Update on Multistate Taxation Legislation–Passed the House Again! But Needs Your Help

In our blog on March 9th of this year we discussed the latest attempt (the last one was 2012) to simplify taxation for multistate employees.  Those are employees who live in one state and work in other states. Many of these employees work in the state for only a few days or weeks out of the calendar tax year, yet employers must withhold taxes for these states and the employees must file, in most cases, income tax returns.  To try to alleviate this burden on employers ( the tracking requirements for payroll departments can be massive) the Mobile Workforce State Income Tax Simplification Act of 2015 (H.R. 2315 ) was introduced.  A major push by payroll professionals and the American Payroll Association was begun. I, myself, wrote letters to the Nevada congress members and Senators asking for the bill to be passed as well as asked my blog followers to do the same.  Well the hard work so far is paying off.  The House of Representatives passed the bill on September 21st and it is now in the hands of the Senate.  It appears to be a bi-partisan bill with co-sponsors from both sides of the aisle. However, a similar bill was passed in 2012 but was not considered by the Senate before they adjourned the session so this may be the case this year.  It is opposed by New York state and similarly situation states that will lose a lot of revenue from nonresidents if the bill is passed. Let’s keep our fingers crossed.  However, writing to your Senators might help push this along. If every payroll professional who has had to deal with tracking, withholding and paying multistate employees would write a letter to their own Senators imagine how flooded the Senate mail office would be! So write, phone or email your Senators today!

The Overtime Battle Rages On!

The battle to stop the new overtime rules from taking effect has begun in earnest. 21 states, including Arizona, Kansas, Oklahoma, Nevada, Texas and Utah, and the U.S. Chamber of Commerce have filed a lawsuit in Texas challenging the Department of Labor’s (DOL) final overtime rules under the Tenth Amendment of the U.S. Constitution and the Administrative Procedures AFlag of Nevada (isolated)ct.   Nevada Attorney General Adam Paul Laxalt led the coalition of states filing the suit. According to the suit the final rule contradicts the statutory text of the exemption, as well as Congressional intent.  The suit also raises the specter of the federal executive depleting state budgets in an effort to impose its policy will on the states.

However the DOL has responded by issuing the following statement by Secretary Tom Perez:  “We are confident in the legality of all aspects of our final overtime rule. It is the result of perez2a comprehensive, inclusive rule-making process. Despite the sound legal and policy footing on which the rule is constructed, the same interests that have stood in the way of middle-class Americans getting paid when they work extra are continuing their obstructionist tactics. Partisan lawsuits filed today by 21 states and the U.S. Chamber of Commerce seek to prevent the Obama administration from making sure a long day’s work is rewarded with fair pay. The overtime rule is designed to restore the intent of the Fair Labor Standards Act, the crown jewel of worker protections in the United States. The crown jewel has lost its luster over the years: in 1975, 62 percent of full time salaried workers had overtime protections based on their pay; today, just 7 percent have those protections – meaning that too few people are getting the overtime that the Fair Labor Standards Act intended. I look forward to vigorously defending our efforts to give more hardworking people a meaningful chance to get by.”

Let’s see where the battle takes us by December 1!

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History Is On President Obama’s Side

We all knew that when President Obama called for changes to the exempt rules under the FLSA and the Department of Labor began the process of implementing those changes that there would be challenges by Congress.  The “Overtime Reform and Enhancement Act” was introduced on Friday, July 15th. The bill requires the salary level changes be done in increments and does away with the automatic updates. But does Congress have history on their side to actually challenge the new rules?  If we look at history, the answer is no. History is on President Obama’s side, even for the automatic updates, which have been proposed in the past several times. Changes of the nature being done (raising the salary level) have always been under the purview of Presidents, their Secretaries of Labor and their Administrators for the Wage and Hour Division. They have however, been few and far between.  The first level was set at $30 per week in 1938 under President Franklin Roosevelt and his Administrator Elmer F. Andrews. It slowly raised up over the course of the years, often with professional and administrative employees being paid more. It was increased to $55/$75 per week in 1949 under President Truman and his Administrator William R. McComb; to $80/$95 per week in 1959 under President Eisenhower and his Administrator Clarence Lundquist; to $100 per week for executives and administrative, $115 per week for professional in 1963 under President Kennedy and his Administrator Clarence Lundquist.  In 1969 hearings were held again to increase the salary level.  This time they would increase to $125 per week for executive and administrative and $140 for professional employees beginning in early 1970 under President Johnson and his Administrator Robert D. Moran. During the hearings it was suggested by union leaders that there be a mechanism put in place to increase the salary level automatically to eliminate the lengthy periods which normally occur between revisions, thus keeping the salaries current and meaningful. But this was not incorporated. Amazingly enough there were only two changes to the salary level since 1970.  First under President Ford (begun under President Nixon) in 1975 and then again under President George W. Bush in 2004. Under Ford and Administrator Betty Southard Murphy they were raised to $155 per week for executive and administrative employees and $170 for professionals effective April 1975.  Again at this time Murphy pointed out that the thresholds had last been updated in 1970 and were increasingly out of date. She referenced that the Consumer Price Index may be utilized as the basis for updating the levels but did not include it in the final proposal. The salary level remained at those rates for the next 29 years.

The issue was not ignored by subsequent presidents it just never made it out of the regulatory agenda to fruition.  It was proposed in 1979 under President Carter but tabled in 1985 under President Reagan. Under President Clinton it was put forth with a target date of September, 1993 but no action was ever taken on it. It remained on the agenda but no timetable was ever set.  Then under President George W. Bush and his Administrator Tammy McCutchen,  a major overhaul of all the requirements for exempt employees, including the salary level tests, were implemented.  The salary level was raised to $455 per week for all exempt employees and a new category was added for the highly compensated.  This category had a salary level of $100,000 per year. It was during this last update that Congress actually attempted to block the new regulations.  Several amendments were added to various bills calling for defunding of the Department of Labor in an effort to stop the regulations from taking place. It was not the levels that were in dispute but the overall changes made to the jobs duties tests that caused the outcry from Congress.  It was felt that too many employees would lose overtime protection under the new regulations. Stand alone bills were introduced as well as hearings conducting in both the house and senate.  But in the end the regulations were implemented in April of 2004.  This was the final update to the salary level until the new rules scheduled to take effect on December 1, 2016.

So the new proposed legislation of the “Overtime Reform and Enhancement Act” which is attempting to delay the implementation of the new salary levels does not have history on its side. Congress normally does not and generally cannot interfere with this type of regulation.  But you never know in this day and age. We will just have to wait to see which side wins. But if history is any indicator, my money is on the DOL.




Minimum Wage: Local vs. State–OH Style

Ohio flag

Local efforts for higher minimum wages are causing lots of concern to state legislatures and governing entities.  The latest round in this battle is in Ohio.   Hamilton County, which includes Cincinnati wants to increase the local minimum wage to $12.20 per hour by a ballot initiative this year.  However, the Ohio Attorney General Mike DeWine states that local minimum wage ordinances violate the state’s constitution and are not permitted.  The current minimum wage in the state is $8.10 per hour.  The group that is seeking the ballot initiative, Cincinnatians for a Stronger Economy plans to see further legal advice.  But it isn’t just Cinncinnati that is looking to increase local minimum wages.  Cleveland, as well, has already announced plans to put a minimum wage increase on the November ballot.  DeWine’s opinion is not binding but it could be used to bolster legal challenges if the voters approve the measure in November.  Employers simply need to wait and see.


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Q & A on New Overtime Salary

As you should be aware of by now, the DOL has issued their final rule on salary levels for an exempt employee.  We sent that out to our Payroll Pause subscribers this morning.  To ensure that everyone understands how it will work the Secretary of Labor Tom Perez will be doing an “Ask Secretary Perez” twitter Q & A tomorrow Thursday, May 19th at 2:30 pm Eastern.  Tweet your questions to #OTrule. @LaborSec #overtime

And the Battle Begins…On Overtime Rule Update

In my March 18th blog I discussed the latest on the “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees”. It has been submitted for executive  review with the Office of Management and Budget and we are hoping to hear something in 30 to 60 days. Well, the Republican lawmakers were also discussing this rule update on March 18th and they introduced legislation that would require the Labor Secretary to nullify this “controversial proposed rule.”  The bill, H.R. 4773 Protecting Workplace Advancement and Opportunity Act, was introduced by Senator Tim Scott (R-SC) and Representative Tim Walberg (R-Mich.).  The measure also would require the Secretary to conduct a specified economic analysis on employers before promulgating any substantially similar rule.  The bill has been referred to the House Committee on Education and the Workforce. So now the battle begins as to who will win out and what will the final ruling look like.  I will keep you posted.

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Heads Up! OT Rules May Be on the Move!

The long awaited overtime changes may finally be getting some movement.  It was hoped that we would hear something from the DOL by the first of summer.  But it appears that they are making their move now.  On March 14th the final overtime rule, known officially as “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees” was submitted for executive  review with the Office of Management and Budget.  Now, there is no official deadline for this review but a typical timeframe would result in the final rule being issued in approximately 30 to 90 days. We still don’t know if there will be any changes to the job duties tests at this time.  There is speculation that since the DOL took comments on it and published them last fall they may announce it at the same time or may then create a second ruling and issue that.  We are still waiting.

In the meantime, some practitioners have been getting restless and set up a petition on February 4th on whitehouse.gov “Tell the Department of Labor to move quickly on implementing the new overtime rule“. It currently has over 113,000 signatures. It even has its own hashtag, #TimeforOT”

Contact Congress Now About Multistate Taxes!

As most payroll professionals are aware, having employees who travel to various states can be a logistical nightmare when it comes to taxation.  Even an hourly employee traveling for a two-day training on their payroll software could create a taxation situation requiring hand calculation of taxes, and the employee having to file a non-resident tax return.  This is the mobile workforce we live with today.  And it is getting worse as more and more employees are traveling for their jobs. But you have a chance to do something about this because it doesn’t have to be this cumbersome for payroll if Congress passes the Mobile Workforce State Income Tax Simplification Act. This bill establishes a 30-day threshold before taxes are required.  This ensures that state and local governments get their fair share of taxes when an employee works in a state on a regular basis, but doesn’t require an employee who only goes to that state for a 2-day conference to pay taxes.   The Government Relations Committee of the American Payroll Association is helping to promote this new bill. It is asking payroll professionals to contact their Senators and Representatives and ask for their support on this bi-partisan bill.  Because they know how busy payroll is, they have made it very simple for you.  All you need to do is to click here. This will take you to their automated page where you just fill in your contact info and it creates the letters for you.  Then your can send as an email or print and mail out yourself.  It even allows you to add your own comments. Let’s help ourselves in payroll by helping to pass this much needed legislation.

9-11 First Responders Were Employees Too!

I have been following the story of Jon Stewart and how he is attempting to get a bill passed by Congress to address the health issues of the first responders who save thousands of lives on 9-11.  He got the bill passed five years ago by shaming Congress but now it is up for renewal.  The thing to remember is that these people were employees doing their job no matter what the risk to themselves.  Payroll professionals should get behind Jon Stewart and demand that Congress help these American employees with the 9/11 related illnesses they are not only facing on a daily basis but dying from.  The bill, James Zadroga 9/11 Health and Compensation Act is being held up for purely spiteful political reasons.  I don’t care if you are a republican, a democrat or an independent.  We should not be playing politics with employee’s lives who risked everything, including their own life, to save others.  Stewart is urging people to use the hashtag #WorstResponders to contact congressional representatives on both sides of the aisle.  Tell your representative and senator to pass the bill now.

California Enacting Electronic Filing Requirement for All Employers

The state legislature has passed AB 1245, a bill that requires California employers of 10 or more employees to submit quarterly payroll tax returns and pay the associated payroll taxes electronically over the California Employment Development Department website starting in 2017. The bill also requires all employers to file and pay electronically effective January 1, 2018. The bill awaits the governor signature and he is expected to sign it.

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