Author: TSA Press

Over the past few months, I have recommended that lawyers check out two TV series — The Paper Chase and Better Call Saul — in order to binge entertaining legal shows to break the monotony of the quarantine. My articles on these shows were extremely popular, and I received numerous emails from readers seconding that these shows should be viewed by people within the legal profession. Although Better Call Saul and to a lesser extent The Paper Chase are already well-known series among lawyers in the United States, I am willing to bet that few people in America are familiar with the TV show Rake (unless you saw the suggestions to watch this series on Netflix like I did). Nevertheless, I recently binged all five seasons of Rake, and I can say unequivocally that this amazing legal show should be on every lawyer’s quarantine watch list.

Rake is an Australian TV show about a disheveled criminal barrister who represents an interesting cast of characters and deals with his shady personal life along the way. It is hard to describe the show’s charm succinctly, but suffice it to say that Rake has all of the eccentricities of the legal profession shown in Better Call Saul, the grumpy humor of House, MD, and the courtroom drama of (the original) Perry Mason or Matlock (I assume. I’m too young to have seen those last two shows!). In addition, Rake has all of the intrigue, surprises, and other drama that viewers are accustomed to seeing in a top-notch legal series.

I would not ordinarily take a chance on watching a series like Rake, since I rarely view foreign shows. I do not like watching shows with subtitles, because I usually view streaming programs casually and do not like to be forced into viewing the screen at all times. Also, I have an extremely hard time understanding British accents, and I had to watch the British Office twice in order to understand what was going on. However, I was easily able to understand and appreciate what the Australian characters in Rake were saying. Maybe it is because I had a lot of Aussie and Kiwi camp counselors growing up, or maybe it is because I love the Outback Steakhouse (Outback, I would gladly be paid for an endorsement deal in Thunders from Down Under or Bloomin’ Onions!). In any event, I had no problems understanding the dialogue of Rake, and Australians have some incredibly colorful expressions. In fact, I hope some of their expressions make it into the American lexicon (except for calling college “uni,” that seems kind of weird).

Regardless, you might be wondering why an American audience would want to watch a show about the Australian legal system. Well first of all, many of the pop culture references and other discussions between the characters in Rake involve the United States. Rake premiered about a decade ago, so some of its pop culture references are dated, but the show contains many funny references to American singers, politicians, television shows, and other parts of American culture. Some seasons even have American characters, which definitely makes it easier for American audiences to connect with the show. I am not sure if Rake intentionally tried to market itself to an American audience with all of these references, or if Australians are more connected to American pop culture than I previously thought, but the show is very relatable to people in the United States.

Moreover, individuals within the American legal profession might uniquely appreciate Rake. I do not know anything about the Australian legal profession aside from what is depicted in Rake. However, suffice it to say that the series seems to show how the Australian legal profession is very different from the legal system we have in the Untied States. I still have no earthly idea what an instructing solicitor is (please someone explain this to me!) and lawyers and judges in Australia wear wigs and robes that make them look like they are playing characters at Colonial Williamsburg. Moreover, constitutional rights, courtroom setups, titles, and other aspects of the legal profession in Australia seem very different than the American legal system.

However, the courtroom drama depicted in Rake is extremely entertaining, especially for people within the American legal community. Cross examination, impeachment, and many of the mainstays of the courtroom are pretty universal, and no matter the technical procedures, viewers will appreciate Rake just as they appreciate My Cousin Vinny or any other classic American courtroom media. Moreover, the characters depicted in Rake, such as the down-on-his-luck solo practitioner, the uptight government lawyer, and others will be extremely familiar to American audiences. In addition, the richness of the dialogue, storylines, and acting depicted in Rake is appealing to any audience, even if viewers are not entirely familiar with the foreign procedures depicted in the show.

All told, I encourage everyone, especially individuals within the legal community, to put Rake on their quarantine watch lists. I enjoyed watching this show immensely and am pretty bummed it got canceled after only five seasons. Not only will Rake provide much-needed entertainment during the quarantine, it may teach legal professionals something about another legal system that is somewhat different, but also similar, to their own.

---

Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.

On August 27, 2020, Trump-appointee Judge Michael L. Brown — who sits on the United States District Court Northern District of Georgia — ruled in favor of U.S. citizen dads Derek Mize and Jonathan Gregg, in their long fight for their daughter to be recognized as a U.S. citizen from birth.

Best. Podcast. Ever. Stop what you are doing now and check out this podcast interview with Mize and Gregg. Mize, at one time a practicing attorney, clearly explains the legal issues, while both dads recount the harrowing experience of their baby being denied U.S. citizenship, the prospect of being forced to live an ocean apart while Gregg undergoes treatment for a brain tumor, and the attorneys that stepped up to fight for their family. Among those legal warriors were Biglaw partner Susan Baker Manning of Morgan Lewis, Lambda Legal, and Immigration Equality.

Both Parents U.S. Citizens, But Not The Child? You might already be familiar with the backstory of this case from reading these earlier columns. Mize was born and raised in Mississippi. Gregg was a U.S. citizen from birth through his U.S. citizen mother, but was born and raised in the United Kingdom. The two adorably met at a swimming meet (again, check out that podcast interview) where Mize immediately knew Gregg was the one. Gregg was initially confused and unimpressed by Mize’s cross-pool American chin gestures (think, “what’s up” versus “what is that guy doing with his chin? Is he trying to say something to me?”). However, after an inseparable weekend, where even their future children were discussed, Gregg was convinced.

The couple married a year later. And when a British school friend of Gregg’s approached Mize at the wedding and offered to be a surrogate for the couple, they did not initially think she was serious. In the UK, unlike the U.S., a woman cannot receive compensation to act as a surrogate. Turns out, she was, indeed, serious. A few years later, their daughter Simone was born in England to the overjoyed dads.

Mize had been studious about all of the steps in the process, and even studied the American immigration code. The code said that a child “born of” U.S. citizen parents was a U.S. citizen. Case closed, that was easy. Moving on to the next item on the to do list. Unfortunately, at that point, Mize and Gregg did not know that the State Department had been interpreting the immigration code to exclude married same-sex male parents from the married parents section, nor had the other nightmare cases been publicized yet — such as the Dvash-Banks case, where one twin of a married same-sex couple was declared a U.S. citizen, while the other twin was denied U.S. citizenship.

The U.S. government has taken the position that the “born of … parents” provision of the code applies only when both parents are biologically related to the child. When one parent is not biologically related to the child — which is the case in a lot of LGBTQ+ families — the U.S. government looks to the “unwed” parents section of the immigration code, which contains a longer residency requirement. Gregg, having resided only four years in the United States, instead of the five required by the unwed section, could not pass on American citizenship under this provision.

Constitutional Avoidance. In deciding the case, Judge Brown found that the doctrine of “constitutional avoidance” required that the court not apply the U.S. government’s interpretation requiring both Mize and Gregg to be biologically related to their child to fall into the wed section of the immigration code. Instead, he concluded the statute’s plain language could be interpreted in such a way — to not require a biological connection — to avoid finding the statute discriminatory and unconstitutional.

The Judge particularly pointed out the elasticity of the government’s interpretation of “born of.” In 2014, the government changed its interpretation to include a woman who gestationally carried the child and was legally the parent of the child (but not biologically related to the child, such as in the situation of an egg donor) to be within their interpretation of the statute.

It’s Not Over.

Mize and Gregg were not the first parents with a child denied U.S. citizenship under the government’s “biological” requirement. Other couples have faced this obstacle, and brought suit. So far, each one has won their case. And, each time, the government has appealed. Those appeals are still pending. If the pattern holds, Mize and Gregg will be facing the government’s appeal shortly.

Politics aside, I can’t help but notice that the government could, like, be doing something way more worthwhile with their resources than continuing to force an interpretation of the immigration code that discriminates against gay dads, as well as couples who turn to assisted reproductive technology to have children. I have yet to see a convincing defense as to why this is a priority of our country. Here’s hoping that the U.S. government takes this moment to change course and embrace an understanding that American families are formed in many different ways — which, at times, includes surrogacy, egg, sperm, or embryo donation — and are no less deserving of citizenship and the acknowledgment and protection of our government.

---

Ellen Trachman is the Managing Attorney of Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-host of the podcast I Want To Put A Baby In You. You can reach her at babies@abovethelaw.com.

He should leave the firm entirely. Leave of absence still imputes the financial interests of the firm to him.

— Richard W. Painter, who served as chief White House ethics counsel during the George W. Bush administration, commenting on Doug Emhoff’s continued association with DLA Piper while his wife, Kamala Harris, campaigns as Joe Biden’s running mate on the 2020 Democratic ticket. Emhoff took a temporary leave of absence from the Biglaw firm in August. Painter said that firm clients could be accused of “trying to buy influence” through Emhoff, but the Biden-Harris campaign said this of Harris’s husband: He “has always observed the highest ethical standards to ensure his personal law practice was kept entirely separate from his wife’s work” and he is “completely focused” on the campaign.

---

Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

Kathryn Mizelle was clerking the term before this one. She’s 33 and got out of law school eight years ago. But as a loyal FedSoc flunky and the wife of Stephen Miller’s BFF — acting DHS GC Chad Mizelle — she now finds herself nominated to a lifetime appointment to the Middle District of Florida.

Consider that Jones Day doesn’t think she’s ready to be a partner yet, and yet the United States Senate is on the cusp of making her a judge for the next four decades or so. Because managing paralegals is roughly the same as managing a criminal trial.

The American Bar Association, as is its usual practice, investigated Mizelle’s professional credentials for serving on the federal bench as a trial judge. After noting that a 12-year minimum of experience is preferred for any federal nomination, the ABA asked the record to reflect that eight is actually less than 12:

Since her admission to the bar Ms. Mizelle has not tried a case, civil or criminal, as lead or co-counsel. Of her four distinguished federal clerkships, one clerkship was in the trial court. That year, plus her 10 months at a reputable law firm and approximately three years in government practice translates into 5 years of experience in the trial courts. We have taken into account the nominee’s experience in federal grand jury proceedings, which are non-adversarial and do not take place before a judge. In each instance those proceedings resulted in the defendant’s agreement to a plea of guilty with no trial. We also are aware that as a law school student the nominee participated as co-counsel with her supervising law professor in two one-day state court trials as part of her curriculum.

In other words, a Not-So Marvelous Mrs. Mizelle. When you’re citing law school clinics for the bulk of the nominee’s trial experience, it’s not a great look. Ironically — as we learned with the nomination of Allison Rushing — the appellate bench would be an easier sell where just being a credentialed bookworm can carry a nominee a lot further.

Her Judiciary Committee hearing today did little to dispel the ABA’s conclusion. Democratic Senators repeatedly probed her inexperience and she offered her prosecutorial career — which, astoundingly, never landed her in a trial — and being counsel of record in a pro bono appellate matter at the Sixth Circuit. Appellate, of course, not being a trial. Republican Senators attempted gamely to spin this resume as remarkably deep — Mike Lee straight up said he was surprised someone could pack this much experience into eight years, which makes you wonder if he exists in some sort of relativistic time bubble.

And, as noted when we covered her initial nomination, this kind of sucks for her. She might well have forged a worthy résumé if given ample time, but the Federalist Society wanted to make their move now and so now her career will forever be marked by her being an unqualified candidate for the federal bench.

Professor Carl Tobias of Richmond Law told me that in the context of judicial nominations, the ABA letter — available on the next page — “is pretty damning.” I’ve read far fewer of these than Professor Tobias and it’s a striking outlier. That said, Mizelle is the tenth unqualified candidate (tenth ABA-certified as unqualified anyway) put up by this administration and seven have already found their way onto the bench. Professor Tobias expects another party-line vote in the committee — will there be enough to dislodge the Mitt Romneys of the world?

The big question, of course, is if this nomination can even get finished by the election. When we first covered Mizelle’s nod, Professor Tobias noted that she was very far down the queue of nominees for consideration and did not see much chance that she’d receive a vote. But since then the Senate has leapfrogged her nomination over those of multiple other ABA qualified candidates so regular order doesn’t hold sway here. Still, even with fast-tracking her nomination it would be hard to imagine getting a vote before the Senate recesses to campaign. Meaning the Mizelle nomination vote could well be taken up in a lame duck session.

Would the Senate really deadhand confirm a 33-year-old unqualified judge after losing the presidential election and — potentially — control of the Senate?

Based on the last three and a half years, I see no reason to doubt it.

(Read the whole letter on the next page.)

Jones Day Associate, Former Thomas Clerk ‘Not Qualified’ for Federal Bench, ABA Says [National Law Journal]

Earlier: Latest Trump Judicial Nominee Clerked LAST YEAR

What do associates at major law firms care about more than money? Prestige, of course. But, at the end of the day, sometimes being a leader when it comes to compensation is enough to boost a firm’s prestige. As luck would have it, the closely watched Vault 100 rankings are here to remind lawyers at the nation’s largest law firms about exactly which ones are considered the most prestigious.

In last year’s Vault 100 rankings, Cravath — the firm that matched Milbank’s $190K associate salary scale two summers ago with over-the-top monetary compensation for senior associates — managed to retain its number 1, with Wachtell Lipton clinging to its spot in second place, even though the firm had once dominated Vault’s top spot for more than a decade. Was Cravath able to keep its cachet as the most prestigious Biglaw firm in the country in the latest Vault rankings?

Obviously. Here’s what Mary Kate Sheridan, Vault’s senior law editor, had to say about Cravath’s placement in the latest rankings: “Cravath is the undeniable leader in the legal field, as the top firm in our ranking for five years running and the only firm to achieve a prestige score above ‘9’ this year. Associates at peer firms recognize Cravath not only for how elite it is, but also for its consistent leadership when it comes to industry practices and standards, such as associate compensation and training.” Cravath keeps crushing it in every way imaginable. Way to go!

Although Cravath kept pace, this year, there was some historic drama when it came to the tippy top of the Top 10 in the latest edition of the Vault rankings. Without any further ado, here are the Top 10 Most Prestigious Law Firms based on Vault’s Annual Associate Survey for 2021:

1. Cravath, Swaine & Moore (no change)
2. Skadden, Arps, Slate, Meagher & Flom (+1)
3. Wachtell, Lipton, Rosen & Katz (-1)
4. Sullivan & Cromwell (no change)
5. Latham & Watkins (no change)
6. Kirkland & Ellis (no change)
7. Davis Polk & Wardwell (no change)
8. Simpson Thacher & Bartlett (no change)
9. Gibson Dunn & Crutcher (no change)
10. Paul, Weiss, Rifkind, Wharton & Garrison (no change)

For the first time in the history of the Vault rankings, Skadden has overtaken Wachtell for the No. 2 spot. (And it was just by a hair, as Skadden earned a score of 8.577, while Wachtell earned a score of 8.567, making Skadden 0.010 points more prestigious than Wachtell.) Associates at Skadden — a firm described by Vault respondents as “esteemed,” “excellent all around,” and “top of the field” — are sure to enjoy the schadenfreude of Wachtell’s fractional rankings tumble. Let’s see if Skadden is able to hold onto the silver medal next year.

Congratulations to all of the Biglaw firms that made the latest edition of the Vault 100 rankings. How did your firm do this time around? Email us, text us at (646) 820-8477, or tweet us @atlblog to let us know how you feel.

Vault’s Top 100 Law Firms For 2021 [Vault]
Introducing Vault’s 2021 Top 100 Law Firms! [Vault]

---

Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

One of America’s most venerable legal institutions has fallen into rank buffoonery and it’s genuinely tragic to watch. From Bill Barr declaring racism over — except on college campuses — to a stumbling effort to get Michael Flynn out of his own sworn testimony, Joe is joined by ATL and Wonkette columnist Liz Dye to discuss what’s gone wrong over there. And we check in on Kyle Rittenhouse’s legal team who’ve made some… let’s just say “interesting” strategic decisions.

Canelo Alvarez has initiated a lawsuit based on what he claims to be the breach of the single largest contract in the history of boxing and one of the largest contracts in all of sport. The complaint, filed on September 8 in the U.S. District Court for the Central District of California, includes Alvarez’s longstanding promoters Golden Boy Promotions and Oscar De La Hoya, as well as sports broadcaster DAZN, as defendants.

Alvarez says that, in October 2018, he committed to a five-year, 11-fight deal with DAZN that was said to be worth a minimum of $365 million. Twenty-three months later, after Alvarez fought in only three boxing matches (all victories), he is suing for damages of at least $280 million.

The complaint reveals that Alvarez appears to not be certain that the $365 million contract was entered into by the relevant parties. The beginning of the general allegations section is premised on information and belief that Golden Boy Promotions and DAZN entered into such a contract. Later on, Alvarez says he is informed of and believes that the contract required DAZN to pay Golden Boy Promotions a licensing fee of $40 million per bout for 10 bouts, with a reduced fee for a December 2018 fight against Rocky Fielding. Another upon information and belief sentence says that there was an expectation and understanding that the bulk of the licensing fees would flow to Alvarez as his purse for the bouts.

Alvarez explains that he has repeatedly asked for copies of the contract and that both Golden Boy Promotions and DAZN have refused to share whatever may exist to support the alleged contractual relationship.

While Alvarez has not been able to get his hands on any contract between Golden Boy Promotions and DAZN, he is sure that he signed a separate agreement with Golden Boy Promotions that required the promotions company to pay Alvarez a total of $365 million for 11 boxing matches, and the contract purportedly includes a clause whereby Golden Boy Promotions’ CEO, Oscar De La Hoya, personally assumed liability for all guaranteed payments.

As is true for many individuals and corporate entities, problems surrounding the business relationships sprouted with the coming of the coronavirus pandemic. According to the complaint, after a temporary pause, the parties resumed discussions about 2020 bouts in May, with Alvarez indicating he was ready and able to face world-class opponents in September and December. A dispute arose when, in June, DAZN said it would not pay the license fee and allegedly used Alvarez’s failure to fight professional boxer Gennady Golovkin in 2019 as an excuse.

“After extended discussions between the parties, DAZN offered to pay Alvarez and Golden Boy Promotions a fraction of the contracted $40 million license fee in cash and some DAZN stock in advance of a potential IPO. However, the entire value of the package — for a bout against another World Champion — was substantially less than Alvarez’ contractual guarantee,” the complaint states.

Alvarez says that he has asked Golden Boy Promotions to explore alternative broadcast options for a Fall 2020 bout but no alternative plans have been provided that would compensate Alvarez with the $35 million per bout that he believes he is owed.

The complaint has 10 counts, including a cause of action for declaratory relief whereby Alvarez asks the court to determine the legal rights and duties of the parties, such as whether he is able to participate in bouts arranged and promoted by entities other than Golden Boy Promotions and broadcast by entities other than DAZN based on each of their alleged breaches.

---

Darren Heitner is the founder of Heitner Legal. He is the author of How to Play the Game: What Every Sports Attorney Needs to Know, published by the American Bar Association, and is an adjunct professor at the University of Florida Levin College of Law. You can reach him by email at heitner@gmail.com and follow him on Twitter at @DarrenHeitner.

Yesterday, the Justice Department filed a motion removing E. Jean Carroll’s defamation suit against the president to federal court. The disputed evidence in this case is literally Donald Trump’s own body, and yet the federal government demands to be substituted as defendant because the president was acting “within the scope of his employment” when he said he couldn’t possibly have raped Carroll because she was “not my type.”

Not to put too fine a point on it, but 2020 is F*CKED UP.

In June of 2019, longrunning Elle advice columnist E. Jean Carroll wrote in New York Magazine that Trump had raped her in a dressing room of Bergdorf Goodman’s on 5th Avenue — where Trump could famously shoot someone and not lose one supporter — 25 years ago. Trump denied the allegations repeatedly, claiming never to have met Carroll, implying that she was carrying out a political attack, and telling The Hill, “I’ll say it with great respect: Number one, she’s not my type. Number two, it never happened. It never happened, OK?”

With great respect.

Carroll sued Trump for defamation in New York state court almost a year ago, since which time the president has ducked service of process, made various assertions of immunity, and generally tried to throw sand in the gears. Having exhausted all remedies and facing the prospect of having to turn over his DNA to see if it matches the male genetic material found on the dress Carroll wore the day of the alleged assault, Trump’s consigliere at the Justice Department has come to the belated realization that his boss was just, ummm, doing his job when he called Carroll a liar.

“Defendant Donald J. Trump was acting within the scope of his office as the President of the United States at the time of the alleged conduct,” attested James G. Touhey, Jr., Director of the Torts Branch at the DOJ’s Civil Division in yesterday’s filing.

In its Motion to Substitute the United States as Defendant, the government gestured vaguely toward the presidential media obligations, writing that “Numerous courts have recognized that elected officials act within the scope of their office or employment when speaking with the press, including with respect to personal matters, and have therefore approved the substitution of the United States in defamation actions.”

Other than that, Mr. Touhey and AAG Stephen Terrell did not elaborate as to how the president’s comments on events which preceded his presidency by 20 years relate to his current “employment.” Nor did they explain how this theory of the president as “employee” gibes with the theory of a unitary executive immune from civil and criminal process in both federal and state court and with absolute control over the Justice Department, which the government has been pressing since January of 2017.

Under the Westfall Act, the Attorney General can unilaterally certify that a government “employee” was acting within the scope of his employment and substitute the government as defendant in a tort claim, and by God, Bill Barr is going to do it no matter how much prestige it costs the Justice Department. And since defamation cases against the federal government are not authorized by statute, a successful move to substitute the United States of America as defendant would effectively disappear the entire suit.

(Remember those halcyon days where twelve lawyers in America had to concern themselves with the vagaries of the Westfall Act, the Hatch Act, the Logan Act, and the Federal Vacancies Reform Act and the rest of us could just get on with our lives?)

The “new” case is already off to an inauspicious start, with the DOJ filing it as Carroll v. USA, and the Southern District of New York forcing them to re-docket it as Carroll v. Trump, the original caption. They’ve also drawn U.S. District Judge Lewis Kaplan, a Clinton appointee. So, make of that one what you will.

Carroll’s lawyer Roberta Kaplan, a partner at Kaplan Hecker & Fink LLP, and counsel for E. Jean Carroll, was disgusted.

“Even in today’s world, that argument is shocking. It offends me as a lawyer, and offends me even more as a citizen,” she said. “Trump’s effort to wield the power of the U.S. government to evade responsibility for his private misconduct is without precedent, and shows even more starkly how far he is willing to go to prevent the truth from coming out.”

And Carroll herself was defiant.

“Today’s actions demonstrate that Trump will do everything possible, including using the full powers of the federal government, to block discovery from going forward in my case before the upcoming election to try to prevent a jury from ever deciding which one of us is lying,” she said. “But Trump underestimates me, and he also has underestimated the American people.”

No one should ever underestimate E. Jean Carroll! As to the American people, well, that remains an open question.

Notice of Removal [Carroll v. Trump, Supreme Court of the State of New York, County of New York, Index No. 160694/2019]

Motion to Substitute Party [Carroll v. Trump, No. 1:20-cv-07311 (S.D.N.Y. Sep 8, 2020)]

---

Elizabeth Dye lives in Baltimore where she writes about law and politics.

Last week, I wrote about President Donald Trump’s executive memorandum directing the Treasury Department to defer the withholding of employees’ social security taxes from September until the end of the year. The IRS has decided to turn the tax deferral into a short-term loan, with employees getting an extra withholding between January and April of 2021 to pay back the deferral. Due to the difficulty of implementing the proposal and the unlikelihood that the deferred taxes will be forgiven, most employers are not expected to comply with the order. However, the military and federal employees will get their future paychecks in compliance with the order.

I wondered if there were any businesses that implemented the order despite the criticism. After asking around, I found a business that has begun implementing the tax deferral order in its future paychecks. So I reached out to the business owner to see why and how he is doing this.

I won’t identify the business, but I will disclose that it is a corporation with two employees, one of whom is the sole shareholder and chief executive officer. The other employee is a full-time assistant.

When I asked the CEO why he decided to follow the new deferral rules, he said that he was treating the extra take-home pay as a no-interest loan, and he could use the extra money for the holidays. He was also hoping that Trump will pull some strings and get the deferred taxes forgiven before the end of the year.

I asked the CEO what would happen if his employee’s hours were reduced or was fired or laid off during the repayment period. He said this was unlikely but, just in case, both he and his employee knew about the repayment requirement and the potential consequences of not repaying the loan. They both agreed that if there was a separation, each would be responsible for paying back their portion of the deferred taxes.

Immediately, he ran into problems. The payroll program he was using did not have software updates to implement the deferral rules. When he contacted his payroll company’s technical support, the customer service representative told him that no update was available, but they would contact him if there are any developments. We suspected that his payroll company was not going to participate due to low interest.

I should note that other popular payroll programs have not issued any software updates to accommodate Trump’s deferral order as well.

The business owner then contacted local bookkeepers and payroll servicers to see if they can issue payroll checks with the modified withholdings. Almost all of them declined. One offered to do it but wanted a surcharge which the CEO thought was excessive for a company with only two employees.

So after speaking with his accountant, the CEO decided to modify the payroll tax withholdings himself. He issued paychecks to himself and his assistant last Friday, and both did not withhold their portion of the social security taxes. The taxes that were not withheld were recorded in a separate ledger so he will know how much to pay back during the repayment period. The total deferred amount will be given to his employee every pay period so she will know how much to pay back.

I wondered how this modified withholding would be reported on his next employment tax return (Form 941). It turns out that the IRS has issued a draft Form 941 that allows employers to report the employee’s deferred share of social security taxes pursuant to the order. In a few weeks, we will see if this draft version becomes the final version due on October 31.

Right now, the IRS does not require employers to abide by Trump’s deferral order. But if he wants more businesses to participate in his order, there needs to be guidance on forgiving the deferred taxes that was suggested in his executive memorandum. I mentioned last week that Section 7122 of the Internal Revenue Code allows the IRS to compromise existing liabilities. The IRS can modify its final draft of the Form 941 to include a forgiveness provision for the deferred taxes. Most businesses will start filing Form 941 employment tax returns starting in October so the Treasury Department has almost a month to make this adjustment.

If small businesses want to participate in Trump’s order, they should take some precautionary steps to avoid misunderstandings and minimize the chances of defaulting on the repayment.

First, the business owner should determine whether the employees will be around during the repayment period. This is not recommended for businesses with seasonal, part-time, or as-needed employees who are not expected to work between January and May.

Second, the owner should give employees a choice about whether they want the withholdings deferred. If the employees do, they must be made aware that the deferred amount has to be paid back and how it will be paid back. The cumulative deferred amount should be noted on employees’ paychecks every pay period so they know how much they will have to pay back.

Lastly, since most payroll providers are not participating in the plan, CEOs or their accountants must know how to make the modifications themselves. Most payroll providers have online guidance on adjusting withholding numbers. For example, here is guidance for modifying tax withholdings on Quickbooks.

Based on the experience of one small business, it seems like small business owners should not have too much trouble implementing Trump’s deferral and repayment order on their own. Some might like getting an interest-free loan and won’t mind paying it back over a four-month period. And who knows, there might be a forgiveness provision coming in the near future.

---

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at sachimalbe@excite.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

Despite the layoffs (largely impacting staff) that seem to be making the rounds in Biglaw, there is a lot of good news too. A lot of firms took a conservative financial approach to the pandemic, cutting expenses — including salaries — where possible. Now that they have a better sense of their 2020 economic outlook, a lot of firms are reversing course on those cuts.

The latest firm to undo their COVID-19 austerity measures is Holland & Hart.

Back in May, the equity partnership’s profit distribution was reduced. And salaried attorneys are also took a hit to their paycheck — to the tune of a 15 percent reduction. Employees making between $60,000 and $99,999 had their compensation reduced by 5 percent — those making under $60,000 were not impacted by the reductions. Plus the employer portion of the 401(k) matching program was suspended.

But now the firm has announced that because of a stronger than anticipated financial performance, all employees will return to their full 2020 salaries, and the 401(k) program is being reinstated. The firm also announced that because of these measures, they were able to avoid layoffs during the pandemic.

Plus, there are bonuses afoot, as Holland & Hart announced, “The firm has reserved a significant bonus pool to reward at the end of the year those staff and lawyers who contribute to the firm at a high level.”

The firm made the following statement on the end of their austerity measures:

Since the outset of the COVID-19 pandemic, Holland & Hart’s business decisions have been driven by our core values—our commitment to our people and our dedication to deliver excellent service to our clients.

In response to the economic disruption and uncertainty caused by the pandemic, last May, Holland & Hart proactively implemented several fiscal adjustments to offset anticipated revenue declines. Although the firm had one of its strongest financial years in 2019, and an equally robust start in the first quarter of this year, these measures were taken to protect our people and the short- and long-term business interests of the firm. Compensation cutbacks, combined with significant expense-saving and expense deferral initiatives, allowed the firm to avoid any layoffs.

After a significantly strong financial performance the past few months, we are pleased to announce that effective this month, the firm will return all employees to their full 2020 salaries and 401(k) matching contributions will be reinstated. The firm’s third quarter profit distribution to equity partners was restored in full. Finally, the firm has reserved a significant bonus pool to reward at the end of the year those staff and lawyers who contribute to the firm at a high level.

We are grateful to the incredible dedication of our lawyers and staff who continue to demonstrate resilience and a willingness to adapt to change. More than ever, we value our relationships with our clients and appreciate the trust and confidence they have placed in our firm as we have all embraced ways to connect and work together in these challenging circumstances.

If your firm or organization is slashing salaries or restoring previous cuts, closing its doors, or reducing the ranks of its lawyers or staff, whether through open layoffs, stealth layoffs, or voluntary buyouts, please don’t hesitate to let us know. Our vast network of tipsters is part of what makes Above the Law thrive. You can email us or text us (646-820-8477).

If you’d like to sign up for ATL’s Layoff Alerts, please scroll down and enter your email address in the box below this post. If you previously signed up for the layoff alerts, you don’t need to do anything. You’ll receive an email notification within minutes of each layoff, salary cut, or furlough announcement that we publish.

---

Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).