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Basic Facts About Registering A Trademark, Part 1
BASIC FACTS ABOUT REGISTERING A TRADEMARK Part 1 of 5   What is a Trademark? A trademark is either a word, phrase, symbol, or design, or combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods or services of one party from those of others. A service mark is the same as a trademark, except that it identifies and distinguishes the source of a service rather than a product. Throughout this booklet the terms 'trademark' and 'mark' are used to refer to both trademarks and service marks, whether they're word marks or other types of marks. Normally, a mark for goods appears on the product or on its packaging, while a service mark appears in advertising for the services. A trademark is different from a copyright or a patent. A copyright protects an original artistic or literary work; a patent protects an invention. For copyright information, call the Library of Congress at (202) 707-3000. Establishing Trademark Rights Trademark rights arise from either (1) actual use of the mark, or (2) the filing of a proper application to register a mark in the Patent and Trademark Office (PTO) stating that the applicant has a bona fide intention to use the mark in commerce regulated by the U.S. Congress. (See below, under 'Types of Applications,' for a discussion of what is meant by the terms 'commerce' and 'use in commerce.') Federal registration is not required to establish rights in a mark, nor is it required to begin use of a mark. However, federal registration can secure benefits beyond the rights acquired by merely using a mark. For example, the owner of a federal registration is presumed to be the owner of the mark for the goods and services specified in the registration, and to be entitled to use the mark nationwide. There are two related but distinct types of rights in a mark: the right to register and the right to use. Generally, the first party who either uses a mark in commerce or files an application in the PTO has the ultimate right to register that mark. The PTO's authority is limited to determining the right to register. The right to use a mark can be more complicated to determine. This is particularly true when two parties have begun use of the same or similar marks without knowledge of one another and neither has a federal registration. Only a court can render a decision about the right to use, such as issuing an injunction or awarding damages for infringement. It should be noted that a federal registration can provide significant advantages to a party involved in a court proceeding. The PTO cannot provide advice concerning rights in a mark; only a private attorney can. Unlike copyrights or patents, trademark rights can last indefinitely if the owner continues to use the mark or identify its goods or services. The term of a federal trademark registration is 10 years, with 10-year renewal terms. However, between the fifth and sixth year after the date of initial registration, the registrant must file an affidavit setting forth certain information to keep the registration alive. If no affidavit is filed, the registration is canceled. Types of Applications for Federal Registration An applicant may apply for federal registration in three principle ways: An applicant who has already commenced using a mark in commerce may file based on that (a use application). An applicant who has not yet used the mark may apply based on a bona fide intention to use the mark in commerce (an intent-to-use application). For the purpose of obtaining federal registration, commerce means all commerce that may lawfully be regulated by the U.S. Congress-for example, interstate commerce or commerce between the United States and another country. The use in commerce must be a bona fide use in the ordinary course of trade, and not made merely to reserve a right in a mark. Use of a mark in promotion or advertising before the product or service is actually provided under the mark on a normal commercial scale does not qualify as use in commerce. Use of a mark in purely local commerce within a state also fails to qualify as use in commerce. If an applicant files based on a bona fide intention to use in commerce, the applicant will have to use the mark in commerce and submit an allegation of use to the PTO before the PTO will register the mark (see Part 3). Additionally, under certain international agreements, an applicant from outside the United States may file in the United States based on an application or registration in another country. For information regarding applications based on international agreements, please call the information number provided in Part 2. A U.S. registration provides protection only in the United States and its territories. If the owner of a mark wishes to protect a mark in other countries, the owner must seek protection in each country separately under the relevant laws. The PTO cannot provide information or advice concerning protection in other countries. Interested parties may inquire directly in the relevant country, in its U.S. offices, or through an attorney. Who May File an Application? The application must be filed in the name of the owner of the mark-usually an individual, corporation, or partnership. The owner of a mark controls the nature and quality of the goods or services identified by the mark. See below in the line-by-line instructions for information about who must sign the application and other papers. The owner may submit and prosecute its own application for registration, or may be represented by an attorney. The PTO cannot help select an attorney. Foreign Applicants Applicants not living in the United States must designate in writing the name and address of a domestic representative-a person residing in the United States 'upon whom notices of process may be served for proceedings affecting the mark.' The applicant may do so by submitting a statement that the named person at the address indicated is appointed as the applicant's domestic representative under 1 (e) of the Trademark Act. The applicant must sign this statement. This person will receive all communications from the PTO unless the applicant is represented by an attorney in the United States. Searches for Conflicting Marks An applicant is not required to conduct a search for conflicting marks prior to applying with the PTO. However, some people find it useful. In evaluating an application, an examining attorney conducts a search and notifies the applicant if a conflicting mark is found. The application fee, which covers processing and search costs, will not be refunded even if a conflict is found and the mark can't be registered. To determine whether the two marks conflict, the PTO determines whether there would be likelihood of confusion-that is, whether relevant consumers would be likely to associate the goods or services of one party with those of the other party as a result of the use of the marks at issue by both parties. The principal factors to be considered in reaching this decision are the similarity of the marks and the commercial relationship between the goods and services identified by the marks. To find a conflict, the marks need not be identical, and the goods and services do not have to be the same. The PTO does not conduct searches for the public to determine if a conflicting mark is registered, or is the subject of a pending application, except as just noted, when acting on an application. However, you can get this same type of information in a variety of ways: Perform a search in the PTO public search library, located on the second floor of the South Tower Building, 2900 Crystal Dr., Arlington, VA 22202. Visit a patent and trademark depository library (at locations listed in Part 4). Go to either a private trademark search company or an attorney who deals with trademark law. The libraries in the first two entries have CD-ROMs containing the trademark database of registered and pending marks. The PTO cannot provide advice about possible conflicts between marks. Laws & Rules Governing Federal Registration The federal registration of trademarks is governed by the Trademark Act of 1946, as amended, 15 U.S. C. 1051 et seq.; the Trademark Rules, 37 C.F.R. Part 2; and the Trademark Manual of Examining Procedure (2d. Ed. 1993). Other Types of Applications In addition to trademarks and service marks, the Trademark Act provides for federal registration of other types of marks, such as certification marks, collective trademarks and service marks, and collective membership marks. These are relatively rare. For forms and information regarding registration of these marks, please call the appropriate trademark information number, indicated below. Where to Send Application and Correspondence The application and all other correspondence should be addressed to The Assistant Commissioner for Trademarks 2900 Crystal Drive Arlington, VA 22202-3513 The initial application should be directed to 'Box NEW APP/FEE.' An AMENDMENT TO ALLEGE USE should be directed to 'Attn. AAU.' A STATEMENT OF USE or REQUEST FOR AN EXTENSION OF TIME TO FILE A STATEMENT OF USE should be directed to 'Box ITU/ Fee.' The applicant should indicate his or her company's telephone number on the application form. Once a serial number is assigned to the application, the applicant should refer to the serial number in all written and telephone communications concerning the application. It's advisable to submit a stamped, self-addressed postcard with the application specifically listing each item in the mailing-that is, the written application, the drawing, the fee, and the specimens (if appropriate). The PTO will stamp the filing date and serial number of the application on the postcard to acknowledge receipt. This will help the applicant if any item is later lost or if the applicant wishes to inquire about the application. The PTO will send a separate official notification of the filing date and serial number for every application about two months after receipt....

Sample Electronic Communication Policy
Every firm with a computer network, Internet access, or e-mail should have a policy for using them. Without one, you risk wasted time and inappropriate use by employees that can be unprofessional at best. Steve Anderson addresses the need with this document, a sample electronic usage policy template you can use as is, or customize to your firm. ABC Insurance Agency Policy Purpose To maximize the benefits of electronic communications to ABC Insurance Agency (The Company) and its employees, while protecting the Company and its employees from liability and/or performance challenges due to improper or unauthorized use of the systems made available to facilitate the business of the Company. Company Property As a productivity enhancement tool, the Company (including all subsidiaries) provides and encourages the business use of electronic communications (notably the Internet, voice mail, electronic mail, and fax). Electronic communications systems owned by the Company and all messages generated on or handled by these electronic communications systems, including back-up copies, are considered the property of the Company. Any attempt to violate, circumvent, and/or ignore these policies could result in corrective action, up to and including termination. Authorized Usage The Company’s electronic communications systems must be used solely to facilitate the business of the Company. Users are forbidden from using the Company’s electronic communications systems for private business activities, personal, or amusement/entertainment purposes. Employees are reminded that the use of corporate resources, including electronic communications, should never create either the appearance or the reality of inappropriate use. Inappropriate use might result in loss of access privileges and disciplinary action, up to and including termination. Proper Usage Employees are strictly prohibited from using Company computers, e-mail systems, and Internet access accounts for personal reasons or for any improper purpose. Some specific examples of prohibited uses include, but are not limited to: Transmitting, retrieving, downloading, or storing messages or images that are offensive, derogatory, off-color, sexual in content, or otherwise inappropriate in a business environment. Making threatening or harassing statements to another employee, or to a vendor, customer, or other outside party. Transmitting, retrieving, downloading, or storing messages or images relating to race, religion, color, sex, national origin, citizenship status, age, handicap, disability, sexual orientation, or any other status protected under federal, state, or local laws. Communicating confidential Company information to individuals inside or outside the Company or to other organizations, without specific authorization from management. Sending or receiving confidential or copyrighted materials without prior authorization. Soliciting personal business opportunities or personal advertising. Gambling, monitoring sports scores, or playing electronic games. User Identification Where electronic communications systems provide the ability to identify the activities of different users, these facilities must be implemented. For example, electronic mail systems must employ personal user-IDs and associated passwords to isolate the communications of different users. Fax machines that do not have separate mailboxes for different recipients need not support user separation. User Accountability Regardless of the circumstances, individual passwords must never be shared or revealed to anyone besides the authorized user. To do so exposes the authorized user to responsibility for actions the other party takes with the password. Violation could result in discipline of both the authorized user and the person receiving the password, up to and including termination. If users need to share computer resident data, they should use message-forwarding facilities, public directories on local area network servers, and other authorized information-sharing mechanisms. To prevent unauthorized parties from obtaining access to electronic communications, users must choose passwords that are difficult to guess (for example, not a dictionary word, a personal detail, nor a reflection of work activities). No Expectation of Privacy Employees should expect that the Company might access all information created, transmitted, downloaded, received, or stored in Company computers at any time, without prior notice. Employees should not assume that they have an expectation of privacy or confidentiality in such messages or information (whether or not this content is password-protected), or that deleted messages are necessarily removed from the system. No Default Protection Employees are reminded that Company electronic communications systems are not encrypted by default. If sensitive information must be sent by electronic communications systems, encryption or similar technologies to protect the data must be employed. Users should have no expectations of privacy using Company equipment. Unlike written communications, e-mail does not usually have an 'envelope.' Unless the e-mail message is encrypted, you’re sending a postcard, not a letter. Regular Message Monitoring Contents of electronic communications might be monitored and the usage of electronic communications systems will be monitored to support operational, maintenance, auditing, security, and investigative activities. The Company reserves the right to disclose any electronic messages to law enforcement officials without prior notice to any employees who might have sent or received such messages. Users should structure their electronic communications recognizing the fact that the Company will, from time to time, examine the content of electronic communications. Because all messages are company records the Company reserves the right to access and disclose any message sent over its electronic messaging systems. The Information Technology Department and Department Supervisors have the right to review the electronic communications of the employees they supervise to determine whether there have been any breaches of security, violations of company policy, or unauthorized actions on the part of the employee. Statistical Data Consistent with generally accepted business practice, the Company collects statistical data about electronic communications. For example, call detail reporting information collected by telephone switching systems indicates the numbers dialed, the duration of calls, the time of day when calls are placed, etc. Using such information, Information Technology personnel monitor the use of electronic communications to ensure the ongoing availability and reliability of these systems. If during the collection and review of such information they find questionable, inappropriate or illegal use of electronic communications, they must report their findings to management. Contents of Messages Workers must not use profanity, obscenities, or derogatory remarks in electronic messages discussing employees, customers, competitors, or others. Such remarks — even when made in jest — might create such legal problems as trade libel, defamation of character, or harassment/discrimination claims. Special caution is warranted because backup and archival copies of electronic mail might actually be more permanent and readily accessed than traditional paper communications. Therefore, transmission of obscene or harassing messages to any individual is strictly prohibited. Message Forwarding Recognizing that some information is intended for specific individuals and might not be appropriate for general distribution, electronic communications users should exercise caution when forwarding messages. Sensitive Company information must not be forwarded to any party outside the Company without the prior approval of management. Blanket forwarding of messages to parties outside the Company is prohibited unless such permission has been obtained. Handling Information About Security Users must promptly report all information security alerts, warnings, suspected vulnerabilities, and the like to an appropriate manager. Users are prohibited from utilizing Company systems to forward such information to other users, whether these users are internal or external to the Company. Public Representations No media advertisement, Internet home page, electronic bulletin board posting, e-mail message, voice mail message, or any other public representation about the Company can be issued without prior approval by management. Archival Storage All official Company e-mail messages, including those containing a formal management approval, authorization, delegation, or handing over of responsibility, or similar transaction, must be archived/copied to individual user archive files within the Company e-mail facility. Purging Electronic Messages Messages no longer needed for business purposes must be periodically purged by users from their electronic message storage areas (including outboxes, in-boxes, and file folders). It’s recommended that individual users delete electronic messages stored on the Company’s e-mail systems after 90 days. After seven days e-mail which has been sent to 'Trash' will automatically be purged in order to increase scarce storage space and simplify records management and related activities. Voice mail messages are saved for 30 days, then purged. Undeliverable messages are automatically deleted. Harassing or Offensive Materials The Company computer and communications systems are not intended and must not be used to exercise employees’ right to free speech. Sexually explicit words and images, ethnic slurs, racial epithets, religious or political statements, or anything else that might be construed as harassment or disparagement of others based on their race, national origin, sex, sexual orientation, age, religious beliefs, or political beliefs may not be displayed or transmitted. Unwanted telephone calls, e-mail, and internal mail messages are strictly prohibited, with violators subject to disciplinary action including termination. Users are encouraged to respond directly to the originator of such messages. If the originator does not promptly stop sending offensive messages, users must report the communications to their manager and the Human Resources department. The Company retains the right to remove from its information systems any material it views as offensive or potentially illegal. Establishing Electronic Business Systems Although the Company seeks to aggressively implement Electronic Data Interchange (EDI) and other electronic business systems with third parties, all contracts must be executed by paper documents prior to purchasing or selling via electronic systems. EDI, e-mail, and similar binding business messages must be released against blanket orders, such as a blanket purchase order. All electronic commerce systems must be approved prior to usage. Paper Confirmation for Contracts All contracts entered into through electronic offer and acceptance messages (fax, EDI, electronic mail, etc.) must be formalized and confirmed by paper documents within two weeks of acceptance. Employees must not employ scanned versions of hand-rendered signatures to give the impression that the sender signed an electronic mail message or other electronic communications....

... a patent protects an invention. For copyright information, call the Library of Congress at (202) 707-3000. Establishing Trademark Rights Trademark rights arise from either (1 ) actual use of the mark, or (2 ) the filing of a proper application to register a mark in the Patent and Trademark Office (PTO) stating that the applicant has a bona fide intention to use the mark in commerce regulated by the U.S. Congress. (See below, under Types of Applications, ' for a discussion of what is meant by the terms commerce' and use in commerce.) Federal registration is not required to establish rights in a mark, nor is it required to begin use of a mark. However, federal registration can secure benefits beyond the rights acquired by merely using a mark. ... example, the owner of a federal registration is presumed to be the owner of the mark for the goods and services specified in the registration, and to be entitled to use the mark nationwide. There are two related but distinct types of rights in a mark: the right to register and the right to use. Generally, the first party who either uses a mark in commerce or files an application in the PTO has the ultimate right to register that mark. The PTO's authority is limited to determining the right to register. The right to use a mark can be more complicated to determine. This is particularly true when two parties have begun use of the same or similar marks without knowledge of one another and neither has a federal registration. Only a court can render a decision about the ...

Agency Risk Management Of Soft Market/Hard Market Exposures
How well are you managing your loss exposures involving market conditions? This article will offer guidelines on your agency’s management of market exposures in hard and soft markets alike. During a soft market, carriers are far more flexible and willing to grant enhancements that aren’t available in a hard market. Knowing what gaps can occur and making sure the client understands them can help avoid or reduce the impact of an E&O claim and help make your client an agency advocate. There are fewer exposures when you go from a hard market to a soft market than when going from a soft market to a hard one. When the market hardens, standard carriers become more selective about what business they write and under what terms. Excess & Surplus Lines (E&S) carriers increase their writings considerably. When you need to move a standard policy into an E&S market, you must consider a number of due diligence areas, such as: Policy coverage and definitions Restrictive endorsements Occurrence vs. claims-made forms Admitted vs. Non-Admitted carriers Solvency/guaranty fund protection Relationship with a contracted carrier vs. the E&S broker or carrier Even if an E&S market uses a standard form, it might be an older version than the one your client currently has and/or be more restrictive than the one it’s replacing. You could also run into a situation in which a coverage enhancement included on the old form must be added to the new one at an additional premium. You might find that the new policy’s definitions section isn’t as inclusive as the old one or that there’s been a change as to whether it’s an occurrence or a claims-made form. Even if you move the coverage from one standard carrier to another, the old carrier might have coverage enhancements that the new carrier doesn’t include. This all boils down to the fact that your agency needs to exercise a greater degree of due diligence to avoid or reduce the impact of an E&O claim. Taking the right steps will also serve the client more effectively and strengthen your carrier relationships. In that light, we’ll discuss three broad topics — solvency, regulatory issues, and policy coverage — focusing on background information, exposures, and agency risk management techniques. SOLVENCY Although solvency is a concern in hard or soft markets alike, the problem worsens with increased E&S use in a hard market. E&S market insolvency is no higher than for standard companies. In most cases, agents who use E&S markets are “once removed” from the kind of contracted company relationship it has with standard carriers. If the E&S market is e approved but not admitted to do business in the agent’s state, the problem becomes still more serious. Also, in most states an E&S market carrier has as much regulatory oversight as an admitted and licensed carrier and that has met the financial deposit requirements. Finally, the State Guaranty Fund protection probably won’t extend to the insured if the carrier becomes insolvent. To start with, most E&S brokers do a good job of advising agencies about companies’ Best ratings. In many states, specific requirements and procedures apply when using an E&S market. Because your agency’s due diligence requires making sure that the client understands the risk, it’s necessary to understand Best’s or other rating organizations. RATINGS A.M. Best, established in 1899, has a huge database. It’s considered the leader and the standard for the industry. There are other rating organizations, most of which are also outstanding sources of information. Some of these firms specialize in certain areas. As a general rule, avoid carriers that A.M. Best rates as “vulnerable,” although sometimes there’s no other market available. Best rates carriers with a “B” or below and those with a financial performance rating (assigned to small or new companies that provide the required financial information) of FPR 4 as vulnerable. Your E&O policy might also have an insolvency exclusion. At the least, you should take specific steps to explain and document the client’s risk. Best also has a number of “Not Rated” categories for such reasons as insufficient data and operating experience. Take such a rating as a warning either to not use the market or to be particularly careful in advising the client. Here are some specific E&O risk management techniques your agency might use: Establish an ongoing Best’s (or other rating organization) rating review program. Make it a regular duty of your producers and staff to check the ratings. Review your agency’s current E&O policy and every renewal, as well as any policy provisions, if you shop your renewal with other E&O markets. If there’s an insolvency exclusion, ask your E&O carrier if it can be deleted based on your written policies and procedures for monitoring activity. If not, the carrier might have a broadening endorsement that reduces the impact of an insolvency, based on special circumstances. Develop, install, and enforce a policy of not using carriers with “vulnerable” ratings. If special circumstances force you to use a vulnerable carrier, outline and communicate the specific actions and requirements that must be followed to use the carrier. Have a written procedure requiring that a carrier’s rating be checked and recorded before using it. If the rating has been downgraded, even with a “secure” rated company or when Best notes that a company is “under review,” require agency management approval before using the carrier. Make following agency procedures a criterion of staff and producer performance evaluation. Since most agencies do a monthly production and financial review; it should be easy to add an automation report that monitors the ratings check. Carriers “under review” or rated “vulnerable” by A.M. Best might not be a risk, but they bear scrutiny. Advise your client accordingly and document your actions. Too many agencies do nothing because they take the attitude that the client is aware of the risk. Then, if the worst happens, they have an E&O issue that’s difficult to defend. Rating information is available daily, weekly, monthly, and annually through the rating organizations, their publications, trade magazines, newspapers, and the Internet, so there’s no reason for not keeping up with rating changes and developments. REGULATORY ISSUES Regulatory issues involve state insurance regulatory agencies and the roles they play. The issue of whether a state or federal agency will regulate the industry is still up in the air; although the states will probably continue to regulate, this might change. Possible areas of change include licensing standardization among the states, the possibility of a single federal agent’s license, resident/nonresident agent status, electronic signatures, and electronic commerce in general. What’s certain is that there will be change. The potential impact of combining financial services, insurance, and electronic commerce is just emerging. The time frame for change is compressed, and an enormous amount of information will be available instantly. Most states tax premiums to raise the money for regulatory activity, but the regulatory agency gets so little of this revenue that it can’t afford the actuaries, auditors, technicians, and other specialized staff to oversee admitted companies properly. Most states do a commendable job with their limited resources. Your agency can’t just pass off its due-diligence responsibility to the regulatory agency. Your clients view you as their primary information source and expect you to inform them of developments that might affect them. Communication with clients is more important than ever amid the company mergers, acquisitions, and realignments, and the expected regulatory changes. For example, although the causes of an insolvency might evolve over time, it could be triggered by a sudden event — such as a catastrophe loss, an unexpected revenue reduction, or a market downturn that reduces investment income — without which there might not be an insolvency at all. It’s crucial to pay attention to your market performance! POLICY COVERAGE Policy coverage involves two broad areas: Policy forms, coverage, definitions, and endorsements Occurrence/claims made, coverage triggers, retroactive date, and extended reporting periods We’ve mentioned the differences between E&S and standard markets; but you might also have problems going from one standard carrier to another. Although many carriers use ISO or AAIS coverage parts and forms, a number of carriers use their own filed forms. Also, a carrier might use an ISO form and then file its own endorsements. Definitions might be more specific on some forms than on others. Coverage enhancement endorsements might differ from one carrier to another. Even if the client renews with the expiring carrier, the carrier might have filed a renewal coverage that’s only slightly more restrictive to most insureds, but happens to affect your client significantly. In all these cases, it’s essential to review renewal policies and forms, and new business policies when changing carriers. When writing a new client, compare their current carrier’s policies with your replacements — a good practice whether the market is hard or soft. Pay careful attention to the edition dates of the forms, definitions, and endorsements, as well as to the forms. It’s crucial to confirm any differences, positive or negative, with the client for their benefit, as well as to avoid or minimize an E&O claim. Remember the old saying: An ounce of prevention is worth a pound of cure. Occurrence/claims made, triggers, retroactive dates, and extended reporting considerations are other problem areas, primarily in Liability and Umbrella/Excess Liability policies. You must understand these areas to prevent coverage gaps and to be able to explain them to the client, who then can make an informed decision. In general, when a policy that has been on an occurrence basis continuously is renewed on an occurrence basis, a problem is unlikely. However, changing from one basis to the other can cause coverage gaps if you don’t understand and inform the client of the circumstances. You should also consider coordinating a General Liability policy with an Umbrella/Excess Liability policy. You need to be able to explain these terms to your clients: Policy Trigger: This determines when a specific Liability policy covers a claim. Occurrence Trigger: The loss is covered if the event causing the loss occurs during the policy period, no matter when the loss is reported. Claims-Made Trigger: The loss must be reported during the period the policy is in effect. Retroactive Date: This is usually the inception date of the policy, but it can be a specified date prior to inception or not specified at all (also called “prior acts” or “full prior acts” coverage). Extended Reporting Periods: This is usually called “tail” coverage because once it’s added, the policy will cover claims submitted after the policy expires. Normally, the policy is designed to cover claims reported within five years, as long as the occurrence is reported to the insurer within 60 days of the end of the policy term. CONCLUSION We’ve only covered the tip of the iceberg in soft market/hard market E&O exposures. Taking initiatives to reduce these exposures will benefit your agency, while demonstrating your professionalism and your concerns to your clients....

Compulsory Arbitration Clauses In Contracts With Insurance Producers
Insurance producer contracts frequently have alternate dispute resolution clauses, which require certain disputes to be arbitrated. These clauses should be re-examined in light of recent legal developments. FORMER FAVORED STATUS OF ARBITRATION CLAUSE Arbitration clauses in contracts have been recognized and even encouraged under federal and California arbitration acts. Until recently, it was commonly felt among employers that mandatory arbitration clauses in employment agreements were a wise precaution. Often such clauses included statutory causes of action, such as claims for violations of civil rights laws and purely contractual disputes. Stock exchange-member companies and banks have made widespread use of such clauses, and they're frequently used in insurance producer contracts. In the late 1990s, a number of developments have cast serious doubt on the efficacy of arbitration clauses in many areas, and point out the need for fairness and careful drafting if they are to be used. ATTACKS BY THE COURTS ON MANDATORY ARBITRATION In the past, the U.S. Supreme Court has held that Title VII statutory civil rights actions for such matters as race, sex, age, or disability discrimination were intended by Congress to be tried in the federal courts, and could not be the subject of a mandatory arbitration provision. In 1991, however, the U.S. Supreme Court held that an arbitration clause in a collective bargaining contract covering age discrimination claims was enforceable. This led some to believe that arbitration agreements could be used for some kinds of statutory civil rights cases. However, recent cases suggest that the federal courts will continue to strike down compulsory arbitration clauses for civil rights claims. In 1998, the 9th U.S. Circuit Court of Appeals struck down an arbitration clause in a securities broker's contract in a sex-discrimination action on the grounds that Congress didn't intend to permit a waiver of the right to a trial in federal court in Title VII civil rights cases. The court did state that there's no constitutional bar to advance agreements to arbitrate state tort and contract claims (other than for violation of state civil rights laws). Two recent 9th Circuit opinions have refused to enforce an employer-employee arbitration agreement in an Americans With Disabilities Act (ADA) case, one because the underlying collective bargaining contract didn't provide for arbitration, and the other because the Federal Arbitration Act supposedly didn't apply to employment contracts which Congress had power to regulate as interstate commerce. However, a California appellate court recently disagreed with the federal approach and struck an offending limitation on damages from the contract, as well as enforced arbitration on the grounds that is was limited. Federal courts have also been striking down civil rights arbitration clauses for lack of specificity. A federal court recently held that an employee had not waived his right to sue for ADA violations by agreeing to arbitrate any employment related disputes, because the waiver was 'neither explicitly presented nor explicitly accepted.' At least two decisions the previous year also found that a 'knowing' waiver of arbitration was not shown. The courts are also targeting efforts to limit damages and expenses through arbitration clauses. A contractual provision limiting damages to contract damages (thereby excluding punitive damages) was held by one California court to make the entire agreement unenforceable. Normally a court would limit the agreement, and enforce it with the limitation. Another federal district court recently imposed the entire cost of a private judge on the employer. Even attempts to broaden the rights of the parties to an arbitration agreement might not work. One court refused to honor a provision permitting limited appeals of matters arbitrated, on the grounds that the arbitration statute didn't allow it. The U.S. Supreme Court recently held that an arbitration provision in a collective bargaining contract was not specific enough to be enforceable in an ADA case. Similarly, the California Supreme Court will decide whether arbitration clauses in Health insurance contracts can be circumvented by use of the California Consumers Legal Remedies Act. These cases may shed some light on the future viability of compulsory arbitration clauses for statutory civil rights cases. ATTACKS ON MANDATORY ARBITRATION The plaintiffs' bar has been active in pushing legislation in California to limit the use of mandatory arbitration clauses entered into before the dispute arises. In the face of these attacks, some employers have begun to abandon compulsory arbitration clauses in their employment contracts. For example, Merrill Lynch announced that it would dismantle its employee arbitration program, and allow employees to take their claims to court. In addition, large arbitration organizations such as the American Arbitration Association and Jams/Endispute are reviewing whether to accept mandatory arbitration cases when one party objects. STRENGTHENING THE ARBITRATION AGREEMENT If employers intend to retain mandatory arbitration provisions in employment contracts, they should take steps to try to increase the likelihood that they will be upheld: Be fair and evenhanded. An unconscionable agreement will not be enforced. Consider nonbinding mediation as a first step. It often works. Be aware of the risk in limiting the kinds of damages that can be imposed. This could invalidate the entire arbitration agreement. The agreement should show on its face that the employee knew of the arbitration clause and agreed to it. Consider having both parties initial the arbitration clause. Some have advocated using a separate arbitration agreement, instead of making the arbitration provisions part of a larger contract. If the agreement eliminates the right to go to court, jury trial, or an appeal, emphasize this by use of capital letters or boldface type, so that a party would have difficulty arguing that he or she didn't know of the provision. Specifically state that the arbitration provision applies to specific statutory remedies, if that's the case. For example, if it's intended to apply to federal and state age-discrimination claims, it should specifically say so. Be aware that the 9th Circuit holds that no Title VII sex-discrimination claims (and possibly no federal and state civil rights claims) can be the subject of an arbitration agreement entered into before the dispute arose. The agreement should probably have a severability clause, stating that even if part of the agreement is unenforceable, the balance will remain enforceable. If you ask existing employees to sign an arbitration agreement, pay them something or give them something of value in exchange. An employer should weigh the advantages and disadvantages of an attorneys' fees clause. Attorneys' fees can probably be collected against the employer if it loses. What are the chances of collecting them from the employee? Are they really a deterrent to frivolous suits? On balance, fair and properly drafted mediation and arbitration agreements in employment contracts are probably still useful. However, existing arbitration agreements need to be reviewed in light of recent developments....

How Good Is Your Competition?
HOW GOOD IS YOUR COMPETITION? A Competitive Position Analysis Agencies can benefit from comparing themselves to their closest competitors: other independent agents, direct writers, even banks. The existence of competing organizations and their level of competence will affect the share of the marketplace available to you and the security of your current book of business. It may take some time to put this information together in a meaningful way, but a thorough competitive position analysis is worth the effort. The more information you gather, the better prepared you will be to compete for market share. You'll want to record the following information about your own agency and about targeted competitors,: How many years has the organization been in business? Is the organization growing, declining, or holding its own? What is the organization's financial condition? Does the organization have markets for all its accounts? Does the organization offer a full line of financial products and services? What is the organization's reputation regarding account retention? What percentage of the organization's business comes from referrals? Does the organization have a formal sales-management program? What is the organization's reputation regarding its staff's professionalism? What is the quality of the organization's policy service? What is the quality of the organization's claims service? Are the organization's internal operations fully automated? What percentage of the organization's book is downloaded? Is the organization uploading? With how many companies? Does the organization have written procedures for its internal operations? What is the condition of the organization's physical plant? To what extent is the organization and/or its staff involved in community affairs? In industry affairs? Doing an objective analysis of your own agency can give you a fresh look at your operation. It may show you strengths, capabilities, and potential weaknesses you have overlooked in the past. Evaluating your competitors' operations is harder. To gather the information, you will need to use a variety of approaches, among them: observation conversations at meetings of local business associations, such as producer associations, Chambers of Commerce, Jaycees, and Rotary Clubs examination of competitors' advertising to find out what they consider their strengths conversations with people doing business with your competitors Areas in which you are as good as or better than the competition are your strengths. Build on these strengths when you plan. Areas in which the competition is better than you are opportunities for your agency to grow and improve. Make these your target areas when you set new operational objectives with your staff. © Copyright ACORD, 1990. Reprinted with permission. ...

Check Fraud And Counterfeiting
As computer and duplicating technologies have advanced and become cheaper and more widely available, check fraud and counterfeiting have grown. The U.S. Department of Justice estimates that $10 billion worth of bad checks is passed every year. Because there's no single standard and because they can be printed in many different ways, checks are much easier to copy than credit cards. Even though many large companies try to deter fraud by printing their own checks, payroll check fraud is still rampant. In fact, one Los Angeles gang recently roamed the nation, easily cashing counterfeit payroll checks to the tune of nearly $25 million. It's intriguing how a criminal mind can slowly and methodically use stealth, guile and technology to overcome individual awareness and thwart procedures and devices that are supposed to stop the intended crime. Checking should be different, but it isn't. With modern technology, criminals can produce documents that compare favorably with those produced by bankers and check printers. Key factors in check fraud and counterfeiting are the people who accept them: retail clerks, bank tellers, and the unsuspecting public. Bank tellers and retail clerks might be expected to best know how to identify a counterfeit check. Sadly, most haven't been adequately trained to do so. The majority of counterfeit checks pass through clerks or tellers. Attempts to alleviate the problem can be frustrating. In one case, all of the chambers of commerce in the Phoenix metropolitan area were offered a free seminar. Attendees would be taught to spot counterfeit checks, traveler's checks, and credit cards. Surprisingly, none of the chambers sent anyone to the seminar; however, several did call with membership offers. To understand checks and counterfeiting, you need to know what a check is, including its normal life cycle. A check is a written order, normally using a preprinted form, showing an amount due from the remitter to the payee and directing the remitter's bank to pay the payee. It's a simple document, and it's a simple concept. There are several basic parts of a check: The remitter is the entity issuing the check. The payee is the entity in whose name the check is issued. The amount is the dollar amount the check was issued for, written both numerically and alphabetically. The signature is the unique authorized signature of the remitter. The institution is the bank that's directed to pay the payee for the remitter. The unusual block printing at the bottom of a check that contains information about the institution, check number, and account of the remitter is the MICR printing. Everything is printed on core stock, also known as blank check stock. There are different kinds of checks: Business and personal checks are written by private parties for use in business or general commerce. Certified checks are business or personal checks certified with 'good funds' by the institution the check is drawn against. These certified funds are reserved in that business or personal checking account. Certified checks aren't as commonly used as they once were. Money orders and cashier's checks are by and between the issuing bank and the payee. The remitter has paid the bank to issue the check to the payee on behalf of the remitter. Money orders are for less than $400 (in most cases) and don't require the remitter or the payee to be filled in at the time of purchase from the bank. A cashier's check can be for any amount (usually more than $400), and both the remitter and the payee must be filled in at the time of purchase. When an account is opened, the bank orders checks from a check printer. The account owner then uses those checks in transactions. Most checks are deposited in the payee's bank. This bank sends the check through the Federal Reserve Bank Check Settlement process. The depositor's bank is credited with the funds. The check is then sent to the remitter's bank, and the account is debited for the amount of the check. The time difference between crediting the payee's account and debiting the remitter's account is the 'float.' Check settlement and processing go on 24 hours a day all across the country. Hundreds of millions of checks are processed every day. The checks are physically transported all across the country. Given all of this, it's amazing that the system works as well as it does. One thing this process can't do is detect counterfeit checks. Such detection is usually done by the payee before the check gets into the system or by the (alleged) remitter after the check has already been through the system. Before we had mechanical readers and computers, all checks were produced by hand and had the bank number, check number, and account number printed on them; checks contained no mechanically readable features. As mechanical readers came into common use (for speed and efficiency), so did one of the first modern check scams. As the new system was phased in, the forms had both the MICR characters at the bottom of the deposit slip and a location to write in the account number by hand. Criminals discovered that they could leave deposit slips printed with their own MICR numbers in bank lobbies in place of blank deposit slips. Other customers would unknowingly use them, fill in their account numbers by hand, and present their deposits to the teller. The teller would run the slip through the mechanical reader, and the sums would be deposited into the criminals' accounts. The MICR reader would read the MICR numbers, not the handwritten numbers on the deposit slip. At the end of the day, the criminals would withdraw as much money as they could from their accounts, which were swollen with misdirected deposits. Today the typical check criminal has to work a little harder, but not much. There are four basic types of check fraud. The Bad Check. This is a check written by the account owner against an insufficient balance. This is the most common form of fraud. Almost every checking account holder has had at least one - intentionally or not. For the vendor of products or services, this is the most common form of loss. In a low volume/high dollar transaction, such as a car purchase, funds can be verified with the bank during normal business hours or through an automated telephone balance inquiry system after the bank is closed. In a low dollar/high volume operation, such as a grocery store, the vendor can purchase insurance through a check verification or guarantee company, although it's always more cost effective to train clerks than to transfer risk through the purchase of insurance. The low volume/high dollar business should never find itself stuck with a bad check. With automated account information available by telephone 24 hours a day, obtaining proper identification of the remitter and physically inspecting the check will catch 99.99% of bad checks. But this doesn't take human nature into account. People are social creatures - we like to do business with people we like. So the more the clerks like customers and feel comfortable with them, the more vigilant they should be about verifying their checks. Criminals are masterful students of human nature. They know how to gain a clerk's confidence enough to erode barriers so that they can move in for a financial score. The second problem is insurance. What was intended as a safeguard has had unintended consequences: Tellers whose employers have insurance against bad checks accept more suspect checks than those who don't. Insurance seems to have the same effect in the checking world that it does in other sectors of risk management. The Stolen Check. Checks on current accounts are stolen from purses or mailboxes. Discarded checks are retrieved from the garbage. Checks stolen from a person through wallet or mail theft are used in a rapid fashion. These checks are usually written for items that can be easily sold for high value, such as VCRs, TVs, jewelry, and automobiles. It's also not unusual for identification to be stolen along with checks. A driver's license, credit card, or other item can help the criminal pass stolen checks. Checks lifted from the garbage are usually on inactive accounts. These 'garbage' checks are usually used slowly and just outside of the remitter's immediate area. Items purchased with these checks are usually chosen for easy resale that rarely cost more than $250. Most 'garbage' checks are business checks with only the business name and address. In this case, it's easy for the criminal to purchase business cards in the same name and begin circulating the checks without needing false identification. A recent scam involved a ring of criminals working in hospitals as security guards and maintenance workers - positions that have broad access authority to even the most secure areas. When cleaning or checking on doctors' offices in the hospital, the thieves would peel open the corners of envelopes containing checking account information (either outgoing bill payments or on incoming checking statements). They viewed the mail through the open corners with an arthroscope and recorded the account information. Counterfeit checks were then created and passed at the alarming rate of 10 or more per day. Methods for avoiding a check theft are similar to those for avoiding bad checks. Review the remitter's identification. Be suspicious if the identification is from out of state but the check isn't. Another dead giveaway is the remitter's not recording information in the check register; after all, criminals don't care how much is in the account because it isn't their account. Passers of stolen checks are often impatient and will try to distract the person accepting the check. They will often make a fuss about ID and other formalities. The more indignant they become, the more suspicious the clerk should be. The Wiped Check. Used checks that have already been through the banking system are taken, usually from a mailbox or garbage can. Wiped checks have been common for years, but they're gaining new popularity. The criminal sets up a lab to erase the check information with acids and organic solvents. Once the check has been wiped clear of the payee, the amount, and sometimes even the signature, the criminal dries and reissues the check. Wiped checks have certain characteristics: The paper of a wiped check is never as flat and smooth as the original. The paper fibers absorb water and solvent during the wiping process and subtly shift positions, changing the feel of the check paper. In addition, wiped checks are usually passed as single checks; they are not in a book like normal checks. If they've been bound into a book, the binding material is usually gum, the same material used to bind cheap note pads. Sometimes, all of the pen ink isn't removed or the paper has indentations from the original writing on the check. In this case, ghost images of the original check are visible. Many new checks are printed on stock treated to react with wiping chemicals, leaving distinctive marks on altered checks. The Counterfeit Check. Counterfeit checks have usually been copied or printed on a laser printer. They contain all of the account information in the MICR and may or may not resemble the true account holder's check stock. Checks used to be fairly safe, but as with cash, counterfeiters can now duplicate checks with amazing accuracy. The Justice Department estimates that 20% of all bad checks passed are counterfeit. Financial fraud is growing, forcing banks and individuals to find new ways to protect themselves. Sophisticated desktop publishing software, scanners, laser printers, and color copiers have contributed to the problem. All a criminal needs to begin is a good check from a business, person, or bank. The key item is the MICR printing on the bottom of the check. Once the criminal has a good account number, the remaining work is done at the desktop. They create a check with desktop publishing software and a laser printer. Then they change the printer or the printer cartridge and duplicate the MICR printing on the newly created counterfeit check stock. What began as a way for businesses to safeguard their accounts by printing their own checks has been co-opted by criminals and turned against the businesses. There are several steps in identifying bad checks. One characteristic feature of counterfeit checks printed with color copiers or color laser printers is the toner. The checks are usually slightly shiny and have a raised feel. A laser printer will lay down toner only where it's required, so the check will have ridges and bumps where the toner is applied and valleys where it isn't. Color-copied checks will have a complete layer of toner over the entire surface and will often have a yellowish appearance where they should be white. Counterfeit checks are usually printed one at a time on 81/2'x11'sheets of paper and must be cut to size, so examine checks to see whether they're trimmed correctly and cut square and clean. Color-copied and laser-printed checks won't have fine line detail, delicate borders, security screens, or microprint. The Federal Reserve has also instituted a set of standards for printing checks based on Federal Reserve Regulation CC. The resulting features ease processing and identification of counterfeit checks. On many newer checks, a padlock icon and the letters 'MP' are printed somewhere on the front of the check. The padlock icon instructs the reader of the check to look at the back. On the back of the check, next to the padlock icon, is an explanation of the security features built into and printed on the check. The 'MP' is next to the feature that contains microprint. However, fraud and counterfeiting still occur, despite advances in check printing and technological devices designed to make them more difficult. These features aren't working because the people who accept checks are either ignorant, willfully negligent, or both. A restaurateur and a very intelligent businessman, recently sold his old vehicle. The buyer looked at the car on a Friday morning and told the restaurateur he'd return with a cashier's check for the full amount. The buyer returned at approximately 5:30 P.M. the same day, cashier's check in hand, and left with the vehicle and title. The title was transferred the next day (Saturday), and the cashier's check was deposited the following Monday. The seller got a call from his bank several days later advising him that the cashier's check was counterfeit and the bank wouldn't honor it. It turns out that he was just one of 42 people who'd lost their vehicles in the same fashion that Friday. The 42 cars are now probably in parts or in another country. The seller knew the deal was too good to be true - the buyer hadn't even argued with him about the price of the car. An examination of the counterfeit check revealed that it had been produced by a laser printer, and it wasn't a very professional effort at that. Anyone with 30 minutes of training would've spotted the check from across the room. A major bit of irony in all of this was that the counterfeit cashier's check had been drawn on the same bank it was deposited into, and it still took more than three days for the bank to discover it. There are no appearance standards for checks. They can be printed in many different ways, making them easier to copy than credit cards. Many large companies print their own checks. Payroll check fraud is rampant, with executives just as vulnerable as corporations to such scams. One Boston gang got executives' names and birth dates from 'Who's Who' and applied for credit and loans in those names. A new account can drain a bank as criminals deposit a counterfeit check and then draw on it before the fraud is discovered. To stop this, banks increasingly require at least two pieces of personal identification on each new account. Some also delay ordering checkbooks and issuing of ATM cards until the account holder's references have been verified. Individuals should benefit from check guidelines issued by the Financial Stationers Association (FSA), a trade group based in Washington for check printers. The FSA's recommendations include using microprinted data and a lightly printed security screen that can't be picked up by a color copier or laser scanner. Checks bearing these marks will have the padlock symbol on the front. Some institutions now require customers to order checks from the bank's vendor. Preventing access to basic information and check stock is the first step in reducing fraud. The second is to educate tellers and cashiers on the characteristics of good and bad checks. Protect account information and limit the amount of personal information that appears in any one place. Don't have phone numbers or driver's license numbers printed on checks. Credit card numbers shouldn't be written on a check even if a sales clerk asks for it. Having all of this information in one place leaves the account holder open to fraud. Protect checks as if they were cash, and report lost or stolen checks. Review bank statements as soon as they arrive; there's no excuse for being lax about that. Criminals will usually tap into a number of accounts, taking a portion of each, but not bleeding any one account dry. Store cancelled checks in a safe place, and voided checks should be torn into small pieces or shredded before being discarded. Handle the deposit slips and checks you receive with care. A cashier's check is the easiest to counterfeit; it's not always a good safeguard. Don't accept a cashier's check from a stranger unless they're willing to walk into a bank and get cash prior to taking possession of an item. If this isn't possible, hold the title to the item until the check has been cashed. Take special care when using an ATM. Never leave a receipt near the machine, and use care when entering PIN numbers. If you don't, a criminal can steal the account number. When a thief steals a credit card, the account holder is liable for no more than $50. Consumers are similarly protected from check fraud. Account holders are protected if their checking account numbers are compromised or if someone has assumed their identities or stolen their checks. The bank takes the hit. But it's a lot like being rear-ended in a car accident: It might be the other guy's fault, but fixing the problem can be bothersome. Despite efforts by the American Bankers Association and the FSA to make counterfeiting more difficult, it won't stop. A mechanical reader/verification step in processing is the best alternative to better-trained clerks. With rapid advances in technology and its costs coming down, there will be more casual counterfeiters, such as students at an Ivy League college who found it easier to make money with a color copier than at a job. Checks of the future might have such anti-counterfeiting measures as watermarks, fibers, embossing, foils, additional MICR algorithm features, specialty inks (including hard to reproduce colors), colorshifting inks, and ultraviolet inks. And they'll have multiple features to thwart counterfeiting, not just one. The consumer will bear most of the burden because these checks will cost more to print. And even these advanced features won't stop counterfeiting by themselves; trained people and check-reading technology will still be needed to detect bad checks. Increased use of direct deposits for employees and regular vendors and customers will cut down on the availability of checks to copy and counterfeit. There will be a rise in the use of credit and debit cards, but these aren't secure either. Banks will most likely go to an image-based check-clearing method to clear checks electronically before physically transporting them. This won't necessarily reduce fraud; it'll just catch it quicker. The technological barriers to checks clearing with image processing are daunting. Everything will have to work without error. A common protocol for data transmission and compression technology will need to be established, along with a secure method of transferring this information. Such technology is 10 or more years away from widespread use, though banks may use more of it for internal check reconciliation. CONCLUSION The payee most often stops a bad check, before it gets into the system and defrauds the person on whose account it's drawn. Check insurance costs money and only applies after a retailer has suffered a loss and if they've followed the proper protocol. The awareness of everyone who deals with checks is the best way to stop the fraud. It's not difficult to detect; in fact, it's easy. The key to prevention is as simple as a little training and education....

Family & Medical Leave Act Of 1993
  FAMILY & MEDICAL LEAVE ACT OF 1993 by Marvin Sahl, CLU Final rules for The Family and Medical Leave Act of 1993 (FMLA) were effective on February 6, 1995. The law and the rules are administered by the Wage and Hour Division of the U.S. Department of Labor. There are two kinds of eligibility: That of the employer complying with the act, and that of the employee qualifying for the leave. As with all federal laws and rules, regulators have attempted to anticipate every possible situation, so the Act has both central and side issues. This article endeavors to explain the relationship of the FMLA to COBRA. This intertwining is considerable, confusing, and constricting, and this article attempts to solve the contradictions between the two acts through a simple reading of the rules. Part 1 of this article concerns the matters just described. Part 2 is an unedited copy of the 'Compliance Guide of the Family and Medical Leave Act.' After that is an unedited copy of the rules as printed in the Federal Register on January 6, 1995, including COBRA rules. Because the rules were published only recently, none of them have been tested in the courts, at least of this writing (mid 1995). Such tests will probably be made over several years, by employers who claim economic or administrative hardship -- or by those who believe that the rules exceed Congress' original intent. PART 1 THE MISUNDERSTOOD KEY EMPLOYEE EXCEPTION This exception applies to 'key' employees, defined in the rules (see Part 2). Nothing in the law allows an employer to keep from granting key employees a required, qualifying leave. The exception has to do with the key employee's return to work and job restoration. Simply put, if the employer would suffer 'substantial and grievous economic injury to its operations, the employer may refuse to reinstate certain highly paid key employees after using FMLA leave, during which health benefits are maintained.' Denying return to work or restoration of job requires careful adherence to rules that appear in Part 2 of this article. WHICH EMPLOYERS MUST COMPLY? Basically, the Act requires compliance by employers of 50 or more employees for 20 or more work weeks per year, at each single location or within 75 miles of the single location. Employees whose jobs entail travel from the location, although not always present at the location, are counted in the determination. The rules promulgated on January 6, 1995 require all governmental units, regardless of the number of employees or their locations, to comply with the Act (except for some school districts). Section 825.106 of the Act widely extends eligibility through what it calls 'Joint Employment.' This is an ERISA term, and is quoted verbatim in Part 2. I checked with the Chief Attorney for the Wage and Hour Division in Washington D.C., only to learn that the new rule's purpose is to broaden the number of people covered by the Act. The specific relationship of contractors (of any sort) and subcontractors was intentionally included. There is no question as to the implication. Clearly, the employees of the contractor and subcontractor are combined to determine the census of employees. Rules are listed for giving notice, leave, and negotiation in joint employment situations. Eligibility rules for counting the number of employees on an employer's payroll are found in the ERISA guidelines. An insurance agency with only a handful of employees would not be required to comply except when independent contractor agents and their employees are considered to be joint employees of both employers.EMPLOYEE ELIGIBILITY If someone works for an employer who must comply with the Family Leave Act, his or her eligibility for leave is delineated in the rules. Employees must have worked for the employer for at least a year, during which they were on duty for at least 1,250 hours. Eligibility also depends on the reason(s) for taking the leave. The birth or adoption of a child-or illness of the employee, spouse, child, or parent-may constitute valid reasons for leave. There is little flexibility beyond these parameters.OTHER RULES Return to work, failure to return to work, employment status upon return to work, continuation of health and welfare benefits during and after leave, COBRA rights, financial arrangements for payment of fringe benefits during leave, and other aspects of the leave are dealt with extensively by the new rules. The relationship of FMLA and the Fair Labor Standards Act is also detailed.PART 2 Compliance Guide to the Family & Medical Leave Act Compiled by Marvin Sahl, CLU partially from U.S. Department of Labor WH Publication 1421, June 1993 and The United States Federal Register, January 6, 1995. The Family and Medical Leave Act (FMLA) became effective on August 5, 1993. The Secretary of Labor has issued regulations to implement the FMLA. This 'Guide to Compliance' begins by summarizing those regulations, explaining the basic provisions of the new law, and the rights and responsibilities of affected employers and employees.SUMMARY The Family and Medical Leave Act was enacted on February 5, 1993. The new law became effective on August 5, 1993, for most employers. If a collective bargaining agreement (CBA) was in effect on that date, the Act became effective on the expiration date of the CBA or February 5, 1994, whichever was earlier. This delay in the effective date applied only to employees covered by a CBA in effect on August 5, 1993, and not, for example, to non-bargaining unit employees. The Wage and Hour Division of the U.S. Department of Labor's Employment Standards Administration administers and enforces FMLA for all private, State and local government employees, and some federal employees. FMLA entitles eligible employees to take up to 12 weeks of unpaid, job-protected leave each year for specified family and medical reasons. An eligible employee's right to FMLA leave began on August 5, 1993. Any leave taken before that date does not count as FMLA leave. However, events qualifying under the Act for FMLA leave purposes (e.g., the birth of a child) occurring before August 5, 1993, still entitled eligible employees to the benefits of FMLA on and after August 5, 1993. The new law contains provisions relating to employer coverage; employee eligibility for the benefits of the law; entitlement to leave, maintenance of health benefits during leave, and job restoration after leave; notice and certification of the need for FMLA leave; and protections for employees who request or take FMLA leave. In addition, the law includes certain employer record-keeping requirements.PURPOSES OF THE FMLA The FMLA allows employees to balance reasonable unpaid leave for certain reasons. The FMLA is intended to balance the demands of the workplace with the needs of families, to promote the stability and economic security of families, and to promote national interests in preserving family integrity. The FMLA seeks to accomplish these purposes in a manner that accommodates the legitimate interests of employers, and which minimizes the potential for employment discrimination on the basis of sex, while promoting equal employment opportunity for men and women. The enactment of the FMLA was predicated upon two fundamental concerns-the needs of the U.S. workforce and the development of high-performance organizations. Increasingly, American children and growing numbers of the elderly are dependent on working family members who spend long hours on the job. When family emergencies arise, requiring employees to attend to their seriously ill children or parents, or to newly born or adopted infants, or even to their own serious illness, workers need reassurance that they will not need to choose between their job security and meeting their personal and family obligations or tending to vital needs at home.EMPLOYER COVERAGE FMLA applies to all: public agencies, including State, local and federal employers, and local education agencies (schools); and to private sector employers who employ 50 or more employees for at least 20 work weeks in the current or preceding calendar year and who are engaged in commerce or in any industry or activity affecting commerce-including joint employers (ERISA definitions of 'joint employers') and successors of covered employers. For FMLA purposes, most federal and Congressional employees are under the jurisdiction of the U.S. Office of Personnel Management (OPM) or the Congress. (Note that the law has just been adopted requiring that all Congressional Employees be covered by the same laws that apply to the private Sector.)EMPLOYEE ELIGIBILITY To be eligible for FMLA benefits, an employee must: (1) work for a covered employer; (2) have worked for the employer for at least a total of 12 months; (3) have worked at least 1,250 hours over the prior 12 months; and (4) work at a location where at least 50 employees are employed by the employer within 75 miles. LEAVE ENTITLEMENTA covered employer must grant an eligible employee up to a total of 12 workweeks of unpaid leave during any 12-month period for one or more of the following reasons: a) for the birth or placement of a child for adoption or foster care; b) to care for an immediate family member (spouse, child, or parent) with a serious health condition; or c) to take medical leave when the employee is unable to work because of a serious health condition. Spouses employed by the same employer are jointly entitled to a combined total of 12 work weeks of family leave for the birth or placement of a child, for adoption or foster care, and to care for a parent (but not a parent 'in-law') who has a serious health condition. Leave for birth or adoption (including foster care placement) must conclude within 12 months of the birth or placement.INTERMITTENT LEAVE Under some circumstances, employees may take FMLA leave intermittently- which means taking leave in blocks of time, or by reducing their normal weekly or daily work schedule. Where FMLA leave is for birth or placement for adoption or foster care, use of intermittent leave is subject to the employer's approval. FMLA leave may be taken intermittently whenever it is medically necessary to care for a seriously ill family member, or because the employee is seriously ill and unable to work. If the need for intermittent leave is foreseeable based on planned medical treatment, the employee is responsible for scheduling the treatment in a manner that does not unduly disrupt the employer's operations, subject to the approval of the health care provider. In such cases, the employer may also transfer the employee temporarily to an alternate job with equivalent pay and benefits that better accommodates recurring periods of leave than the employee's regular job.SUBSTITUTION OF PAID LEAVE Subject to certain conditions, employees or employers may choose to use or require the use of accrued paid leave (such as sick or vacation leave) to cover some or all of the otherwise unpaid FMLA leave. The employer is responsible for designating if paid leave used by an employee counts as FMLA leave, based on information provided by the employee. In no case can an employee's paid leave be credited as FMLA leave after the leave has been completed.SERIOUS HEALTH CONDITION 'Serious health condition' means an illness, injury, impairment, or physical or mental condition that involves: a) any period of incapacity or treatment connected with inpatient care (i.e., an overnight stay) in a hospital, hospice, or residential medical care facility; b) any period of incapacity requiring absence of more than three calendar days from work, school, or other regular daily activities that also involves continuing treatment by (or under the supervision of) a health care provider; or c) continuing treatment by (or under the supervision of) a health care provider for a chronic or long-term health condition that is incurable or so serious that, if not treated, would likely result in a period of incapacity of more than three calendar days, and for prenatal care. HEALTH CARE PROVIDERHealth care providers who qualify under the regulations to provide certification of a serious health condition for an employee or an immediate family member include: a) doctors of medicine or osteopathy authorized to practice medicine or surgery (as appropriate) by the State in which the doctor practices; b) podiatrists, dentists, clinical psychologists, optometrists, and chiropractors (limited to treatment consisting of manual manipulation of the spine to correct a subluxation as demonstrated by X-ray to exist) authorized to practice in the State and performing within the scope of their practice under State law; c) nurse practitioners and nurse-midwives authorized to practice under State law and performing within the scope of their practice as defined under State law; or, d) Christian Science practitioners listed with the First Church of Christ, Scientist in Boston, Massachusetts. MAINTENANCE OF HEALTH BENEFITSA covered employer is required to maintain group health insurance coverage for an employee on FMLA leave whenever such insurance was provided before the leave was taken, and on the same terms as if the employee had continued to work. Where appropriate, arrangements will need to be made for employees taking unpaid FMLA leave to pay their share of health insurance premiums while on leave. For example, if the group health plan involves co-payments by the employer and the employee, an employee on FMLA leave must continue making insurance premium payments to maintain insurance coverage, as must the employer. The employee and employer need to work out the method for the employee to pay his or her share of health insurance premiums while on unpaid FMLA leave. An employer's obligation to maintain health benefits under FMLA will stop if and when an employee informs the employer of an intent not to return to work at the end of the leave period, or if the employee fails to return to work when the FMLA leave entitlement is used up. (See the COBRA Q & A at the end of this discourse.) In some instances, the employer may recover premiums it paid to maintain health insurance coverage for an employee who fails to return to work from FMLA leave.OTHER BENEFITS Certain types of earned benefits, such as seniority, need not continue to accrue during periods of unpaid FMLA leave. For other benefits, such as elected life insurance coverage, the employer and the employee need to make arrangements so that the benefits may be maintained during periods of unpaid FMLA leave. Except for accrued or earned benefits (such as seniority), the employee must be restored to the same benefits upon return from FMLA leave as if the employee had continued to work the entire FMLA leave period. Use of FMLA leave cannot result in the loss of any benefit that accrued before the employee's leave began. Accordingly, an FMLA leave period cannot be counted as a break in service for purposes of vesting or eligibility to participate in benefit programs.JOB RESTORATION Upon return from FMLA leave, an employee must be restored to his or her original job, or to an equivalent job with equivalent pay, benefits, and other employment terms and conditions. In addition, an employee's use of FMLA leave cannot result in the loss of any employment benefit that the employee earned or was entitled to before using FMLA leave.'KEY' EMPLOYEE EXCEPTION Under specified and limited circumstances where restoration to employment will cause substantial and grievous economic injury to its operations, the employer may refuse to reinstate certain highly paid 'key' employees after using FMLA leave during which health benefits are maintained. In order to do so, the employer must: a) notify the employee of their status as a 'key' employee in response to the employee's notice of intent to take FMLA leave; b) notify the employee as soon as the employer decides it will deny job restoration and explain the reasons for this decision; c) offer the employee a reasonable opportunity to return to work from FMLA leave after giving this notice; and d) make a final determination as to whether reinstatement will be denied at the end of the leave period if the employee then requests restoration. A 'key' employee is a salaried 'eligible' employee who is among the highest paid ten percent of employees within 75 miles of the work site.NOTICE AND CERTIFICATION Employees seeking to use FMLA leave may be required to provide: a) 30-day advance notice of the need to take FMLA leave when the need is foreseeable; b) medical certifications supporting the need for leave due to a serious health condition affecting the employee or an immediate family member; c) second or third medical opinions and periodic recertification, at the employer's expense; d) periodic reports during FMLA leave on the employee's status and intent to return to work; and e) a 'fitness-for-duty' certification to return to work. When leave is needed to care for an immediate family member or the employee's own illness and is for planned medical treatment, the employee must attempt to schedule treatment so that it will not unduly disrupt the employer's operation.EMPLOYER NOTICES Covered employers must post a notice approved by the Secretary of Labor explaining rights and responsibilities under FMLA. An employer that willfully violates this posting requirement may be subject to a fine of up to $100 for each separate offense. In addition, covered employers are obliged to provide information to their employees about their rights and responsibilities under FMLA, including specific information-in response to an employee's notice of the need for FMLA leave-regarding just what will be required of the employee and what might happen in certain circumstances, such as if the employee fails to return to work from FMLA leave.UNLAWFUL ACTS FMLA makes it unlawful for any employer to interfere with, restrain, or deny the exercise of any right provided by this law. It is also unlawful for an employer to discharge or discriminate against any individual for opposing any practice, or because of involvement in any proceeding, related to FMLA.ENFORCEMENT FMLA is enforced by the Wage and Hour Division of the U.S. Labor Department's Employment Standards Administration. This agency will investigate complaints of violations. If violations cannot be satisfactorily resolved, the Department may bring action in court to compel compliance. An eligible employee may bring a private civil action against an employer for violations.OTHER PROVISIONS Special rules apply to employees of local education agencies. Generally, these rules provide for FMLA leave to be taken in blocks of time when the leave is needed intermittently or when leave is required near the end of a school term (semester). Salaried executive, administrative, and professional employees of covered employers who meet the Fair Labor Standards Act (FLSA) criteria for exemption from minimum wage and overtime under Regulations, 29 CFR Part 541, do not lose their FLSA-exempt status by using any unpaid FMLA leave. This special exception to the 'salary basis' requirements for FLSA's exemption extends only to 'eligible' employees' use of leave required by FMLA. The FMLA does not affect any other federal or State law which prohibits discrimination. It does not supersede any State or local law which provides more generous family or medical leave protection. Nor does it affect an employer's obligation to provide greater leave rights under a collective bargaining agreement or employment benefit plan. The FMLA also encourages employers to provide more generous leave rights. For more information, contact the nearest office of the Wage and Hour Division, listed in most telephone directories under U.S. Government, Department of Labor, Employment Standards Administration.  'JOINT EMPLOYMENT' Section 825.106 entitled, 'How is 'joint employment' treated under FMLA?' This is the Section: (a) Where two or more businesses exercise some control over the work or working conditions of the employee, the businesses may be joint employers under FMLA. Joint employers may be separate and distinct entities with separate owners, managers and facilities. Where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the work week, a joint employment relationship generally will be considered to exist in situations such as: (1) Where there is an arrangement between employers to share an employee's services or to interchange employees; (2) Where one employer acts directly in the interest of the other employer in relation to the employee; or, (3) Where the employers are not completely disassociated with respect to the employee's employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer. (b) A determination of whether or not a joint employment relationship exists is not determined by the application of in any single criterion, but rather the entire relationship is to be viewed in its totality. For example, joint employment will ordinarily be found to exist when a temporary or leasing agency supplies employees to a second employer. (c) In joint employment relationships, only the primary employer is responsible for giving required notices to its employees, providing FMLA leave, and maintenance of health benefits. Factors considered in determining which is the 'primary' employer include authority/responsibility to hire and fire, assign/place the employee, make payroll, and provide employment benefits. For employees of temporary help or leasing agencies, for example, the placement agency most commonly would be the primary employer. (d) Employees jointly employed by two employers must be counted by both employers, whether or not maintained on one of the employer's payroll, in determining employer coverage and employee eligibility. For example, an employer who jointly employs 15 workers from a leasing or temporary help agency and 40 permanent workers is covered by FMLA. An employee on leave who is working for a secondary employer is considered employed by the secondary employer, and must be counted for coverage and eligibility purposes, as long as the employer has a reasonable expectation that that employee will return to employment with that employer. (e) Job restoration is the primary responsibility of the primary employer. The secondary employer is responsible for accepting the employee returning from FMLA leave in place of the replacement employee if the secondary employer continues to utilize an employee from the temporary or leasing agency, and the agency chooses to place the employee with the secondary employer. A secondary employer is also responsible for compliance with the prohibited acts provisions with respect to its temporary/leased employees, whether or not the secondary employer is covered by FMLA (see 825.220(a)). The prohibited acts include prohibitions against interfering with an employee's attempt to exercise rights under the Act, or discharging or discriminating against an employee for opposing a practice which is unlawful under FMLA. A covered secondary employer will be responsible for compliance with all the provisions of the FMLA with respect to its regular, permanent work force.   IRS NOTICE DISCUSSING RELATIONSHIP BETWEEN FMLA AND COBRA Notice 94-103The Family and Medical Leave Act of 1993 ('FMLA'), P.L. 103-3, imposes certain requirements on employers regarding coverage, including family coverage, under group health plans for employees taking FMLA leave. Many employers have raised questions about how the requirements under FMLA affect their obligation to provide COBRA continuation coverage in accordance with the requirements of section 4980B of the Internal Revenue C...