June is a busy month for state campaign finance reporting!

On June 14, 2016 all political committees, political funds, independent expenditure committees and independent expenditure funds are required to file a Report of Receipts and Expenditures for the period covering January 1 through May 31, 2016.

State reports must be filed electronically. The Board will consider exceptions to the electronic filing requirements if you can show that your committee or fund has a good reason for not filing electronically. If granted, a waiver of the electronic filing requirements is valid for two (2) years. A committee or fund that fails to file the annual report by the due date is subject to a late filing fee of $50 per day, not to exceed $1,000. Additional information about state reporting requirements can be found at: http://www.cfboard.state.mn.us/index.html

On June 15, 2016 all Minnesota lobbyists are required to file a lobbyist disbursement report, covering the period of January 1 through May 31, 2016. Reports can be filed electronically at http://www.cfboard.state.mn.us/lobby/report.htm. In order to file the report, lobbyists should use the username and password provided by the Campaign Finance and Public Disclosure Board.

At the time of registration, each lobbyist designates whether he or she is a “self-reporting lobbyist,” an “authorizing lobbyist” or a “reporting lobbyist.” A self-reporting lobbyist reports his or her own expenditures to the Board. A lobbyist that reports distributions for another lobbyist on behalf of the same client is referred to as a reporting lobbyist. A lobbyist who allows someone to report expenditures on his or her behalf is an authorizing lobbyist. In addition, Minnesota Rules require all lobbyist principals to appoint one lobbyist as a “designated lobbyist” who is responsible for reporting the disbursements of the entity. Lobbyists must retain records related to lobbyist expenses for a period of four (4) years.

All self-reporting, reporting and designated lobbyists must file a Lobbyist Disbursement Report no later than June 15, 2016. The report must disclose the following information for expenditures between January 1 and May 31, 2016:

• Total lobbying disbursements (not including lobbyist compensation);
• Gifts to public officials; and
• Other sources of funds used for lobbying purposes.

In general, an expense is a lobbying disbursement if it is incurred (1) to communicate with officials for the purpose of influencing official action; (2) to urge others to communicate with officials for the purpose of influencing official action; or (3) for any activity that directly supports either of these types of communication. Lobbyist disbursements do not include lobbyist compensation. Lobbyist compensation is reported by the principal on the principal report that is filed in March. If an actual cost of a lobbying activity is not available, the lobbyist must use a reasonable approximation of the cost.

Designated lobbyists must also provide a current list of officers and directors for the associations that the lobbyist represents. A report must be filed even if no disbursements were made during the reporting period.

The report may be filed with the Board by facsimile at 651.539.1196 or 800.357.4114 or by e-mail to [email protected]. Alternatively, the report may be filed electronically at http://www.cfboard.state.mn.us/lobby/report.htm. To access the electronic filing system, each lobbyist will need a user name and password that is provided by the Board.   All reports are available for viewing by the public.

A lobbyist who fails to file a required report by the due date is subject to a late filing fee of $25 per day, not to exceed $1,000.

If you have any questions about either of these reports, please contact Tami Diehm at 612.604.6658.

On November 22, 2016, just 10 days before the Department of Labor’s final rule on overtime exemptions was to become effective, a federal judge in Texas issued a preliminary injunction halting its implementation.

The Department of Labor (“DOL”) final rule would have doubled the salary that “white collar” employees must earn to be exempt from overtime and minimum wage requirements from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).  The final rule would have also raised the exemption threshold for “highly compensated employees” who are still subject to a more minimal duties test, from $100,000 to $134,004 annually.

The emergency motion for a preliminary injunction was filed in October by twenty-one states, and then consolidated with another lawsuit brought by the U.S. Chamber of Commerce and other business groups.  The parties asserted that the DOL exceeded its authority in raising the salary threshold and requiring adjustments to the threshold every three years.

The issuance of the preliminary injunction means the current overtime rule will remain in effect while the court determines the validity of the new final rule.  Therefore, as it stands, the new final rule will no longer become effective on December 1, 2016, but could still become effective in the future.  Employers can therefore continue operating under the existing rule until the courts reach a final decision.

If you have any questions regarding the new or existing overtime rules, please contact Laura Pfeiffer at (612) 604-6685, [email protected] or Mark Pihart at (612) 604-6623, [email protected].

For additional background on the new rule, please also refer to our previous Alert, “FLSA Overtime Exemption Salary Threshold Update,” sent on May 27, 2016.

On May 18, 2016, the Department of Labor (“DOL”) issued a final rule on overtime exemption likely to impact more than 4 million American workers and their employers. The DOL doubled the salary “white collar” employees must earn to be exempt from overtime and minimum wage requirements, raising the threshold from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). The final rule also raises the exemption threshold for “highly compensated employees,” who are still subject to a more minimal duties test, from $100,000 to $134,004 annually.

This dramatic shift is estimated to increase overtime wages by $10 billion over 10 years and likely has some employers as concerned as worker advocates are elated.

So what does this final rule mean to affected employers, and how can they prepare for the changes set to take effect on December 1, 2016?

For employers to establish that an employee is exempt from overtime requirements under the “white collar exemption,” three criteria must be satisfied:

1. The employee must be paid on a salary (not hourly) basis not subject to reduction based on quality or quantity of work;
2. The employee must be paid at least $913 per week or $47,476 annually (the new “Salary Level Test”); and
3. The employee’s primary job duty must involve the kind of work that qualifies as exempt, that is, they are employed in a bona fide executive, administrative, professional or computer position, as defined by the regulations.

Affected employers may need to make some important choices in order to comply with the new rule: accept the change and begin paying overtime wages to formerly exempt workers for hours in excess of 40 per week; raise salaries to maintain current overtime exemptions; decrease wages to meet budgetary needs in light of increased overtime costs; or reorganize workloads, adjust worker schedules, and potentially hire more employees to spread out work and keep each employee’s workweek under 40 hours.

It is imperative that employers proactively assess prior to December 1, 2016 the current pay, job duties, scheduling, and work-hour tracking practices to fully determine the impact the DOL’s new rule will have on their bottom line and on their employees. Employers should review and revise their overtime policies to provide close management of actual hours worked. Furthermore, job descriptions versus actual job duties performed should be reviewed as well to ensure executive, administrative, and professional work is performed by workers who are classified as exempt.  By taking such proactive steps now, employers may minimize the impact of the new overtime rules.  The new rules also mandate automatic increases to the salary threshold every three years.

If you have any questions regarding the new rules, please contact Laura Pfeiffer at 612.604.6685, [email protected] or Mark Pihart at 612.604.6623, [email protected].

Granting employees equity can be a great way to reward and motivate employees. Most employees will work harder once they have some skin in the game. However, granting equity can be complicated and it’s easy to make mistakes. Before granting equity to your employees, ask yourself these important questions:

1. Is equity really the right choice?
   Make sure you have a clear understanding of what you want to achieve. Are you aiming for retention, compensation, empowerment or other goals? There are multiple ways to grant traditional equity, and there are alternatives to traditional equity, such as cash bonuses, profits interests and stock appreciation rights. An alternative to traditional equity may achieve your business objectives while avoiding the inherent complications of making an employee your business partner. If you’re only thinking about one kind of “equity,” you may be limiting yourself and may not achieve your goals.
2. Are you making it too complicated?
   Once an equity program is created, someone must be tasked with administering it. And you have to pay for that administration. If you’re considering a complicated structure or would regularly make exceptions to the rules of your program, step back and think about what you’re really trying to achieve. There may be a simpler way to get there.
3. What if things don’t work out?
   Having a disgruntled former employee as a shareholder can be a nightmare. You need the ability to repurchase your equity from departing employees, but check with an attorney to make sure the repurchase mechanism works as expected, and that it is enforceable. Buy-outs under these circumstances can be contentious and you want to make sure you’ve followed appropriate procedures.
4. Have you considered all of the tax consequences?
   f you grant equity that has value, or grant a stock option with a strike price below fair market value, you’ve just saddled your employee with a current tax obligation-even though the employee does not get paid any cash. The tax code is full of complexities dealing with equity compensation that can lead to adverse tax consequences for the company too (e.g., forfeiting S-corp status, withholding obligations, running afoul of ERISA rules, losing the ability to properly claim certain tax deductions, etc.). Make sure your program provides the expected benefit and not an unexpected tax bill.
5. Have you complied with securities laws?
   Many people are unaware that granting equity to an employee is a securities transaction governed by federal and state laws. If the total annual value of compensatory equity granted to employees exceeds $5,000,000, you will need to provide specific disclosures to recipients. Additionally, many states have filing requirements for equity grants of any value or size, and some states have specific disclosure requirements or require the payment of a fee. Check with a securities attorney to identify compliance requirements.
6. Are you unintentionally giving employees rights you don’t want them to have?
   Ownership of traditional equity makes employees shareholders. Equity owners in Minnesota companies generally have the right to review the company’s sensitive information, including board and shareholder minutes, financial statements, and shareholder lists. They may also get voting rights on matters important to the company, like amending articles, merging or liquidating the company. Be sure you have a clear understanding of these rights before the grant occurs.
7. Does granting equity provide lifetime employment?
   If your company is closely held (generally 35 or fewer owners), an employee who owns equity may assert that she is no longer an at-will employee because the ownership of equity gave her a reasonable expectation of continued employment. While you can contract around this problem, you have to do so proactively and thoughtfully.
8. Have you protected yourself from having unwanted co-owners?
   While you may be willing to allow an employee to be a co-owner of your company, you need to avoid unwittingly allowing an employee’s spouse, children, your competitor or an unknown third party to become a co-owner. You should have strong restrictions on the transfer of equity in the form of a restricted stock agreement, buy-sell agreement, member control agreement or shareholder agreement. If you don’t, your employee may be able to transfer the equity to a person you don’t want to have as a co-owner.
9. Have you contacted an accountant?
   Granting equity will impact your company’s financial statements. You need to work with an accountant experienced in equity grants to fully understand that financial impact.
10. Have you contacted an experienced business attorney?
    Equity is complicated. Do it right at the beginning and avoid problems later. An experienced attorney can assist you in designing an equity program that achieves your business goals, avoids tax surprises, complies with securities laws and reduces the risk of future disputes with your employees.

When done right, granting equity can be a great way to motivate and retain employees. When done wrong, it can be a massive headache for your company and create legal, accounting and tax problems.

While most of us are focused on getting our taxes finished, do not forget to file your campaign finance reports too!

All Minnesota political committees, political funds, independent expenditure committees and independent expenditure funds are required to file a quarterly report of receipts and expenditures no later than Thursday, April 14, 2016. The period covered by this report is January 1 through March 31, 2016.

State reports must be filed electronically. The Board will consider exceptions to the electronic filing requirements if you can show that your committee or fund has a good reason for not filing electronically. If granted, a waiver of the electronic filing requirements is valid for two (2) years. A committee or fund that fails to file the annual report by the due date is subject to a late filing fee of $50 per day, not to exceed $1,000. Additional information about state reporting requirements can be found at: http://www.cfboard.state.mn.us/index.html

Unless they elect to file monthly, all federally registered PACs and Super PACs are being required to file a quarterly report of receipts and expenditures no later than Friday, April 15, 2016. Like the state reports, the period covered is January 1 through March 31, 2016.

Under the FEC’s mandatory electronic filing rules, any committee that receives contributions or makes expenditures in excess of $50,000 in a calendar year, or expects to do so, must submit all campaign finance reports electronically. Committees that do not meet the $50,000 threshold are permitted to file paper reports but the FEC strongly recommends the voluntary use of the electronic filing system. Once a committee begins to file reports electronically, on a voluntary basis, it must continue to do so for the remainder of the calendar year unless the FEC determines that extraordinary and unforeseeable circumstances make electronic filing impractical.

Reports filed electronically must be received and validated by the FEC by 11:59 PM Eastern Time on the filing deadline. Paper filers must ensure that the FEC receives their report by the close of business on the date of the filing deadline. The filing deadline is not extended because the due date falls on a weekend. Additional information about federal filing requirements can be found at: http://www.fec.gov/info/filing.shtml

On February 2, 2016, the European Commission announced that the U.S. and European Union have reached a deal on a new Safe Harbor to replace the old Safe Harbor program that was struck down by the European Court of Justice on October 6, 2015. Details about the new Safe Harbor program are still emerging, but will include the following elements:

Strong obligations on companies handling Europeans’ personal data and robust enforcement
U.S. companies wishing to import personal data from Europe will need to commit to robust obligations on how personal data is processed and individual rights are guaranteed. The Department of Commerce will monitor that companies publish their commitments, which makes them enforceable under U.S. law by the U.S. Federal Trade Commission. In addition, any company handling human resources data from Europe must commit to compliance with decisions by European Data Protection Authorities (DPAs).

Clear safeguards and transparency obligations on U.S. government access
For the first time, the U.S. has given the EU written assurances that the access of public authorities for law enforcement and national security will be subject to clear limitations, safeguards and oversight mechanisms. These exceptions must be used only to the extent necessary and proportionate. The U.S. has ruled out indiscriminate mass surveillance on the personal data transferred to the U.S. under the new arrangement. To regularly monitor the functioning of the arrangement there will be an annual joint review, which will also include the issue of national security access. The European Commission and the U.S. Department of Commerce will conduct the review, and invite national intelligence experts from the U.S. and European DPAs to attend.

Effective protection of EU citizens’ rights with several redress possibilities
Any citizen who considers their data to have been misused under the new arrangement will have several redress possibilities. Companies have deadlines to reply to complaints. European DPAs can refer complaints to the Department of Commerce and the Federal Trade Commission. In addition, alternative dispute resolution will be available free of charge. For complaints on possible access by national intelligence authorities, a new Ombudsperson will be created.

All federally registered PACs and Super PACs are required to file a year-end report of receipts and expenditures no later than Sunday, January 31, 2016. The period covered by the reports is January 1 through December 31, 2015.

Under the FEC’s mandatory electronic filing rules, any committee that receives contributions or makes expenditures in excess of $50,000 in a calendar year, or expects to do so, must submit all campaign finance reports electronically. Committees that do not meet the $50,000 threshold are permitted to file paper reports but the FEC strongly recommends the voluntary use of the electronic filing system. Once a committee begins to file reports electronically, on a voluntary basis, it must continue to do so for the remainder of the calendar year unless the FEC determines that extraordinary and unforeseeable circumstances make electronic filing impractical.

Reports filed electronically must be received and validated by the FEC by 11:59 PM Eastern Time on the filing deadline. Paper filers must ensure that the FEC receives their report by the close of business on the date of the filing deadline. The filing deadline is not extended because the due date falls on a weekend. Additional information about federal filing requirements can be found at: http://www.fec.gov/info/filing.shtml.

All Minnesota political committees, political funds, independent expenditure committees and independent expenditure funds are required to file a year-end report of receipts and expenditures no later than Monday, February 1, 2016.

State reports must be filed electronically. The Board will consider exceptions to the electronic filing requirements if you can show that your committee or fund has a good reason for not filing electronically. If granted, a waiver of the electronic filing requirements is valid for two (2) years.   A committee or fund that fails to file the annual report by the due date is subject to a late filing fee of $25 per day, not to exceed $1,000. Additional information about state reporting requirements can be found at: http://www.cfboard.state.mn.us/index.html.

In accordance with the Minnesota Campaign Finance and Public Disclosure Act, each lobbyist who registers with the Minnesota Campaign Finance and Public Disclosure Board must periodically disclose the total amount of money spent on lobbying activities in a semi-annual Lobbyist Disbursement Report.  The report covering disbursements from June 1 – December 31, 2015 is due Friday, January 15, 2016.

At the time of registration, each lobbyist designates whether he or she is a “self-reporting lobbyist,” an “authorizing lobbyist” or a “reporting lobbyist.”  A self-reporting lobbyist reports his or her own expenditures to the Board.  A lobbyist that reports distributions for another lobbyist on behalf of the same client is referred to as a reporting lobbyist.  A lobbyist who allows someone to report expenditures on his or her behalf is an authorizing lobbyist.  In addition, Minnesota Rules require all lobbyist principals to appoint one lobbyist as a “designated lobbyist” who is responsible for reporting the disbursements of the entity.  Lobbyists must retain records related to lobbyist expenses for a period of four (4) years.

All self-reporting, reporting and designated lobbyists must file a Lobbyist Disbursement Report no later than January 15, 2016. The report must disclose the following information for expenditures between June 1 and December 31, 2015:

• Total lobbying disbursements (not including lobbyist compensation);
• Gifts to public officials; and
• Other sources of funds used for lobbying purposes.

In general, an expense is a lobbying disbursement if it is incurred (1) to communicate with officials for the purpose of influencing official action; (2) to urge others to communicate with officials for the purpose of influencing official action; or (3) for any activity that directly supports either of these types of communication.  Lobbyist disbursements do not include lobbyist compensation.  Lobbyist compensation is reported by the principal on the principal report that is filed in March.  If an actual cost of a lobbying activity is not available, the lobbyist must use a reasonable approximation of the cost.

Designated lobbyists must also provide a current list of officers and directors for the associations that the lobbyist represents.  A report must be filed even if no disbursements were made during the reporting period.

The report may be filed with the Board by facsimile at (651) 539-1196 or (800) 357-4114 or by e-mail to [email protected]. Alternatively, the report may be filed electronically at http://www.cfboard.state.mn.us/lobby/report.htm.  To access the electronic filing system, each lobbyist will need a user name and password that is provided by the Board.   All reports are available for viewing by the public.

A lobbyist who fails to file a required report by the due date is subject to a late filing fee of $25 per day, not to exceed $1,000.  Because January 18 is a holiday, late filing fees will be imposed beginning on Tuesday, January 19.

Should you have any questions regarding the filing of this report, or any other campaign finance or lobbying issues, please contact our Political Law team.

Fulfilling a promise made more than three and a half years ago, on Friday the SEC approved final rules for Regulation Crowdfunding (“Reg CF”), the last remaining component of the JOBS Act of 2012. Reg CF aims to create a nationwide infrastructure for “retail crowdfunding,” primarily benefiting:

• emerging companies and entrepreneurs seeking to raise small amounts of capital from a wide array of investors,
• accredited and non-accredited investors seeking to fund early stage and growth stage companies, and
• funding portal operators seeking to connect the issuers and investors over the internet.

Reg CF is expected to go into effect in 2016. The SEC has published a Fact Sheet detailing highlights of the recommended final rules, which can be found here.

Additionally, on Friday the SEC also proposed rules to modernize intrastate securities offerings, such as Minnesota’s MNvest system, crowdfunding legislation drafted by Winthrop & Weinstine attorneys Ryan Schildkraut and Zachary Robins and signed into law in the state of Minnesota during the 2015 legislative session. Proposed changes to Securities Act Rule 147 and Rule 504 of Regulation D would eliminate cumbersome advertising constraints and increase the amount of securities that may be sold. The SEC’s Fact Sheet on the proposed amendments can be found here. The SEC is seeking public comments to the proposed changes over the next 60 days, and will then determine whether to adopt the proposed rules.

If you intend to utilize crowdfunding for your business, either under the SEC rules or under MNvest, it is wise to begin planning now, to take advantage of opportunities as soon as the rules are enacted.

We will continue to monitor developments to crowdfunding rules; for more information on the proposed changes and how they may affect your business, please feel free to contact us.