Archive for the 'Business Law' Category

Red Team vs. Blue Team: Minimum Wage

Today’s article is a special two for one: two of our writers debate the merits of raising the minimum wage. Who do you think makes the most convincing argument?

Should the Federal Minimum Wage Rise?

by Alexis Watts

Recently, presidential candidates have discussed raising the Federal Minimum Wage, which is currently set at $7.25 an hour. Bernie Sanders advocates a minimum wage of $15 an hour, which is more than double the figure. Hillary Clinton argues that wages should gradually be raised to $12 an hour. Conservative candidates do not generally favor such high wage hikes, and this may be an issue for debate in the 2016 election.

The US currently has one of the lowest minimum wages of any high-income country. It has had a higher minimum wage in the past. In 1968, the minimum wage was $1.60, the equivalent of $10.34 an hour in current dollars. The US has also had lower minimum wages; in 1938, for example, the minimum wage was 25 cents, the equivalent of only $3.98 today.

So, should the national minimum wage be raised?

What is the Federal Minimum Wage, and who benefits from it?

The Federal Minimum Wage was originally part of the Fair Labor Standards Act (FLSA), passed in 1937. This act also regulated how many hours employees could work without receiving overtime pay. The federal government is authorized to set a minimum wage and make hours regulations because the Constitution gives it broad power to regulate many aspects of commerce in the United States. FLSA benefits many low-wage workers who are paid by the hour. While some characterize these workers as teenagers with no real responsibilities, statistics show that 89% of those who would benefit from a national raise are workers over the age of 20.  Minimum Wage

There are some exceptions to FLSA. Employees who receive tips or work on commission (such as waiters) receive a lower base wage, but employers must make up the difference if their total pay falls below a certain hourly minimum. Domestic and agricultural workers do not benefit from these minimum wage protections. One notable criticism of FLSA is that it leaves out these important workers, who are often from minority groups.

What about State and Local Minimum Wages?

29 states have raised their minimum wage to above $7.25 an hour. Some cities have raised their wages even higher. Berkeley, CA is now contemplating a minimum of $19 an hour. Seattle has already raised its minimum wage to $15 an hour. These high local wages may reflect unique economic conditions. In both the Bay Area and Seattle, the price of rent has been driven higher by an influx of highly paid technology industry employees. However, these cities still need hourly workers like clerks an baristas; they are often the backbone of a rich local cultural scene.

The Minimum Wage Must Properly Reflect Current Economic Needs

In the United States, the minimum wage makes it difficult to afford shelter and other essentials. Purchasing power varies widely from place to place; a dollar buys more housing, food, and other essentials in many rural areas than it would in a major city. However, the National Low-Income Housing Coalition recently issued a study showing that these regional differences still do not allow any minimum wage workers much breathing room. Most financial planners suggest that no more than 30% of a worker’s income go to housing. However, there is no state in which average minimum-wage workers can secure housing using only that portion of their income. An average two-bedroom apartment for a small family would now require a full-time wage of $12.65 an hour in Arkansas and a whopping $28.04 in Washington, D.C. Many low-wage workers have little ability to save or to buy non-essential goods.

While some argue that the minimum wage causes inflation, the reality is that inflation also devalues the minimum wage. The minimum wage does not automatically increase as the price of basic food or housing rises, leaving many individuals who provide important services without the means to earn a living.

If the Minimum Wage is Raised Gradually, it Will Not Increase Unemployment

When the minimum wage is raised, it redistributes some of the country’s entire income from the top (where it is often saved or invested) to the bottom (where it is often spent). Households in the bottom 20% make their income mostly through wages and employment-based tax incentives, and they experience an increase in discretionary income when wages rise. The money these households spend flows into the economy and may allow employers to create new jobs, rather than decrease their staff.

A Department of Labor survey recently showed that 3 out of 5 small business owners support a gradual increase in the minimum wage. This type of an increase would make it possible for business to operate without laying off employees. Department of Labor data also shows that there is no negative effect on unemployment when the minimum wage is raised.

Experiments like the minimum wage hike in Seattle may help to clarify what happens to a local economy when much higher wages are introduced. If the wage increase creates jobs and helps to eliminate poverty, it may prove detractors wrong.


Arguments Against Raising the Federal Minimum Wage

by Sarah K. Lee

Is raising the federal minimum wage all it’s cracked up to be? Although recent presidential candidates have taken a stance for raising the minimum wage in support of more sustainable wages for low-income earners, there are a number of economists who widely disagree. Many economists claim that raising the minimum wage would in fact be detrimental to the economy and the low-income earners such advocates seek to protect. Economists predict raising the minimum wage would result in a steep decline in minimum wage jobs, higher consumer prices for goods, and less entry-level positions for less experienced workers—all of which would negatively impact low-income communities the most.

Increased Unemployment

A number of studies have shown raising the minimum wage results in a loss of jobs due to employers being unable to hire as many minimum wage employees as they would have been able to at lower wages. The Congressional Budget Office predicts a rise in minimum wage from $7.25 to $10.10 would result in a loss of 500,000 jobs across the nation. Supporting that prediction, a study showed the incremental minimum wage increases between 2006 and 2012 resulted in an overall decrease in the national employment-population ratio by 0.7 percent, equating to a loss of

conceptual sign with words minimum wage increase  ahead over blue sky

approximately 1.4 million jobs. Economists argue inflating the minimum wage would actually do more harm than help to low-income communities, those who are purportedly meant to benefit from such a raise.

Higher Consumer Prices

Economists argue hiking the minimum wage could drive businesses to charge more for goods in order to make up for the additional labor costs. This would be particularly detrimental in low-cost, low-wage states where such an increase in prices would affect poor consumers the most. Again, economists argue such an outcome would negatively impact the very target group a raise in the minimum wage seeks to help.

Fewer Positions for Entry-Level Workers

A higher minimum wage could also result in more experienced workers feeling less compelled to move on to higher level positions because the pay at a minimum wage job is adequate. Such a scenario would be bad for less experienced workers, shutting them out from potential entry-level positions. These less experienced workers are primarily made up of teenagers, immigrants, and low-income populations—many who lack the skills to obtain any other type of employment and rely on minimum wage positions to help escalate them to higher paying positions. Economists argue a higher minimum wage could throw off the balance of employment dynamics.

Alternative to Raising the Minimum Wage? Raising the Earned Income Tax Credit (EITC)

Many who oppose raising the minimum wage are not against it for malicious reasons, but rather believe low-income populations can be aided through alternative means without disrupting employment rates. One of the most popular proposals has been to raise the Federal Earned Income Tax Credit (EITC). The EITC is a refundable tax credit calculated based on a recipient’s income and number of children. By increasing the EITC, more money would be afforded to those who are not making enough on wages alone. Advocates of this proposal maintain this change would provide real assistance to those who truly need it, the low-income population, and would not adversely affect employment rates or consumer prices.

Update on Proposed Fines for California Drought Water Usage

California Lawmakers Crack Down in the Face of a Monstrous Drought

For the past four years, the state of California has suffered through one of the worst droughts in history. A historic and unprecedented lack of rain has created the need for some very immediate and systemic changes regarding water usage.

As Governor Brown and state officials urge California residents to cut back, local county and city governments have begun passing ordinances that restrict water usage. These restrictions often ban residents from washing their cars and doing other activities involving water. Some neighborhoods are prohibited from watering their lawns while other neighborhoods have placed residents on a schedule, permitting sprinkler usage on only one day a week.  Droughtful

Thankfully, these restrictions, as well as awareness of the issue, have led to an impressive 35% cut in California’s water usage.

Celebrities Among the Most Egregious Offenders

Many California residents have allowed their lawns to go brown in order to conserve water while others have transformed their yards using zeroscaping. Unfortunately, many of Hollywood’s elite have eschewed the water restrictions and have continued to operate their sprinklers, enjoying lush, rolling lawns while their surrounding neighbors have dead grass.

Each individual water district is responsible for policing its residents. As such, uniform policies have failed to develop. For instance, Las Virgenes Municipal Water District is patrolling wealthy Calabasas neighborhoods for violators and has issued many violation letters to famous residents. Some of these individuals were fined.

However, it appears many water districts are not being vigilant about the issue. In Los Angeles, only 9 people were fined despite thousands of warning letters for violations. In Beverly Hills, where some of the more outrageous violations have occurred (and where the largest yards exist), no fines have been levied yet.

California Spring Usage Limited During Drought

California is home to many natural springs. Water bottle companies like Nestle and Sugar Pine contract with the California government to pump water from the springs for bottling and resale. In January of 2014, the governor announced a state of emergency. In response, the California Water Resources Control Board ordered Sugar Pine Spring Water Company to stop diverting water from the Sierra Nevada spring to its bottling facility. Despite this order and numerous warnings, Sugar Pine continued to divert water and was recently slapped with a whopping $225,000 fine.

Individual Accountability for Corporate Crime?

On September 9, the Department of Justice (DOJ) released an “Individual Accountability for Corporate Wrongdoing” memorandum, also known as the “Yates Memo.” It outlined several strategies to seek accountability from the individuals who perpetrated corporate wrongdoing:

  1. Corporations may only receive credit or benefits for cooperation in criminal or civil matters if they disclose all relevant facts about the individuals involved.
  2. Investigations should focus on individuals from the beginning.
  3. There should be routine communication between civil and criminal attorneys handling corporate investigations.
  4. Ordinarily, the DOJ should not release individuals from civil or criminal liability as part of a settlement with a corporation.
  5. Attorneys should not resolve corporate matters without a plan to resolve individual cases.
  6. Civil attorneys should bring suit against individuals involved regardless of their ability to pay.

Criticism of Previous DOJ Policies

After the 2008 financial crisis, the DOJ and other government agencies took steps to increase oversight and to prosecute financial wrongdoers. In 2009, the Financial Fraud Enforcement Task Force was formed to address mortgage scams, predatory lending, and other types of fraud. The DOJ prosecuted many white collar crime and mortgage fraud cases, but few individuals were charged and even fewer served time. Only one executive — Kareem Serageldin of Credit Suisse — went to jail for manipulating bond prices leading up to the 2008 crash. Many people who were allegedly involved in financial transactions that led to market failure have gone unpunished. White Collar

Corporations and executives have been protected to some extent by deferred prosecution (DPC) and non-prosecution agreements (NPC), which are still common. These agreements allow corporations to avoid prosecution by promising to pay penalties and to reform their internal policies. Many major financial institutions paid out multi-billion dollar settlements after DOJ investigations began and have so far avoided further prosecution. In some cases, these settlements actually led to bonuses for the corporate executives involved.

The DOJ has also been criticized for reacting too slowly to the crisis. In 2013, the DOJ lost the ability to file many types of civil suits related to the financial crisis because the statute of limitations required action within 5 years. Before leaving office, Attorney General Eric Holder encouraged federal attorneys to build potential criminal cases against individuals and corporations before it was too late to proceed.

Prosecuting Individuals for Financial Market Crimes

The Yates Memorandum encourages a renewed focus on individual wrongdoing. The new policy incentivizes full cooperation from corporations in investigations that “name names” and do not shield individuals from further scrutiny. It disallows further agreements between corporations and the DOJ that contain conditions which shield individuals from prosecution or lawsuits for their involvement in wrongdoing. Attorneys must also make a greater effort to resolve individual cases as well as the corresponding corporate cases in a timely manner through proper planning. This may be a response to the harsh criticism that the DOJ received after they could no longer bring many civil suits based on the financial crisis.

The memo’s emphasis on civil suits against guilty individuals who cannot afford to pay settlements seems misplaced, though it may bring accountability. Critics say that the real problem is “untouchable” corporate executives who can more than afford to pay up in the wake of a civil suit. Bringing suit against more low-level employees will not solve this problem.

Communication between Civil and Criminal Attorneys

Parallel civil and criminal investigations have already been employed in many environmental and health care cases. This strategy was also a goal of the Interagency Financial Fraud Task Force. This type of investigation has many benefits. Civil cases can be won using a preponderance of the evidence; thus they do not have to be proven beyond a reasonable doubt like their criminal counterparts. Some materials may be discovered in civil cases but not in criminal ones, leading to more information. Previous federal cases have brought concerns about the propriety of parallel investigations, but courts have allowed them to continue. Parallel corporate investigations may be beneficial, but must also be fair and efficient.

Future DOJ prosecutions and behavior change within corporate offices will determine if the strategies within the memo effectively deter corporate crime.

Update on “Deflategate”

The New England Patriots played the Pittsburg Steelers for the NFL season opener. Tom Brady played. NFL Commissioner Roger Goodell wasn’t in attendance. Goodell watched the game at home. Were deflated footballs there? We can only wonder.

If you haven’t been keeping up with the latest reality-drama-soap opera scandal called “Deflategate,” here’s the run down. The New England Patriots were accused of letting the air out of footballs used during the game after the 2014 AFC Championship game. The deflated footballs went against league rules.

A league investigation discovered air was let out of the footballs by New England Patriot staff. There was also evidence that Quarterback Tom Brady was more than likely directly or indirectly involved in tampering with the footballs. He was allegedly uncooperative with investigators, to the point of getting rid of his cell phone. Patriots

Brady was suspended four games without pay for the 2015 season. The team was sanctioned. The National Football League Players Association, or NFLPA, appealed Brady’s suspension on May 14. The decision was upheld. The NFLPA filed an injunction to prevent the NFL from enforcing the suspension. The lawsuit was moved to the Southern District of New York.

Brady won. The NFL will appeal on September 3.

Many of Brady supporters claim this wasn’t a showdown between the NFL and Brady, but between Goodell and players. From Ray Rice to Adrian Peterson and Tom Brady, there’s contention over how much power the commissioner has.

The real question may not be whether Goodell has too much power. Instead, the focus should be if the last collective bargaining agreement between the NFL and players gave Goodell too much power.

Collective bargaining refers to negotiations between unions and employers to determine the conditions of employment. When unions and employers agree on terms, they enter into a collective bargaining agreement. The agreement binds the employer to obey certain conditions of employment for a specific timeframe.

Article 46

The commissioner’s current authority comes from Article 46 of the collective bargaining agreement. The Article specifies the commissioner can hand out any punishment which is detrimental to:

  • The integrity of the game
  • Public confidence in the game

It also gave the commissioner permission to hear player appeals on any punishment. In other words, there was a lot of harsh discussion among Brady supporters about Goodell not recusing himself from Brady’s appeal. He wasn’t acting badly or out to get Brady. Goodell was acting within the rights given to him in the collective bargaining agreement.

Abuse of Power or More Players Behaving Badly

Granted, the commissioner’s broad powers haven’t changed since Pet Rozelle held the job in 1969. What has changed since that time is the new personal conduct policy instituted in 2007. Although it seems like a large number, only one to two percent of the NFL players have been punished under this policy. Whether it’s Brady or Peterson, Goodel looks to be using his authority to level suspends and fines. Prior to 2011, many players deemed to be acting badly received fines.

What most may not understand is that Goodell doesn’t have unchecked power. The NFLPA has actually used the language in the collective bargaining agreement to win appeals just like in the Brady case. The last appeal a player won occurred when a former federal judge overruled the indefinite suspension levied on Rice for a domestic violence issue.

Back to Brady

Brady and the Patroits won their season opener for the 2015 season. Will Goodell and the NFL win their appeal? Maybe. Well, if the commissioner can prove Brady needed small balls to win games and coordinated an effort to deflate them. For now it looks like the most interesting game of the football season is happening off the field.

The Ins and Outs of Credit Card Fraud

Credit card fraud may soon be a thing of the past, like dial up problems and floppy discs. The major credit card companies have set an October 2015 deadline to switch from swipe-and-sign cards people have in their wallets to a chip-reading system. This means Americans will have the same credit card protection as nearly everyone else in the world.

The magnetic strip on the credit card will disappear. Instead the card will just have a silver or gold square box on the front of the card with a microchip embedded into it. Instead of swiping the card at check out, the credit cardholder will just slid the chip into the chip reader to make the purchase. No signature needed. How will the purchase be validated? By entering a personal identification number, or PIN.

Data Breach and Credit Card Fraud

You might have received e-mails explaining your personal financial information was hacked. These emails have been sent to customers who made a purchase at a retailer like Target—and even the government. Credit card fraud generates approximately $1 billion dollars for scammers each year.  Visa

Criminal fraud is the act of intending or actually deceiving someone via false representation of a fact. This false representation can be a lie or half-truth. What makes it fraud is the victim relies on the information to his legal detriment. Legal detriment refers to the victim relying on a promise made which alters his decisions and how he assumes liability. In criminal law, there are several types of fraud, including credit card fraud.

Credit card fraud is the act of using another person’s credit card without permission. Typically, this is done by making an unauthorized purchase with the individual’s credit card. Several types of credit card frauds exist. Common types include:

  • Using a stolen or lost credit card
  • Placing unauthorized charges on an existing account
  • Identity theft
  • Using a counterfeit credit card. This is a credit card that is fake, but with the correct information on it
  • Acquiring the credit card fraudulently via the mail
  • Using credit card information to make online purchases

The latter type of credit card fraud has skyrocketed because an individual doesn’t need a physical card to make a purchase, open an account, or obtain other credit cards.

Does credit card fraud only refer to credit cards? No. The term “credit card” is a broad term used to describe a debit card, credit card, or similar type of credit used to:

  • Make a purchase
  • Obtain financial gain with no intention of repayment

What is a Credit Card Fraud Scheme?

As you’ve just read, many forms of credit card fraud exists. In fact, there are more credit card schemes than can be listed here. So it’s important to note that credit card schemes fit into two basic categories:

  • Account takeover
  • Application fraud

When someone hijacks a credit card account, he literally takes over an existing credit card account. He obtains your personal information, then proceeds to become you. He changes the billing information to another address. He subsequently contacts the credit card issuer to report the card missing or lost to obtain a new card. Lastly, he makes fraudulent charges.

Application fraud is different. It refers to someone opening a credit card account in another individual’s name without permission. For example, he could find out enough information about you to complete a credit card application or create fake documents to open an account.

Ways Criminal Access Credit Card Accounts

Data breaches often come to mind when someone realizes she’s a victim of credit card fraud. After all, you hear about companies being hacked all the time online or in media reports. Of course, there are other ways to gather credit card information and fraudulently use it, such as:

  • Obtaining information from a lost or stolen credit card
  • Looking over a person’s shoulder as they make a transaction
  • Stealing from the mailbox
  • Going through trash
  • Making fake phone calls to solicit information
  • Search personal records
  • Sending unsolicited emails to obtain personal information

New Credit Cards

It’s unclear when everyone in the United States will have the new micro-chipped credit card. Target has already announced it can accept the micro-chipped cards. The main reason for the move to get rid of the magnetic strip is to eliminate credit card fraud. The chips are harder to hack. However, credit card users still have to be vigilant to avoid having criminals access the card a different way.