Ring in the New Year with The Payroll Advisor

Each year payroll professionals attend year end webinars or live events to get the latest news on how to close out the old year and begin the new one.  This year I am offering something a little different than “year end”.   My next lecture will focus on just the new year.  So I am calling it “Ringing in the New Year–2020”.  In this 90-minute lecture I will cover all the latest for 2020.  This includes:

  • Completely new and revamped 2020 Form W-4
  • New DOL exempt rules
  • Minimum wage increases on the state level
  • New and upcoming sick leave and/or paid leave programs going into effect
  • 2020 Form W-2
  • 2020 Form 941
  • 2020 Form 1099-NEC

This different approach allows me to concentrate on the upcoming year and saves your time by not having to review information you may already know or will receive from other sources.

Our price for this information packed lecture is only $149. Click here to register.  Subscribers to Payroll 24/7 will receive a 20% discount if they register by Tuesday, December 3, 2019.  Not a subscriber to Payroll 24/7?  Try us out with your registration. If you register prior to Tuesday, December 3, 2019 you will receive a free 60-day subscription to this valuable payroll news service.

This lecture has been submitted to APA for 1.5 RCH credits.

DOL Proposing Rules for Tip Credit Provisions

The U.S. Department of Labor (DOL) has announced a proposed rule for tip provisions of the Fair Labor Standards Act (FLSA).  The proposed rule would implement provisions of the Conso

Still life of a full tip jar

lidated Appropriations Act of 2018 (CAA). The proposal would also codify existing Wage and Hour Division (WHD) guidance into a rule.

According to the announcement: The CAA prohibits employers from keeping employees’ tips.  During the development of those provisions, the Department provided technical assistance to Members of Congress. DOL’s proposed rule would allow employers who do not take a tip credit to establish a tip pool to be shared between workers who receive tips and are paid the full minimum wage and employees that do not traditionally receive tips, such as dishwashers and cooks.

The proposed rule would not impact regulations providing that employers who take a tip credit may only have a tip pool among traditionally tipped employees. An employer may take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (currently $2.13 per hour) and the federal minimum wage. Establishments utilizing a tip credit may only have a tip pool among traditionally tipped employees.

Additionally, the proposed rule reflects the Department’s guidance that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties with tipped duties. For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties. The proposed regulation also addresses which non-tipped duties are related to a tip-producing occupation.

In this notice of Proposed Rulemaking (NPRM), the Department Proposes to:

  • Explicitly prohibit employers, managers, and supervisors from keeping tips received by employees;
  • Remove regulatory language imposing restrictions on an employer’s use of tips when the employer does not take a tip credit. This would allow employers that do not take an FLSA tip credit to include a broader group of workers, such as cooks or dishwashers, in a mandatory tip pool.
  • Incorporate in the regulations, as provided under the CAA, new civil money penalties, currently not to exceed $1,100, that may be imposed when employers unlawfully keep tips.
  • Amend the regulations to reflect recent guidance explaining that an employer may take a tip credit for any amount of time that an employee in a tipped occupation performs related non-tipped duties contemporaneously with his or her tipped duties, or for a reasonable time immediately before or after performing the tipped duties.
  • Withdraw the Department’s NPRM, published on December 5, 2017, that proposed changes to tip regulations as that NPRM was superseded by the CAA.

After publication this NPRM will be available for review and public comment for 60 days. The Department encourages interested parties to submit comments on the proposed rule. The NPRM, along with the procedures for submitting comments, can be found at the WHD’s Proposed Rule website.

Salary Levels Are Rising (Or Are They?) …It’s Still Anyone’s Guess …But We ARE Getting Closer!

On March 7, 2019, the U.S. Department of Labor (DOL) issued a news update concerning the new salary levels for employees to qualify for the Executive, Administrative, and Professional exemptions under the Fair Labor Standards Act (FLSA).  The news update acknowledges that the currently salary level of $455 per week, in effect since 2004, needs to be increased but not to the level that was required by the Obama Administration in 2016 ($913 per week). The Department is proposing to adopt a salary level that uses a clear and predictable methodology for employees and that will also comply with the FLSA and the recent court decisions concerning the Obama Administrations regulations that were invalidated by the United States District Court for the Eastern District of Texas. The rule was submitted on Appeal to the United States Court of Appeals for the Fifth Circuit but was being held in suspension.

This rulemaking proposes to rescind the 2016 rule formally and replace it with this current rule. The same methodology is being used as in the 2016 rule.  The level is set at approximately the 20th percentile of earnings for full-time salaried workers in the lowest region (South). Applying the 2017 data and projecting forward to January 2020 (when the rule should be effective) this results in a proposed standard salary level of $679 per week or $35,308 per year. However, the Department anticipates using the 2018 data in developing the final rule.

One holdover from the 2016 Obama Administration rule is the ability to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level test.  These bonuses must be paid annually or more frequently. The new rule will incorporate these types of bonuses.

The DOL is not proposing any changes to the standards duties tests at this time.

For employees who are exempt under the Highly Compensated Employee test, this level will be increasing as well.  The 2016 rule increased that $100,000 threshold to $134,004.  This new rule, using the same methodology of the 90th percentile for full-time salaried employees nationally as the 2016 ruling is projecting that the final level will be $147,414 for 2020.

The automatic updates contained in the 2016 rule will not be adopted.  Instead the DOL proposes to update the earnings thresholds every four years to prevent the levels from, once again, becoming outdated.

The DOL is now conducting a 60-day comment period on the new rule.  Click here to read the new proposed rule.  The address to comment is on page 2 of the report.

We will see where the rule stands after the 60-day comment period. Until then we just wait…

I invite your comments… what do you think of the new level?

 

Reminder: Keep up with the payroll news by subscribing to Vicki’s e-news alerts, Payroll 24/7.  The latest payroll news when you need it, right to your inbox.

Taxpayer Advocate Annual Report: Payroll is Upfront and Center in this Year’s Recommendations

The Taxpayer Advocate Service is an independent organization within the IRS.  Its purpose is to ensure that every taxpayer is treated fairly and to help taxpayers know and understand their rights.  The current Taxpayer Advocate is Nina Olson.  Each year the National Taxpayer Advocate (NTA) releases their Annual Report to Congress.  This report describes the challenges the IRS is facing. Federal law requires that the NTA’s annual report identify at least 20 of the most serious problems encountered by taxpayers and to make administrative and legislative recommendations to mitigate those problems. The following are the highlights of this year’s recommendations that affect payroll:

  1. Alternative to Form W-4: The report recommends scraping the Form W-4 altogether and analyzing the feasibility of adopting an IRS-determined withholding code. This approach is currently being utilized in the U.S. tax administration.  It also recommends that withholding be expanded at the source to encompass not only wages, but taxable interest, pensions, dividends, capital gains, IRS income, unemployment and even, potentially, certain earnings as an independent contractor.
  2. Furnishing Information Returns Electronically: Information return data to taxpayers should be furnished electronically for direct importation into tax return preparation software or to authorized tax return preparers.
  3. Lower Electronic Filing Thresholds: The report recommends requiring employers with more than five employees to file Forms W-2 electronically.
  4. Form 941 Filing: Recommends requiring Form 941 contain information about each employee’s name, address and social security number. To promote electronic filing, direct the IRS to use the fillable form currently on the IRS website and reformat so the form can be electronically filed, at no cost, directly from the website.
  5. Effects of the new tax law and the shutdown on overall IRS workloads: With all of the new tax forms needed to incorporate the changes to the tax code the IRS was overwhelmed. Add to this the shutdown and the antiquated systems (IRS has two of the oldest IT systems in the federal government) and you have a recipe for potential disaster. Because of these issues the IRS is now having to process more than five million pieces of mail and over 87,000 amended returns. All manually. IT modernization was the number one recommendation in this report.

Whether or not the recommendations are implemented is anybody’s guess.  But as the situation is becoming more intense at the IRS for meeting deadlines and handling the workload with antiquated systems it will be well remembered to monitor this report for any upcoming legislative changes.  Especially in the area of electronic filing, lowering thresholds and replacing the Form W-4.

Reminder: Keep up with the payroll news by subscribing to Vicki’s e-news alerts, Payroll 24/7.  The latest payroll news when you need it, right to your inbox.

Show Down in Texas Over Sick Leave Looming

After Midnight, On February 16th, the Austin, TX city Council approved an ordinance establishing a paid sick leave requirement.  This requirement applies to all private employers located within the City of Austin.  The Mayor is expected to sign the ordinance.  This will have Austin joining the growing lists of cities and states requiring mandatory sick leave.  But before the City Clerk has even had the chance to verify the approved language and post the finalized ordinance, the state legislature began rumblings that they will take steps to curtail the Austin ordinance in its next session.

The Texas Tribune is reporting that just hours after the bill was passed state Rep. Paul Workman, R-Austin sounded off against the bill, saying the ordinance is “declaring war” on small private businesses.  According to Workman, “It’s not the role of the government to mandate for employers to do this”.   This again is going to come to a show-down between local control of the cities versus control in the state capital.  Something that organizations like the American Legislative Exchange Council (ALEC) have made good use out of to curtail the sick leave movement. We can only stay tuned to see how the show-down plays out in the state legislature.

Why Don’t Businesses Embrace Universal Health Care?

Yesterday the California Senate passed SB 562, The Healthy California Act. This bill would create the Healthy California Program to provide comprehensive universal single-payer health care coverage and a healthcare cost control system for the benefit of all residents of the state of California. It would be funded by a combination of employer and employee payroll taxes. Of the 33 developed nations in the world 32 of them have what is known as universal healthcare. The lone exception to this, of course, is the United States. Universal healthcare, however is not defined as government only healthcare, but can include both public and private insurance and medical providers. So if this bill actually passes the assembly and the financial aspects are resolved it would put California on the list of countries with universal healthcare. This would be a very unique situation. One of our states has universal health care but the country does not. But I think the bigger question for this blog is: “why don’t businesses embrace universal health care?”

And I’m not the only one questioning this. Warren Buffett has stated that other countries have gained a five or six point advantage over the United States because of healthcare spending by employers. The National Federation of Independent Business conducted a survey of small business priorities and problems and found that the cost of health insurance is the most severe problem facing American small business today. In fact 52% of small business owners identified it as a critical issue. The Bureau of Labor Statistics (BLS) puts the cost of healthcare in 2016 for employers with more than 500 workers at $4.28 per hour or 9% of the total compensation costs. For employers with 100 to 499 employees the insurance costs are $2.77 per hour worked or 8.5% of total compensation. Now some will say that this cost is due to the Affordable Care Act. But the increase under the Affordable Care Act for employers with more than 500 employees as compared with the cost in 2006 was 1%. For those employers with under 500 employees it was 2.5%. However this statistic does not reflect that many of the employers with under 500 employees did not offer health insurance in 2006. So why do we continue to put this burden on employers and why do they continue to fight to keep it?

Using the 2006 figures so that we do not factor in Obama care, if I were to propose an 8% tax on all employers with over 500 employees there would be riots in the streets. Yet that’s what employers were paying for healthcare. So if we were to take this 8% as a payment from each employer and add in the cost the employee paid could this be the beginning of universal healthcare for the United States. Think about it for a minute. Employers would no longer need to contact insurance companies, negotiate costs, and have someone in the company to oversee the program (an additional cost of a salary) nor have someone in Accounts Payable pay the bill. Would it have to be a federal program? Most countries that have universal healthcare have a combination of national and municipalities handling the programs. The tax would be on the federal level but the healthcare itself is provided on the local level since those are the ones that usually understand what the community requirements are.

Would this help us become more competitive in the world?  Would it help employers become more financially solvent?  Would it get health care for all the citizens of the United States?  The answers to those questions, of course, remained unanswered as of today.  But unless we begin to look into shifting the costs of health care away from employers we will never know.

 

What do you think?  Take our poll

or leave a comment.

Is Private Sector Comp Time Finally Here? And Is It a Good Idea in the First Place?

This week the House of Representatives passed The Working Families Flexibility Act of 2017, H. R. 1180. The purpose of this bill is to amend The Fair Labor Standards Act of 1938 to allow employees to receive compensatory time off instead of payment for overtime worked for employees working in the private sector. It sponsors say that this gives employees in the private sector the same flexibility that employees in the public sector have enjoyed for a number of years. In essence, being able to choose between being paid for overtime or getting time off at a later date. I have not yet made a decision on this bill as to whether or not I support it. It has good points but it also has a lot of flaws.

First the good points:

  • the bill does require that the employee agree to, in writing, receive comp time instead of being paid for the overtime worked. If the employee would prefer to be paid over time then they have to be paid overtime, at least in theory.
  • The bill also requires that the employee be given opportunity to take the comp time when requested, as long as it does not interfere with business operations.
  • The bill does require that the employee be cashed out upon termination, voluntary or involuntary, or at the end of a 12 month period. This in theory prevents overtime from never being paid.
  • The bill permits an employee to opt out after agreeing in writing to be paid compensatory time and does not permit compensatory time to be as a condition of employment.
  • The bill does not allow new employees to be forced to take compensatory time instead of overtime. The employee must work at least 1000 hours for the employer before they can agree to be pay compensatory time.
  • The bill sunsets after five years and requires after two years that the GAO submit a report outlining whether or not there were complaints alleging violation of the rules made to the Secretary of Labor or the Department of Labor. It requires an accounting of any unpaid wages, damages, penalties, injunctive relief, or any other remedies that were obtained or sought by the Secretary Of Labor.

However there are flaws:

  • first the premise that public sector employees “enjoy” the privilege of compensatory time in lieu of overtime. Public sector employees did not come under the FLSA until 1985 when it was mandated by a court decision. Private-sector employees have been under the FLSA since 1938. The only reason the comp time in lieu of overtime was permitted is because it was written into many cities, counties and states requirements because they were spending public money. It was never something that was negotiated or requested by the employees themselves.
  • Many studies in the United States show that employees tend not to take all of the vacation they are due because they can’t get the time off from their employers. So my question is if they can’t get time off to take vacation that has been given them how will they be able to take off using compensatory time? Especially when the bill does not state that they must be given the comp time when requested but only if it does not interfere with business operations. And how many of us have not been able to take our vacation because our boss says I can’t give you the time off right now.
  • If not able to take the time off due to business operations then what’s the purpose of having comp time except to delay paying the employee overtime that was rightfully do. I understand that taking time off does affect business operations and if I’m requesting vacation I can understand that my boss can say not at this time. Because in essence vacation is not something that I actually worked for, but a benefit my boss is offering me. But compensatory time off is not the same as vacation although this bill seems to treat it that way. This is money that I’ve already worked for and am already due. It is not a benefit that my boss gets to allow me to take at his or her convenience.
  • My biggest problem with this bill is the fact that even though it says that the GAO will present a study on whether or not there were violations the fact is that the Labor Department collects hundreds of millions of dollars each year for violation of simple minimum wage and overtime rules. These rules have been in effect since 1938 and yet employers still violate them on a regular basis. Is this just adding one more area that employees will have to sue their employers through the DOL to get their money? Especially lower paid or minimum wage employees. Is this one more thing the employee will have to be aware of and make sure they are being paid properly?

Compensatory time off bills have passed the house many times in the past but have never gone past the Senate, usually dying in committee. But these are not normal times so we will have to wait and see.

 

What do you think? Take our poll. Are you for or against The Working Families Flexibility Act of 2017? 

State vs. Cities: The Wage Hour Fight Continues

Localities such as cities or counties have been enacting their own wage and hour requirements for quite a few years now.  Dozens of cities in California and New Jersey have their own sick leave laws as well as higher than state minimum wages.  New Mexico has local minimum wages as does Washington.  But it seems the state legislators are starting to fight back.  With the assistance of groups such as the American Legislative Exchange Council (ALEC) model bills (draft legislation that legislators may customize and introduce) have passed in several states.  The latest states to pass such legislation are Arkansas and Iowa.  These bill basically forbid the local governments from passing any type of law relating to minimum wage, living minimum rates, employment leave or benefits, hiring practices or any condition of employment that is more generous than the federal or state law.  Whether cities will fight back in the courts, or if they even can, remains to be seen. Miami Beach recently tried to establish its own minimum wage despite Florida having passed its own version of the ALEC legislation.  The court struck down the Miami Beach ordinance. So the fight continues.  Payroll professionals need to monitor local minimum wage and sick leave ordinances to ensure compliance but remember these ordinances can be fleeting if the state has passed the ALEC-style legislation.

Get all the latest on local minimum wage laws by subscribing to Payroll 24/7 new alert service. News you need as payroll professionals when you need it.

MA Governor Proposes Reinstating “Fair-Share” Assessment

Massachusetts Governor Charlie Baker included a plan to reinstate the “fair-share contribution” formerly assessed against employers without a health insurance plan in his fiscal year 2018 budget.  The assessment would recommence as of January 1, 2018 if passed.  They are intended to partially cover the $600 million shortfall in the state healthcare system (Mass Health) for low-income residents. The fair-share contributions were repealed in 2013 with the advent of the Affordable Care Act.   For more detailed information check out the Associated Industries of Massachusetts blog. 

 

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New OT Rules Update: DOL Vows to Fight On

On November 22, 2016, U.S. District Court Judge Amos Mazzant granted an Emergency Motion for Preliminary Injunction and thereby enjoined the Department of Labor from implementing and enforcing the Overtime Final Rule on December 1, 2016. The case was heard in the United States District Court, Eastern District of Texas, Sherman Division (State of Nevada ET AL v. United States Department of Labor ET AL No: 4:16-CV-00731).  The DOL has issued the following concerning the ruling:

The rule updated the standard salary level and provided a method to keep the salary level current to better effectuate Congress’s intent to exempt bona fide white collar workers from overtime protections.

On December 1, 2016, the Department of Justice on behalf of the Department of Labor filed a notice to appeal the preliminary injunction to the U.S. Circuit Court of Appeals for the Fifth Circuit.

Since 1940, the Department’s regulations have generally required each of three tests to be met for the FLSA’s executive, administrative, and professional (EAP) exemption to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (“salary basis test”); (2) the amount of salary paid must meet a minimum specified amount (“salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (“duties test”). The Department has always recognized that the salary level test works in tandem with the duties tests to identify bona fide EAP employees. The Department has updated the salary level requirements seven times since 1938.

The Department strongly disagrees with the decision by the court. The Department’s Overtime Final Rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule.