Municipal Matters Newsletter – October 2016

October 2016

Your friends in the Bernstein Shur’s Municipal & Governmental Services Practice Group are pleased to present Municipal Matters to offer practical updates on legal issues relevant to your work and interests. Take a quick break in this busy fall season to keep current on the latest municipal legal issues.

In this edition, you will learn about updates to the new Fair Labor Standards Act, the upcoming deadline on paper streets, and a case law update involving sewer connection surcharges in a bankruptcy proceeding.

Changes Made to the Fair Labor Standards Act

By Ann Freeman

Even though this gorgeous fall weather makes it seem far away, December 1, 2016 is really just around the corner.  By that date, you should not only have your plow trucks tuned up and ready to go, but also have reviewed your employment policies and classifications to ensure they are in compliance with the new Fair Labor Standards Act changes, which take effect on December 1, 2016.

Based upon the updated Department of Labor regulations that were released earlier this year, the minimum annual salary for exempt employees will be $47,476 ($913 per week), as of December 1, 2016.  This minimum annual salary for exempt employees will be subject to adjustment every three years to make it consistent with the 40th percentile of the earnings of full-time salaried workers in the lowest-wage census region, which is currently the south.  Although the DOL did not make any changes to the “duties tests” for exempt employees, as they previously suggested they might, they have indicated that they will be paying close attention to the duties tests in future enforcement actions.  For more information about new regulations, visit  the DOL website.

Why this Matters

The DOL has in the past reported that it finds some sort of wage and hour violation in 78% of the investigations it conducts. Many of those violations involved the misclassification of employees who should have received overtime as “exempt” employees and the resulting failure to pay those employees their overtime pay. The financial impact of such misclassifications on employers can be enormous. The new regulations will cause everyone, including your employees, to focus on the issue of overtime. It is expected that there will be an increase in the number of claims that are filed by disgruntled employees and the number of investigations that are launched by the DOL.

To Do List

If you have not done so already, you should immediately take these next steps:

• Review all of your employee classifications (“salaried” employees are not always “exempt” employees!).
• Determine what impact the new regulations may have on you.
• Develop a plan to minimize that impact.

It also would be prudent to conduct a full audit of your employee classification system focusing on your exempt employees, your policies and practices for record keeping and overtime calculation for your non-exempt employees, and your use of independent contractors. We can assist you with that process.

Learn more about our Labor and Employment Practice Group or contact us with questions.

Paper Streets: One Year Left

By Phil Saucier

ME’s Paper Streets Act was enacted in 1987, and held that if a municipality had not accepted a “paper street” or unaccepted ways by September 29, 1997, the paper street would be deemed vacated. The act allowed municipalities, however, to prevent automatic vacation by not only filing an initial 20-year extension listing the affected paper streets until 2017, but also filing an option for a second 20-year extension until 2037.

The initial 20-year period that paper streets have been accepted from the “deemed vacated” provisions in ME law will expire within one year of September 29, 2016, including any extensions that were filed by municipalities in 1997. For municipalities that have paper streets that may be subject to the deemed vacated provisions, proper planning, review, and decision-making about whether to file an extension or allow vacation can be a technical, labor-intensive process. With a little over a year to go, now is the time to start.

If you have questions regarding filing a notice of extension, proper vacation procedures, or paper streets in general, please contact Phil Saucier at 207 228-7160 or psaucier@bernsteinshur.com.

In re Vista: Connection Surcharges & Bankruptcy

By Zack Brandwein

Will a “connection surcharge” against a sewer user survive a bankruptcy sale? That was the question a federal bankruptcy court tackled in a case that may have ramifications for ME sewer and water districts. In In re Vista Marketing Group Ltd. a sewer district assessed had substantial unpaid use fees against a gas station owner.  Upon receiving notice of the gas station owner’s bankruptcy, the district essentially wrote off these unpaid fees. After the gas station was sold out of bankruptcy, the district attempted to collect on the unpaid amounts through charging the new owner a connection surcharge. The district argued that the surcharge was not discharged by the bankruptcy sale because it was an “interest that ran with the land,” and because it was a tax that the court could not prevent it from collecting.

The court found otherwise on both arguments and prevented the district from collecting its substantial surcharge from the purchaser. The court found the fact that the district did not object to the debtor’s motions to sell the property free and clear and that despite notice, the district did not attend a hearing on the property sale either.  Understanding why the court denied the district from collecting, and strategizing to avoid similar outcomes is important to sewer and water districts who have major commercial users at risk of discharging their payment obligations in bankruptcy. Bernstein Shur will be presenting on this topic at the 36th Annual ME Rural Water Association Conference at the Cross Insurance Center in Bangor, ME on December 6th.

Upcoming Events

Mary Costigan and Wendy Paradis are speaking at the ME Municipal Association Convention on dangerous buildings and tax acquired property in Bangor on October 6.

Phil Saucier is speaking at the American Bar Association’s Section of Public Contracting Law Fall Educational Program and Council Meeting with the University of Maine School of Law on emerging issues in municipal law in Portland on October 6.

Shana Mueller will be presenting as part of a National Business Institute education/training program on Local Government Law in Portland on December 15.

Lee Bragg, Zack Brandwein, Mary Costigan, Shana Mueller and Matt Tarasevich will be presenting at the ME Rural Water Association’s Annual Conference in Bangor on December 6.