DC Metropolitan Business Law Alert - Updates on Important Legal Developments that Impact the Business Community in DC, Md and Va.

The IRS has announced that the filing date for income and gift tax returns is Tuesday, April 17. Estate tax returns are due based on the actual date of death. Because April 15 falls on Sunday and April 16 is Emancipation Day in the District of Columbia, the tax filing date is extended to the next day, Tuesday, April 17. The Internal Revenue Code [Section 7503] establishes that the date for tax filing is extended when April 15 falls on a Saturday, Sunday or a legal holiday. For that purpose, a "legal holiday" means any legal holiday in the District of Columbia. Emancipation Day is a legal holiday in the District of Columbia, established in 2005. It is celebrated each year on April 16 to recognize the date when President Abraham Lincoln signed the Compensated Emancipation Act which released certain persons held to service or labor in the District of Columbia. If April 16 falls on a Saturday, Emancipation Day is celebrated on the preceding Friday.

The IRS announced a new program today that will permit employers voluntarily to reclassify workers as employees rather than nonemployees or independent contractors, without significant retroactive tax impact. To qualify, employers must have filed all required Forms 1099 for the workers for the past three years and not be under audit currently by IRS, the Labor Department or a state agency for worker classification issues. Employers that have significant numbers of workers whose employment classification is questionable should consider the application of this new program.

IRS has today issued guidance (IRS Notice 2011-72) regarding an employer's provision of a cell phone to an employee. Earlier law changes ended any obligation to provide substantiation for the use of a cell phone for business purposes. But, a question remained whether an employee nonetheless had income from the provision of a cell phone. The guidance states that a cell phone provided for noncompensatory reasons is not taxable to an employee. The IRS gives these examples of noncompensatory reasons: the employee needs a cell phone at all times for work-related emergencies; the employer requires that an employee be available to speak with a client at all times when away from the office; and the employee's need to speak to clients in other time zones from locations out of the office. The IRS points out that the provision of a cell phone to enhance employee morale and goodwill is not a noncompensatory reason. The charges for use of a qualified cell phone, as well as the value for limited personal usage, will be excluded from an employee's income.

A recent court decision has shed some light on the fiduciary duty that D.C. employees owe to their employer. In National Railroad Passenger Corporation v. Veolia Transportation Services, Inc. (D.D.C. May 9, 2011), the federal district court for the District of Columbia evaluated the nature of the fiduciary duty that Amtrak employees owed to their employer while Amtrak prepared its bid for a government contract. The court examined various factual scenarios in which an employee engages in direct and indirect competition with its employer, and emphasized that a breach of the employee’s fiduciary duty is extremely fact-specific and must be evaluated on a case-by-case basis. For more information on this case, click here.

Jason Zink, owner of taverns in Baltimore, would often bartend alongside his employees.  He would receive tips, add those tips to a collective tip pool, and then share in that tip pool when it was divided among his employee bartenders.  In a question of first impression within the Fourth Circuit, Judge Richard Bennett of the U.S. District Court for the District of Maryland ruled this month that Zink, as an employer, could not receive a “tip credit” while participating in the tip pool without violating the Fair Labor Standards Act and the Maryland Wage and Hour Law.

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