Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

Legislature Approves Bill that Would Eliminate Customs Duties in US Virgin Islands

Posted in Government Relations

The Legislature of the Virgin Islands recently approved Bill No. 31-0398, a new bill eliminating customs duties in the Territory. These duties generate approximately $12 million every year, but for more than 10 years, the U.S. Customs and Border Protection has taken almost all of it to cover the costs of collecting it. As a result, the duties reached the point where negligible funds actually received by the U.S. Virgin Islands were not worth the trouble and cost focused on collecting them.

The Revised Organic Act of the Virgin Islands It defines the powers of the Territory and its authority to take up to 6 percent duties on any goods brought from other lands into the Territory. U.S. Customs and Border Protection had taken a portion of the duties to cover its costs, but that portion became significantly larger—almost the entire value of the funds—after the establishment of the federal Department of Homeland Security in 2003.

Previous solutions proved ineffective

In December 2014, the administration of Governor John deJongh, Jr. signed an agreement with the stated goal of resolving this problem. At the time, U.S. Customs and Border Protection agreed it would fund pre-departure clearance for air passengers with federal funds and would work to limit reimbursement from these local customs duties. This agreement also called for greater transparency in reporting the funds that were collected, why they would be retained and how they would be used.

Reports from various U.S. Virgin Islands officials revealed that U.S. Customs and Border Protection had essentially ignored the agreement from the beginning, only remitting $1 million since it was signed. CBP kept more than 90 percent of all the funds earned in customs duties in 2015 and has not returned any 2016 funds, according to US Virgin Islands  Finance Commissioner Valdamier Collens.

The original purpose of the customs duties was to provide additional funding to the territory. With how little money was actually coming back to the US Virgin Islands  under the arrangement, the Government of the Virgin Islands decided to put an end to the practice altogether.

The decision to remove the customs duties was not met without resistance. The St. Croix Chamber of Commerce, for example, did not agree with the changes. In a written statement, it said “the federal government could easily refuse to fund these services and remove the convenience of local customs clearance.” However, the majority of elected officials who passed the amended bill were of the mindset that money going to CBP should come from federal funding—not local money.

The passage of Bill No. 31-0398 could have an impact on businesses throughout the U.S. Virgin Islands. It will be interesting to see if upon approval of Governor Kenneth E. Mapp, it will open up any new opportunities for commerce in the Territory in the years to come.

 

BoltNagi is a respected and established business and corporate law firm proudly serving clients throughout the U.S. Virgin Islands.

Federal Judge Blocks FLSA Overtime Rule Implementation

Posted in Labor & Employment

Over the past year, business owners across the United States have been trying to prepare for December 1, when new Fair Labor Standards Act (FLSA) overtime rule changes were set to go into effect.

However, in late November, Judge Amos Mazzant of the U.S. District Court issued a ruling blocking the implementation of the rule, primarily due to the way it treated white-collar exemptions within the law as it was originally written. According to the court, Congress intended these white-collar exemptions to turn on an employee’s performance and conduct on the job—and not his or her salary. The judge’s ruling essentially states that by doubling the salary threshold for guaranteed overtime pay, the U.S. Department of Labor operated outside its jurisdiction.

It is important to note that this injunction is not permanent and is only meant to delay the rule until the courts can make a “merits determination.” While a permanent injunction is anything but a given at this point, the fact that a federal judge even implemented a preliminary injunction indicates there’s at least a chance the rule could be overturned.

With a change of administration coming to Washington, D.C., this also means President-Elect Donald Trump and his Secretary of Labor will have a lot of say as to whether the Department of Labor will continue to pursue the new overtime regulations under the FLSA.

What impact will this injunction have on businesses?

Small businesses across the country widely supported the ruling by the federal judge, as did the National Association for the Self-Employed. Many believe that had the DOL succeeded in implementing the change, there would have negatively impacted small businesses. Employers suddenly would have been forced to eliminate positions, cut back hours or change salaried workers to hourly.

Some small business owners had asked for specific exemptions to be put into place for smaller organizations so they would better be able to adjust to the changes. Many businesses had not yet shared any information about these rule changes to their employees, which would have meant a large number of workers would have been suddenly surprised by a change in their payment had they not been following along.

One study by ComplyRight revealed that out of nearly 800 owners of very small businesses (under 20 salaried employees) polled, about 82 percent had not shared information with employees regarding the new law. This would suggest employers either did not know how they were going to make the changes within their business or were altogether unaware the changes were coming.

It will be important for businesses owners in the U.S. Virgin Islands and beyond to stay up to date on this issue as it develops. If you have any questions about how the potential overtime rule change could impact your company, meet with a knowledgeable employment law attorney.

 

Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Litigation Practice Group at BoltNagi, an established and well-respected civil litigation law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

 

How to Create a Strong IP Indemnity Clause

Posted in Corporate & Financial Services, Labor & Employment

Every product you sell as a manufacturer is subject to the Uniform Commercial Code. This law requires you to guarantee to your customers that your products are free of infringement claims made by other manufacturers.

You may already have customer contracts in place with even more stringent conditions, such as providing legal defenses to customers or reimbursing them for any costs that could be imposed on them as a result of a lawsuit. These costs may quickly mount to staggering figures, so businesses need a way to mitigate the risk. The best means of accomplishing this is negotiating an indemnity clause with your customers.

Indemnity is kind of like an insurance policy — as it protects the “indemnitee” from certain covered losses. A typical agreement involves an “indemnitor” promising to protect the indemnitee from certain losses sustained as a result of a specific act or omission. Practically speaking, this would involve a manufacturer or seller of a product agreeing to cover the buyer for specific losses sustained in third-party patent or trademark infringement claims.

Considerations as you begin the process

Your first step in creating such a clause is to clearly define the parties and the scope of claims your agreement will cover. Typically, the agreement will be between a seller or licensor and a buyer or licensee. You should also consider whether you will cover officers, affiliates, subsidiaries and other parties in the agreement. If your transaction also allows resale or sublicensing, you will need to consider whether those third parties will also be protected (or “indemnified”).

Once you have set all of the ground rules, you should clearly identify each party’s obligations. In most situations, an indemnity provision would indicate that the seller will indemnify, defend and hold the buyer harmless from any losses associated with the covered claims.

There’s a variety of other considerations that could also impact the scope of your coverage and your liability. These include limitations of use, limitations on liability, geographic limitations, multiple indemnitors, pre-existing threats and remedial measures. Your corporate planning attorney can work with you to pinpoint any such factors that could have an impact on your indemnity agreement with your buyer or licensee.

Finally, you should be sure to clearly identify the procedures that must be followed to initiate and resolve any claims that occur. These procedures include the amount of notice time required to file a claim, who is the controlling party, the parties that will have authority to settle, the obligations each party has to cooperate and the amount of time the seller has to provide reimbursement.

 

Attorney Steven K. Hardy is an Associate in the Corporate, Tax and Estate Planning Practice Group at BoltNagi, PC, a well-established and respected intellectual property law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

Tax Deductions Every Small Business Owner Should Know

Posted in Labor & Employment

Tax deductions are important tools for small business owners that can help them maintain efficient operations while reducing their tax obligations. The more deductions you can take, the less income the Internal Revenue Service (IRS) can tax you on, which means greater savings and more capabilities to grow your company.

The following are a few common tax deductions of which every small business owner in the United States and its territories should be aware:

  • Vehicle expenses: If you regularly use your motor vehicle for business, or your company has its own car, you may deduct a portion of the costs associated with using it. There are two different methods for doing so. The first is the actual expense method, where you track and deduct every business-related expense associated with your vehicle. The other is the standard mileage rate method, in which you deduct a certain amount of money for every mile driven, plus all tolls and parking fees related to business.
  • Traveling: Whenever you travel for business reasons, you may deduct many of the expenses, including plane fare, car costs, taxis, meals, lodging, cleaning clothes, phone calls, tips and taxes. As long as business is the primary purpose of the trip, these costs are deductible. However, if you take family members along, only your expenses may be deducted, as only you are there for business purposes.
  • Business formation expenses: The cost of actually starting up a business are considered capital expenses. You are allowed to deduct $5,000 of these expenses in your first year of business. Remainders must be deducted equally over the course of the next 15 years.
  • Books and professional fees: Business books for your finances are fully deductible as business expenses. You may also typically deduct fees you pay to attorneys, consultants, tax professionals and accountants in the year those expenses were incurred. But if the work they performed was related to future years, those expenses may need to be deducted over the amount of years in which you expect to benefit from those services.
  • Business entertaining: If you pay to entertain current or prospective customers or colleagues, you may deduct 50 percent of those costs, as long as they meet certain stipulations. The entertaining must be directly related to business, with business discussed at the event—or it must be somehow associated with your business. The entertainment must also take place immediately before or after business discussions.
  • Interest: If you finance purchase for your business, all interest incurred is completely tax deductible. This is also true if you take out a personal loan, but use its proceeds for business purposes.

Navigating the complexities of the IRS and U.S. and territorial tax law can be complicated. Be sure to meet with a skilled business planning attorney to make sure you are getting the most out of your deductions.

 

Attorney Adam Marinelli is an Associate in the Corporate, Tax and Estate Planning Tax Group at BoltNagi, a respected and well-established business law firm serving clients throughout the U.S. Virgin Islands.

How Can You Tell When an Anticipatory Breach of Contract Has Occurred?

Posted in Labor & Employment

When you’ve signed an agreement with another party, one issue you may find yourself dealing with is an “anticipatory” breach of contract, which often means taking action before an actual breach has occurred.

For a little context, a contract could be considered breached or broken if either party unconditionally refuses to perform under the contract as promised. This unconditional refusal is referred to as a “repudiation” of the contract.

Whenever a party indicates through actions or words that it will not live up to its contractual obligations, the other may file a breach of contract claim and seek remedies, typically in the form of monetary payment. This is referred to as “anticipatory breach of contract,” a situation in which the party might not have actually breached the contract yet, but there is reason to believe it will not live up to its end of the deal.

The following are a few of the most common situations in which repudiation may occur:

Express repudiation: Express repudiation is a circumstance in which one party clearly communicates an unconditional refusal to the other party. The repudiating party must outright state that it will not follow through with the deal. An ambiguous refusal—or one qualified with certain conditions—is not enough to be considered express repudiation. It must be completely clear, direct and straightforward, with no other potential meaning.

Actions make it impossible for the party to perform: Actions can sometimes be just as powerful as words when it comes to repudiation. If, for example, someone wanted to start a business and took out loans to do so, but then recklessly ran the business into the ground and incurred numerous other debts in the process, it would be impossible for that person to pay back those original loans. Although this isn’t considered express repudiation, it is clear to the lender, through the actions of the borrower, that the borrower will not live up to his/her contractual agreement because of voluntary actions.

Property that is the subject of the deal was transferred to another party: If the contract in question was in regard to the sale of a certain piece of property, repudiation would occur if one party either transfers or makes a deal to transfer that same property to a different party. For example, if you were under contract to purchase a house, but then discovered the seller sold it to someone else, your contract was repudiated and you may be able to seek legal remedies.

It is, in some circumstances, possible for a party to repudiate the contract, but then retract that repudiation. If the other party did not make a “material change” in his or her standing due to that repudiation, the agreement may return to normal.

Consult an experienced business attorney to learn more about this issue and others related to business contracts.

 

Attorney Mark Kragel is Senior Counsel with the Litigation Practice Group at BoltNagi, a well-established and widely respected civil litigation law firm proudly serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

What Does it Mean to ‘Pierce the Corporate Veil?

Posted in Labor & Employment

One of the main reasons business owners decide to form a company in the structure of a limited liability company (LLC) or corporation is so they can avoid personal liability for business debts, if the business is unable to meet its obligations. However, there are situations in which courts will hold the owners, members or shareholders of an LLC or corporation personally liable for these debts, a circumstance known as “piercing the corporate veil.”

This situation has occurred more frequently in recent years after the economic downturn of 2008-2009, when business owners were either struggling to keep their companies afloat or deciding to shut down operations. Unpaid creditors may sue to “pierce the corporate veil” and hold these owners responsible.

The following are some situations in which courts may agree to pierce the corporate veil:

  • There is not a true separation between owner(s) and company: If the owners do not maintain a true legal separation between their personal finances and their business, the court could determine the LLC or corporation is invalid—and just an alter ego of the owner. In this situation, the owners would be personally operating the business as if the LLC or corporation was not in place. An example would be owners paying personal bills from a business checking account.
  • The company was engaged in fraudulent or illegal practices: If the business owners recklessly borrowed money and then lost it, made various deals knowing the business would not be able to meet its payments or otherwise acted in a dishonest or reckless way, a court could determine the business owner was guilty of fraud. As a result, the owner would not be protected by limited liability through a corporate structure.
  • The creditors suffered losses in an unjust manner: If someone who was engaged in business with the company had unpaid bills or a court judgment and there were other factors at play (such as those noted above), a court may pierce the corporate veil to correct the injustice.

Factors to consider when piercing the corporate veil

A court will take a number of factors into account when deciding whether to pierce the veil. These include the following:

  • Whether the business was engaged in some sort of fraudulent behavior
  • Whether the business had failed to follow formalities associated with a corporation
  • Whether the business was inadequately capitalized
  • Whether the business was completely controlled by either one person or a small group of people

Closely held companies are far more likely to lose their limited liability status than larger companies, as they are less likely to observe what are known as “corporate formalities.” These include annual shareholder or directors’ meetings, keeping accurate records, adopting bylaws for the company and ensuring those bylaws are followed by everyone in the organization.

For more information on “piercing the corporate veil” and how to best protect both your business and personal interests, meet with a dedicated corporate law attorney in the U.S. Virgin Islands.

 

Attorney J. Nash Davis, is an Associate in the Corporate, Tax & Estate Planning Practice Group at BoltNagi, an established and trusted corporate planning law firm serving a wide range of businesses and organizations throughout the U.S. Virgin Islands.

Key Questions to Avoid When Interviewing Candidates

Posted in Labor & Employment

Whenever you interview candidates who are applying for a job opening, you need to figure out exactly what experience, skills and capabilities they bring to the table that would benefit your organization. However, many employers are just as nervous during the interview process as the candidates, and they may end up asking questions that could open them up to potential legal issues.

As long as you focus your questions primarily on the applicant’s skills and qualifications, you should be fine. But for your reference, the following are a few types of questions you should avoid asking:

  • Questions about family or gender: You are not allowed to discriminate against employees or job applicants based on their gender, their family life or a pregnancy. This includes one’s gender identity and transgender status, which has been a big topic of discussion lately across the United States.
  • Questions about ethnic background or race: Again, you cannot discriminate against employees or applicants based on ethnicity or race. It is illegal to ask any questions about race or origin during an interview. You may ask if candidates are able to speak certain languages fluently, but you are not allowed to ask specifically what race or ethnicity they are.
  • Questions about age: Applicants’ ages are usually obvious on their application, which often contains information such as college graduation dates or years of experience, so there’s not really a need to ask about age in the first place. But you should also never make assumptions that someone’s age precludes him or her from doing certain work. Instead, focus on knowledge of the job or demonstrated experience the person has in the field.
  • Questions about criminal history: You are allowed to perform criminal background checks, but certain laws may prohibit you from asking questions about your applicant’s criminal record, along with arrests that did not lead to convictions.
  • Questions about disability: You are not allowed to ask applicants questions about whether they have a disability or how their disability affects their daily life. However, you are allowed to ask them how they would perform certain functions associated with the job and if attendance would be difficult, as long as you ask these questions to all applicants—not just those with disabilities.
  • Questions about religion: It is illegal to ask any questions about an applicant’s religious beliefs. However, if the job you have requires employees to work weekends, you may ask applicants about their availability, as long as you ask all applicants these questions.

The best way to avoid getting yourself into trouble with inappropriate questioning is to write down all of the questions you will ask your applicants ahead of time, and to not deviate from that list whenever possible. For more information on how to properly interview job candidates to avoid potential liability, consult a skilled labor law attorney in the U.S. Virgin Islands.

 

Attorney Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor & Employment Law Practice Group at BoltNagi, a widely respected and well-established business and employment law firm serving clients throughout the U.S. Virgin Islands.


 

How an Assignment of Contract Works

Posted in Labor & Employment

An assignment of contract happens when one party involved in a contract hands the obligations and benefits of that contract to another party, known as the “assignee.” Generally, the assignor wants the assignee to completely take on all of the rights and obligations of the contract. However, the other party involved in the existing contract must be properly notified before this may occur.

The following is an example situation in which a contract may be assigned to another party:

Imagine that the Smith Company has a contract with Joe to deliver him firewood every other week. The Smith Company could assign the contract to a new company and provide Joe notice of that change. Then, the new company would continue to make the deliveries on the same schedule, as long as Joe agrees to the change.

However, assigning a contract in this manner does not necessarily mean the assignor no longer has any liability associated with the contract. Some contracts have stipulations in place for this exact purpose, that the original parties will guarantee the agreement will be executed as stated. This means the assignee must fulfill all of the terms agreed to by the assignor.

When are assignments not used or enforced?

There are a few situations in which assignments are not allowed or enforced. These include the following:

  • The contract specifically says assignment is not allowed: Some contracts include an anti-assignment clause that could void any assignments one party attempts to make. In this case, the only option is to negotiate an end to the contract if one party is no longer able to meet its obligations.
  • The assignment significantly alters the arrangement made in the contract: If the assignment somehow affects the performance due from one party to the other according to the contract, decreases the value anticipated or otherwise increases risks for the other party not assigning away its contractual rights, courts are typically not going to enforce the assignment. So, using the example above, if Joe expected to receive shipments of pine wood, but the assignee only supplied oak, it would materially and significantly alter the arrangement.
  • The assignment is in violation of the law: There are some laws in place that could prohibit assignments in certain situations. Many states and territories do not allow future wages to be assigned. The U.S. federal government also has laws prohibiting the assignment of various claims made against the government. Certain other assignments might not be illegal, but could be in violation of public policy.

Before you attempt to assign your contractual responsibilities and rights to another party, you must be sure that you are doing so in compliance with the law and that you have provided proper notice to all parties affected. To learn more about this issue and how it might impact your agreement, meet with a corporate law attorney.

 

Attorney Steven K. Hardy is an Attorney in the Corporate, Tax and Estate Planning Practice Group at BoltNagi, a respected and established corporate planning law firm serving clients throughout the U.S. Virgin Islands.

Establishing a Probationary Period for Your Employees

Posted in Labor & Employment

Most Virgin Islands employees are subject to a 90 day probationary period of employment pursuant to the “Virgin Islands Wrongful Discharge Act”.  Notwithstanding this provision of VI labor law, employers may establish probationary periods as a means of evaluating recently hired employees, along with any workers who may not be performing well on the job. While these periods may be useful management tools, there are also some potential legal pitfalls if they are not implemented correctly.

The idea of a probationary period is that a company modifies the typical employment rules for someone who is either new to a position or who is struggling to keep up with his or her performance expectations. In a probationary period, the employee would meet with their supervisor on a regular basis to review progress and go over any concerns or questions either side has. The employer would also provide training and feedback. If the employee does not improve during this period, they would likely be fired.

These arrangements may cause labor law challenges if they compromise what’s known as at-will employment. In an at-will structure, an employer may fire a worker at any time for any legal reason. This is the case with the 90 day statutory probationary period under the Virgin Islands Wrongful Discharge Act.  However, employers might lose this right if they make certain guarantees that are not consistent with this type of employment arrangement.

To that end, if an employer implies there will be a probationary period outside the statutory 90 day probationary period, it is assumed that the employee will have that entire stretch of time to either learn a new position or make necessary improvements. Workers will also reasonably expect to stay employed if they successfully complete the probationary period.

How to implement probationary policies effectively

If your company does decide to move forward with a probationary period for workers, here are a few tips to help you ensure it’s done the right way:

  • Clearly state your expectations: Make sure your employees know exactly how long this probationary status will last, what must change during that time, how often they must meet with you and any milestones they must hit.
  • Give constant feedback: Regularly review employees’ performance with them. If they are having difficulties, make sure to provide guidance for how they can improve.
  • Get help when needed: Assign the employee a mentor, such as someone on staff who has a lot of experience. Be sure to provide the probationary employee with all of the additional resources he or she needs to be successful.
  • Track and document: Make sure you are keeping close tabs on everything that’s happening, and that you are documenting it accordingly. You must be able to provide evidence that you gave the employee a fair shake, so you should record the employee’s performance, your efforts taken to coach and train them, etc. This could protect you if the worker decides to take legal action, claiming that you violated his or her rights.

To learn more about how can implement an effective probationary period policy that protects your company’s best interests, consult an employment law attorney who has familiarity with the specific labor laws and regulations of the U.S. Virgin Islands.

 

Attorney Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor & Employment Practice Group at BoltNagi, a widely respected and established employment and labor law firm serving businesses and organizations throughout the U.S. Virgin Islands.