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North American Edition
1st December 2023
 
THE HOT STORY
IRS ruling could impact fund managers' taxes
A ruling by the U.S. Tax Court could require fund managers to pay self-employment taxes of over 3% on a significant portion of their income, potentially closing off a popular tax-reduction technique. The ruling, if applied broadly, would eliminate the ability for fund managers to exclude millions of dollars in income from self-employment taxes. The case was a loss for Soroban Capital Partners, and similar arguments have been made against other firms, including Point72 Asset Management. The IRS has been challenging investment funds on this issue and has been working on regulations to define limited partners more clearly. The ruling creates uncertainty and could result in limited partners being taxed more like wage earners and sole proprietors. The Biden administration has proposed taxing limited partners and S corporation owners to raise revenue. If the ruling stands, it would create a divergence between partnership members and S corporation owners who currently avoid self-employment taxes on their profits.
HEALTH & WELLBEING
Indeed cancels monthly mental health days for employees
Job site Indeed is cancelling the monthly mental health days it introduced during the pandemic. The company initiated "YOU Days" in June 2020, giving all employees the same day off each month. However, employees are now booking time off at a similar rate to before the pandemic, so the need for these days has passed, the company says. Bloomberg notes that many companies are reevaluating their benefits offerings and making difficult decisions about which to keep. Indeed's move follows a decision earlier this year to cut 2,200 jobs. Indeed says it will continue to provide unlimited paid time off and the option to work fully remote.
LEGAL
Sprint Communications settles $3.5m class action lawsuit over retirement benefits
Sprint Communications has reached a $3.5m settlement in a class action lawsuit over retirement benefits. The settlement comes after workers claimed that the T-Mobile unit had miscalculated pensions for certain married workers, resulting in improper shortchanging of retirement benefits. The settlement is expected to increase monthly payments for over 1,000 Sprint retirees who opted for pension packages with post-death payments for their surviving spouses. The settlement represents about 36% of the total estimated damages for the retirees. The settlement has been hailed as an "excellent result" given the complex nature of the case.
Wisconsin unions file lawsuit to end ban on collective bargaining
Seven unions representing teachers and other public workers in Wisconsin have filed a lawsuit attempting to end the state's near-total ban on collective bargaining for most public employees. The 2011 law, known as Act 10, has faced legal challenges over the years and was a significant achievement for former Republican Gov. Scott Walker. The latest lawsuit, filed in a county circuit court, argues that Act 10's exemption of certain public safety workers from the bargaining restrictions violates the Wisconsin Constitution's equal protection guarantee. If successful, the lawsuit would restore collective bargaining power for all public sector workers. Wayne Rasmussen, a vice president of the Service Employees International Union of Wisconsin, stated that the end of Act 10 would give workers a say in retirement plans, healthcare, and time off without the threat of losing their union every year.
Former McDermott Will & Emery lawyer sues firm over salary exclusion
A former lawyer at McDermott Will & Emery has filed a lawsuit against the firm, claiming that he was excluded from a major salary increase for U.S. partners. David Huberman, who is now a corporate shareholder at Greenberg Traurig, alleges that he was not included in the pay rise to $425,000 because he was living in Israel. Huberman argues that despite being based in Israel, McDermott required him to be licensed to practice in Illinois. The lawsuit claims that the firm violated the Illinois Wage Payment and Collection Act by refusing to pay him the difference between his initial base salary and the increased amount. McDermott has not yet commented on the case.
Foley & Lardner rescinds job offer over public comments
Law firm Foley & Lardner has rescinded a job offer for an incoming associate, Jinan Chehade, due to public comments she made following the Hamas attack on Israel. Chehade has filed a charge of discrimination with the Equal Employment Opportunity Commission, accusing the firm of illegal retaliation and discrimination. She plans to file a lawsuit in federal court in Chicago. Chehade claims that her advocacy for Palestine was framed as "supporting terrorism" by Foley. The incident adds to a growing list of job offers being revoked by law firms over comments about the Israel-Palestine conflict.
Wells Fargo faces lawsuit over overtime pay
A Wells Fargo employee has filed a lawsuit accusing the bank of depriving hundreds of its U.S. branch workers of overtime pay. The proposed class action claims that Wells Fargo improperly classified "senior premier bankers" as exempt from overtime pay. The lawsuit alleges that these bankers often work unpaid overtime due to chronic understaffing. The lawsuit seeks unspecified damages, penalties, and legal costs.
WORKFORCE
Continuing jobless claims reach two-year high
Initial jobless claims rose 7,000 to 218,000 in the seven days to November 25th, the Labor Department said Thursday, just below the 11,000 increase expected among economists polled by the Wall Street Journal. The four-week moving average was 220,000, while continuing claims, reported with a one-week lag, came in at 1.93m, up 86,000 from the prior week, and representing their highest level since November 2021. On an unadjusted basis, continuing claims dropped sharply, falling nearly 98,0000 and suggesting seasonal factors may be impacting the data. Unadjusted initial claims also fell, led by declines in California, Texas and Oregon.
CORPORATE
Ford labor deal adds $8.8bn in costs over four years
The new labor deal between Ford and the United Auto Workers (UAW) is expected to add $8.8bn in costs over the four-year contract, impacting the company's bottom line. The UAW contract will add about $900 in cost per vehicle by 2028. Ford plans to offset the added expense by reducing complexity in its lineup and using automation. Ford Chief Financial Officer John Lawler stated that the added expense of the contract ended up being four times as costly as the previous agreement. The UAW contract costs, along with the profit forecast withdrawal due to the strike, resulted in a $1.7bn drain on Ford's bottom line. Ford expects a full-year operating profit of $10bn to $10.5bn.
TRAINING & DEVELOPMENT
The best companies for career growth
A new ranking of Fortune 500 companies, the American Opportunity Index, rates companies based on how well they help employees, especially those without college degrees, move into better, high-paying jobs. The index, created by the Burning Glass Institute, reveals the top 10 companies overall, such as Coca-Cola, Bank of America, and J.M. Smucker, that excel in promoting career growth and offering higher-paying roles. However, even the best-performing employers still have areas for improvement. The index's analysis of promotion, pay, hiring, parity, and culture shows that very few companies excel in all categories. The rankings provide valuable insights for job-hunters seeking companies that prioritize employee advancement.
TECHNOLOGY
PwC launches AI chatbot
PwC has launched an AI chatbot to aid deal-making. The new technology will analyse client documents and provide guidance to deal-makers. PwC's chatbot, developed in collaboration with AI start-up Harvey, aims to reduce deal failure and provide a competitive advantage. The company plans to license the platform to clients, including private equity firms and banks, and has already implemented Harvey's AI tools in other departments. Lucy Stapleton, U.K. deals leader at PwC, said its new AI chatbot will help staff develop new skills and boost productivity by allowing more time for analysis. The Telegraph notes that the launch of the chatbot comes just weeks after PwC announced up to 600 job cuts across its advisory team in a voluntary redundancy scheme, with weaker demand for advisory services leaving the Big Four firm overstaffed.
HEALTH & SAFETY
FedEx worker dies in accident at Memphis hub
A FedEx worker has died after an accident at the shipping giant's world hub in Memphis, according to police. The worker was injured while working on Wednesday and later died at the hospital. The identity of the worker and the details of the accident have not been released. FedEx, which employs about 30,000 people in Memphis, expressed condolences to the worker's family and friends and stated that they are investigating the accident. This tragic incident follows two other fatal accidents at the Memphis hub in 2022.
REMUNERATION
Cravath Swaine & Moore's pay raise puts pressure on less-profitable law firms
Cravath Swaine & Moore's decision to raise associate salaries is causing pressure on less-profitable law firms who may struggle to afford similar pay increases. While top-tier firms are likely to follow suit, others in the industry may be unable to do so. Michelle Fivel, a legal recruiter, predicts that fewer firms will be able to match Cravath's scale. Peter Zeughauser, a law firm management consultant, warns that firms that cannot offer competitive compensation may face increased poaching. Cravath, known for setting salary standards, will raise annual pay to between $225,000 and $420,000. Several other firms have already announced that they will match this scale. Miguel Zaldivar, CEO of Hogan Lovells, emphasized the need to compete for top talent. The salary increases come as a surprise during a period of decreased associate productivity. Some firms have even had to downsize. The pay raises are funded either through longer working hours or increased billing rates. The biggest 50 firms have seen stronger revenue growth compared to other firms, largely due to higher billing rates. Revenue gains this year were driven by an average billing rate increase of 8%.
INTERNATIONAL
U.S watchdog fines PwC $7m over exam cheating
PwC affiliates in Hong Kong and China have been fined $7m by the Public Company Accounting Oversight Board (PCAOB). The U.S. accounting watchdog found that more than 1,000 audit staff cheated on internal training exams between 2018 and 2020. Without admitting the allegations, PwC’s Hong Kong firm has agreed to pay a $4m settlement, while PwC China is to pay $3m. PwC said it was “highly regrettable” that staff had shared test answers. The PCAOB has ordered the firm to strengthen its policies to ensure staff act with integrity in internal training.
OTHER
Older people at higher risk in climate disasters, new book argues
One of the deadliest climate events in the U.S., Hurricane Katrina, highlighted the vulnerability of older people during disasters, writes Linda Poon for Bloomberg. Older people often make up the majority of death tolls in hurricanes, wildfires, and heat waves. Danielle Arigoni, managing director for policy and solutions at the National Housing Trust, argues in her new book that the needs of this fast-growing demographic have been largely overlooked in disaster and climate resilience planning. The book, "Climate Resilience for an Aging Nation," also offers insights into creating age-friendly communities. Arigoni emphasizes the importance of considering the unique challenges faced by older adults, such as limited mobility and financial constraints, in preparedness planning. She suggests that cities should focus on climate-friendly housing, sustainable transportation solutions, and social infrastructure to better incorporate older adults in climate resiliency efforts. By addressing these issues, cities can create safer and more inclusive communities for all residents.
 


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