Virginia Supreme Court To Decide Fairfax County Metrorail Expansion Tax Case
The Virginia Supreme Court has granted the appeal of a Fairfax County business who is challenging a controversial special tax established to fund the extension of the Metrorail to Dulles International Airport. FFW Enterprises, a commercial real estate company in Tysons Corner, filed the appeal after a Fairfax County Circuit Court judge granted the Fairfax County Board of Supervisors’ motion for summary judgment in June of last year.
At issue in the case is whether the Fairfax County Board of Supervisors’ creation of a special tax district to fund the county’s share of the Dulles Metrorail expansion project is constitutional. The county charged commercial and industrial real estate owners in the special tax district 22 cents per $100 of assessed property value (in addition to their normal property taxes), but exempted residential property owners.
It is FFW Enterprises’ position that the tax is unlawful because the Virginia Constitution requires a uniform application of taxes, so that tax burdens are equally distributed amongst commercial, residential, and industrial tax payers.
This is an important case for Fairfax County businesses and residents alike as the Virginia Supreme Court’s determination will have a substantial impact on how Fairfax County finances its share of the Metrorail expansion project.
A decision from the Virginia Supreme Court should come later this year. We will keep you updated on any new developments with this case.
Court Dismisses Bid Protest Against the City of Harrisonburg
A Virginia trial court recently dismissed a contractor’s bid protest against the City of Harrisonburg on jurisdictional grounds. In the case of General Excavation, Inc. v. City of Harrisonburg, the contractor’s bid was rejected along with all the other bids. Thus, the Court determined that there wasn’t any award for a bidder to challenge under the Virginia Public Procurement Act.
The bid by General Excavation, Inc. (GEI) for the road-improvement contract worth approximately $20 million was one of seven rejected by the City. After the City declined to award the contract to anyone, GEI filed suit pursuant to the Virginia Public Procurement Act and the City’s own purchasing manual alleging that the City’s action was done solely to avoid awarding GEI the project.
However, the Court noted that the plain language of the Virginia Public Procurement Act allows contractors to bring an action in the appropriate circuit court challenging only a proposed award or the award of a contract – not the rejection of all bids.
Although the alleged conduct of the City appeared to be in violation of Virginia Code section 2.2-4319, which allows a public body to reject all bids but not solely to avoid awarding a contract to a particular bidder, the Court declined to exercise jurisdiction. It noted that the General Assembly created relief mechanisms for those aggrieved under the Public Procurement Act, and it would not enlarge the scope of those remedial statutes.
It should be noted that the City claimed that its decision had nothing to do with a desire not to award GEI the project. Rather, the City official recommended the rejection of all bids based on the city, state and federal transportation representatives’ determination that the contract documents were probably not clearly understood by the bidders. However, the Court's interpretation of the Virginia Public Procurement Act's jurisdiction eliminated the contractor's ability to receive a fair and impartial hearing on whether the City's actions were opportunistic and an unlawful rejection of all bids.
Virginia Governor Proposes to Reinstate Tax Deduction for Employers
Governor McDonnell announced today that he will propose reinstating a tax deduction for Virginia employers in the biennial budget in hopes of spurring economic development. Since 2004, Virginia law has allowed companies to claim the federal Internal Revenue Code Section 199 Domestic Production Activity Deduction, which encouraged U.S. manufacturing. The tax break initially allowed a 3 percent deduction, and was increased to 6 percent then 9 percent. However, this deduction is set to gradually phase out by 2014. Governor McDonnell asserts that the elimination of the deduction would result in an estimated $30 million tax increase for Virginia employers, and is proposing an amendment to prevent this result.
McDonnell said in a statement that “[t]his is a pro-job creation amendment that will help keep employers in the commonwealth, encourage businesses to locate in Virginia and give us a further advantage over other states.” Major employer, Northrop Grumman, which is weighing whether to locate its headquarters in Virginia or Maryland, would qualify for the tax break.
The amendment will have no fiscal impact in FY 2011, according to the Governor, and an estimated $10 million in FY 2012. The Governor has until midnight Tuesday to send any further amendments to the budget to the legislature, which will be considered on April 21.
EEO Guidelines for Small Businesses with Federal Contracts
Small businesses with Federal contracts have to be especially mindful of ensuring compliance with equal employment opportunity (EEO) requirements. The failure to comply with the EEO guidelines set forth in Executive Order 11246 (which prohibits employment discrimination by Federal contractors and subcontractors as well as federally-assisted construction contractors and subcontractors) may very well result in the cancellation of a contract, termination, suspension (in whole or in part), or the debarment of the contractor. As the Office of Federal Contract Compliance Programs (OFCCP) requires contractors to engage in their own internal EEO compliance analysis, small businesses often run afoul of satisfying their obligations under Executive Order 11246.
To ensure compliance with the basic EEO requirements imposed by Executive Order 11246 -- and to avoid the wrath of the OFCCP – contractors should adhere to the following OFCCP guidelines:
Don’t Discriminate! Contractors must refrain from engaging in workplace employment discrimination on the basis of race, color, religion, sex, or national origin. Although most people think of intentional discriminatory acts, employment discrimination can also arise when a neutral policy or practice has an adverse impact on the members of any race, sex, or ethnic group.
Post an EEO Poster. Federal contractors must post OFCCP’s EEO poster in a location that is easily seen (e.g., a lunchroom, break room, or locker room).
Include an EEO Tag Line in Employment Advertising. Contractors should include a sentence in all solicitations and advertisements for employment stating that “all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.”
Keep Records. Contractors must maintain their personnel records and employment records including job descriptions, job postings, job offers, applications and resumes, interview notes, tests and test results, written employment policies and procedures, personnel files, and time-keeping records.
Develop and Maintain an Affirmative Action Program. Contractors with 50 or more employees and a contract of $50,000 or more must develop and maintain a compliant affirmative action program (AAP).
Small businesses with Federal contracts should regularly review their EEO policies and procedures to ensure that they are compliant with Executive Order 11246. Certainly, given the potential penalties, it is better to be safe than sorry!
Terminated Professor Denied Injunction by Virginia Federal Court
The Virginia Federal Court sitting in Big Stone Gap recently applied the tougher preliminary injunction standard set forth by the U.S. Supreme Court in Winter v. Natural Resources Defense Council, Inc. In doing so, it denied a professor’s request for an injunction against his employment termination in Holbrook v. The University of Virginia’s College at Wise. The Court recognized that the repudiation of the traditional “balance of the hardships” test formulated in Blackwelder Furniture Co. of Statesville, which had been relied upon for 30 years, places a difficult burden on the party seeking the injunction as it requires a party to meet all four prongs of the injunction test.
In this case, the professor was unable to meet the prong – likelihood of irreparable harm. The professor claimed that the Faculty Handbook required that he be allowed to work at the College for another year after being denied tenure. Therefore, he sought an injunction against his termination pending the outcome of his claims for violations of his federal and constitutional rights. He argued that obtaining future employment while without a job was difficult at best, and therefore an injunction was needed to prevent further harm. Although sympathetic to his situation, the Court reasoned that there was the possibility of adequate compensation for the year of employment at a later date in the case, which weighed heavily against a claim of irreparable harm.
Although in this case the Virginia Federal Court focused on the irreparable harm prong, litigants seeking injunctions will most likely find the requirement in the Winter test that a party demonstrate a likelihood of success on the merits the most problematic. The Blackwelder standard required only that a party demonstrate a grave or serious question for litigation and it allowed more interplay between the standard’s prongs. The Winter test is not as flexible.
We’ve also discussed the new, tougher standard in relation to non-competes and as it related to a Virginia state court case in previous posts on Virginia Business Law Update.
Virginia Court Finds Non-Compete Agreement Unenforceable
A recent decision from a Virginia Circuit Court serves as a worthwhile reminder to Virginia employers that not all non-compete agreements are enforceable. Although there was a non-compete agreement in place between a wholesale business and a former employee (who served as an account representative), the court in Specialty Marketing, Inc. v. Lawrence dismissed the breach of contract action because the agreement was geographically and functionally overbroad.
As we recently detailed in our series on business litigation claims, restrictive covenants (e.g., non-compete agreements) are disfavored in Virginia as they are restraints on trade. As such, it is the employer’s burden to prove that the restrictions are: 1) no greater than necessary to protect the employer’s legitimate business interest; and 2) not unduly harsh or oppressive in curtailing an employee’s ability to earn a livelihood. To determine whether an employer has met its burden, a Virginia court will look at the function, geographic scope, and duration of the non-compete agreement.
In Specialty Marketing, Inc. v. Lawrence, the non-compete agreement at issue provided that the employee could not “be employed by . . . any business competitive with Specialty in areas where Specialty has a market for its business.” The court concluded that this language was overbroad and unenforceable because it was unlimited in functional scope and far exceeded whatever limitation was necessary to protect the employer’s business interests. Additionally, the non-compete agreement was geographically overbroad as it was not limited to the area formerly serviced by the employee; nor was the agreement limited to a specific mile radius from the employee’s former territory.
As this case illustrates, simply having an agreement in place may not properly protect a Virginia business from competition by a former employee. To be upheld under Virginia law, the non-compete agreement must be narrowly tailored in terms of function, geographic scope, and time.
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