She presented an Employment Law Update to the York Society of Human Resource Managers. Additionally, she conducted multiple sessions of supervisor and employee anti-harassment training for a number of York County employers.

Richard K. Konkel presented a seminar to the National Business Institute in Harrisburg, PA called, "A Step-By-Step Approach to Understanding PA Divorce Law."

Andrew M. Paxton presented to the York Chapter of SCORE on the topic of proper set-up of business enitities and avoiding common mistakes and future litigation. SCORE is a national organization of retired executives that provide counseling services to small businesses.

Christian J. Dabb co-presented a number of seminars for the Pennsylvania Coalition Against Rape entitled, "Legal updates on Sexual Assault and Rape Myths for District Justices."

Honors, Awards and Appointments

Joseph C. Adams was successful in his bid for Judge on the York County Court of Common Pleas in the November elections. He will begin serving his term in January, 2006. Though he will be greatly missed at CGA Law Firm, we know his experience and character will serve the people of York well and we wish him every success.

Frank H. Countess was one of four judges on the Central Penn Business Journal's 40 Under 40 Fall Event honoring young entrepreneurs. Frank was a recipient of the 40 Under 40 Award himself in 2002.

Margaret Walsh Driscoll was appointed to the Board of Directors for the Mental Health Association of York and Adams Counties.

Anne E. Zerbe successfully litigated a case of first impression regarding restrictive covenants in the healthcare profession. Her opinion was later published in a number of professional journals.

Jon C. Countess was appointed solicitor to the York County Recorder of Deeds.

Michelle Pokrifka was appointed as solicitor to Glen Rock Borough.

Timothy J. Bupp was appointed as solicitor to Loganville Borough.

Professional Development

Timothy J. Bupp, Caryann M. Sculley, and Richard K. Konkel were admitted to practice before the U.S. Supreme Court in November.

Tina H. Ness attended a seminar detailing new issues regarding Mechanics' Liens and Confession of Judgement.

Jeffrey L. Rehmeyer and Benjamin L. Pratt attended the PA School Board Solicitors Fall Update in Hershey, PA.

For more information, please contact Nikki A. Rovito, Director of Marketing at (717) 848-4900 ext. 139.

KNOW YOUR NEIGHBORS

The Pennsylvania State Police operate a Megan's Law website at:

www.pameganslaw.state.pa.us

You can enter your county or zip code in the website's search feature and view the names and photographs of individuals who reside in your area who are convicted sex offenders subject to Megan's Law registration.

The website also explains the history of Megan's Law. The dangers to children from sexual offenders are of ever-increasing national concern. Pennsylvania's Megan's Law website can help you and your children know more about potential dangers in your own neighborhood.

AN INTRODUCTION TO COLLEGE SAVINGS PLANS

The steady rise in the cost of attending college may have become one of those few absolute certainties in life, along with death and taxes. Tuition and fees for public and private institutions alike can seem overwhelming, especially if parents have done little financial preparation ahead of time. Some solace can be taken in the fact that there is a wide variety of approaches for saving for college. For parents who have some foresight, the use of a plan that is tailored to their circumstances can at least soften the blow of financing a college education.

529 College Savings Plans

With mutual funds as the primary investment option, state 529 plans are best for those looking to contribute substantial amounts to a college fund. Earnings are tax-free, as are later withdrawals for qualified education costs. These plans generally are in the parents' names, which means that the plans have minimal effects on the family's eligibility for financial aid. The drawbacks are limited investment options and relatively high fees.

529 Prepaid Plans

A prepaid tuition plan makes the most sense for families that are reasonably certain that their child will attend one of the schools in a state's plan, and that are satisfied with a rate of return that equals the inflation rate for the costs of schools in the plan. Under prepaid tuition plans, you are buying future tuition at a state's public colleges at today's prices. On the downside, payouts from these plans reduce eligibility for financial aid on a dollar-for-dollar basis. In addition, states dealing with especially tight budgets have been raising the costs of participating, and in some cases have been temporarily closing off enrollment.

For a group of approximately 250 private colleges, there are independent 529 plans. They work like state prepaid plans, including the dollar-for-dollar reduction in financial aid eligibility when funds are distributed. Money from such a plan can be rolled over to a state 529 savings plan or a state prepaid plan without penalty.

Coverdell Education Savings Accounts

If you want the most variety in investment options and lower fees, a Coverdell account may make sense. Joint income tax filers with adjusted gross incomes of up to $220,000 can save up to $2,000 a year, tax-free, for education expenses. No plan is without its weaknesses, and for the Coverdell accounts it is the adverse effect on financial aid eligibility because the accounts are in the student's name, not the parents' names.

Custodial Accounts

A custodial account is appropriate for those who want to transfer assets, including securities, to a young beneficiary in order to reduce taxes. However, be forewarned that the beneficiary will have control over the account upon reaching the age of majority. Funds can be taken from the account at any time and for any purpose benefiting the child, not just educational expenses. Withdrawals are taxed at the child's rate.

Savings Bonds

If the 529 plans are the showhorses of financing in higher education, savings bonds are the workhorses. Returns on savings bonds are usually modest, but the investment could not be safer. Savings bonds may be especially attractive to middle- and low-income households that fall within certain income restrictions. For Series EE bonds issued after 1989, and all Series I bonds, at least some of the interest earned on the bonds is tax-free if used for higher education expenses.

These approaches to saving for college are not exhaustive, and the descriptions here only scratch the surface. Professional advice can help a family craft a plan that is best suited to its needs and priorities.

DO YOU HAVE RESIDENCES IN MORE THAN ONE STATE?

By Timothy J. Bupp

If you spend time in any given year in residences in different states, somewhere in your travels you also may want to schedule an appointment with your professional tax advisor. One topic for discussion would be the legal concept of domicile.

In simplest terms, a person's domicile is the place where he or she intends to return after leaving another location. The special significance of where a domicile is established is in tax planning. An individual's domicile determines which state's income, gift, and estate tax laws apply, and in which state or states a person, trust, or estate is taxable. The rules that will govern the administration of an estate also depend on the state of domicile. Inadequate attention to establishing and documenting an intended state of domicile could mean that even the best-laid estate plan might go awry because the laws of a different state could apply. The end result could be an unexpected tax burden that otherwise could have been avoided.

Although the basic definition of "domicile" is simple enough, many different criteria may be taken into account in pinpointing a state of domicile. No one factor is controlling, and the states differ in the criteria that they use. The address included in a person's will may be a good indicator of the person's domicile. A nonexhaustive list of other factors would take into account in what state a person votes, registers an automobile, has a driver's license, keeps important personal property, pays state and local income and personal property taxes, last applied for a passport, and keeps the bulk of his or her money. Contrary to the old saying, you can go home again, and it is a good idea to make sure that you and the government agree on where that home is.

Tim is a member of the Tax, Business and Estate Planning practices. He regularly advises clients on such matters. Tim earned his LL.M. in Taxation from Temple University. Please direct any questions or comments to him at 717.848.4900 ext. 121.