Tag Archives: training

Tax Bill Cuts Deduction for Confidential Sexual Harassment & Abuse Settlements

Contributed by Noah A. Frank and Kelly Haab-Tallitsch, January 3, 2018

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law as P.L. 115-97.  Hidden about halfway into the law, in Section 13307, is an amendment to the tax code on itemized deductions for individuals and corporations. Generally, current law permits employers to treat the costs of settlement payments and related attorney’s fees as a tax deductible business expense. However, the recent amendment eliminates the deduction in certain situations, stating:

No deduction shall be allowed under this chapter for — (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment. (26 USC 162(q)).

This change applies to any payments made after December 22, 2017, including payments for settlements that occurred prior to this date.

The result of this amendment is that business must weigh their desires to (a) deduct the settlement as a business expense, versus (b) keep allegations and settlement of sexual harassment/abuse claims confidential. Employers may have been willing to pay more for an agreement with a non-disclosure provision, but the inability to deduct the settlement may be changing this calculus.

Interestingly, the amendment applies only to sexual harassment/abuse related settlements in for-profit businesses – it does not impact settlements:

  • Related to race, religion, age, disability, other civil rights-type causes of action, employee benefits claims, breach of contract, or other employment related claims.
  • For tax exempt enterprises (that do not have such deductions to take), or
  • For government agencies (that do not pay federal taxes).

The IRS and courts will be left to clarify the nature and extent of this amendment, including (i) what “related to” means; (ii) whether part of a settlement can be confidential if there are multiple causes of action (e.g., sex and age harassment); (iii) whether attorney’s fees may be apportioned between investigation, evaluation, multiple claims, etc. to allow for a deduction if the final result is a confidential, sexual harassment related settlement agreement.

What this means for your business:

Of course, the best position to be in is to prevent claims in the first place. Seek the advice of employment counsel for effective preventative measures. At a minimum, employers must conduct regular antidiscrimination/anti-sexual and other harassment training (bullying, too, in some states), and ensure that employment policies, reporting procedures and the like remain up to date.

But if there is a claim of sexual harassment and/or abuse for which a business decides to settle, the business will be left to determine whether a tax deduction or confidential settlement is more important, and how to handle related issues.

While Summer is Fleeting, Lawsuits are Not….Train Seasonal Employees

Contributed by Julie Proscia

Many employers forget to train summer employees on their company’s workplace policies, procedures and safety rules. Unfortunately, just because the employee is “seasonal” does not mean that you are free from liability. Employers are just as liable for the actions of summer employees that occur in the workplace as they are for full-time regular employees. It is not too late to train your summer help!

Summer employees are more apt than a full-time employee to gloss over the employee handbook. While it is important to have policy and rule information in the handbook, it is always good to provide in-person training to new hires, including summer or seasonal help. It is uncomfortable at best to argue to a judge that a sixteen year old employee should have  known, based on the 100-page handbook, who to call when their supervisor got grabby…awkward.

A summer job is a right of passage for young adults. Responsibility is a good thing, however, as with every good thing there are certain perils that emerge. Because a summer job is frequently the first time that a young adult has worked outside of the home, the young adult does not have the years of experience behind him or her to understand what is appropriate behavior in the work place. What is “okay” on a Friday night with friends is not “okay” at the office. As such, train employees on what behavior they should and should not be engaging in, as well as what type of behavior is unacceptable from others. Sexual harassment and discrimination training are pivotal in establishing boundaries of appropriate behavior and the proper channels for inquiring about potentially inappropriate behavior. 

Just as harassment and discrimination training are important for the morale and health of the team, safety training is important for the physical well being of all employees. Frequently employers neglect to train seasonal employees on equipment and safety rules. The oversight is almost never intentional; rather it is a matter of time constraints and/or the belief that the seasonal employee will be there too short of a time to use the equipment. However, a few minutes, much less a few months on the job, is more than enough time for an accident to occur. Train all employees, including your seasonal staff, on the safety rules of the department and make very clear the areas that are dangerous and explain the nature of the danger. Reiterate that all employees have to follow all of the organization’s safety procedures, regardless of how cumbersome they may appear, and that all employees must report any injury or accident immediately.

Time moves quick, one minute it is Memorial Day and the next it will be the Fourth of July – training summer help is the last thing that an employer has time for…well, no, the last thing would be the law suit that emerges from the injury that occurred when seasonal employees are not properly trained. Take the hour and save yourself some time and heartache and expense later.