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Payroll Masters Business News & Happenings blog has moved as of September 1, 2015. Please visit www.payrollmasters.com/news to read the latest blogs.

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Health Care Law Tax Provisions: IRS Recorded Webinars for Employers and Coverage Providers

Employers and health coverage providers now have access to recorded webinars from IRS about the Affordable Care Act’s employer provisions and related tax requirements. If you are a business owner, tax manager, employee benefits manager, or health coverage provider, you can access and review these videos anytime to better understand how the health care law may affect your organization.

Each of the following ACA videos on the IRS Video Portal provides about 40 minutes of detailed information on the specific tax provision mentioned in the title.

Employer Shared Responsibility Provision (47 minutes)

Learn about determining applicable large employer status, payments, and transition relief for 2015.

Employer-Sponsored Health Coverage Information Reporting Requirements for Applicable Large Employers (37 minutes)

Learn about employer-sponsored health coverage information reporting requirements for applicable large employers, including:

  • who is required to report
  • what information the law requires you to report
  • how to complete the required forms

Information Reporting Requirements for Providers of Minimum Essential Coverage (35 minutes) 

Learn about the information reporting requirements for providers of minimum essential coverage, including employers that provide self-insured coverage.  Learn about:

  • who is required to report
  • what information the law requires you to report
  • how to complete the required forms

View the recorded webinars in the IRS Video Portal using one of the following tabs: Businesses, Tax Professionals, Governments and Non-Profits. After clicking on one of these tabs, simply select “Affordable Care Act” from the list of topics on the left side of the screen, and you will see a list of recordings about these and other ACA topics.

In addition to videos about the tax provisions of the Affordable Care Act on the IRS Video Portal, there is a wide range of videos on other tax topics for individuals, businesses and tax professionals.

For more information about the Affordable Care Act visit IRS.gov/aca.

Want more info about this? Contact Payroll Masters.

Source: IRS

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

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CA Labor Commissioner Cites Sacramento County Janitorial Company Nearly $460,000 for Wage Theft

The California Labor Commissioner Julie A. Su has issued citations of $459,573 to a janitorial employer after an investigation uncovered wage theft violations affecting 12 workers, many of them recent immigrants from El Salvador. Norcal Floor Services, Inc., based in North Highlands in Sacramento County, paid the janitors an average of $7.53 per hour.

The investigation and a two-year pay audit from June 2012 to June 2014 revealed that managers threatened to fire workers who complained about working up to seven days in a row every week, for up to 9 hours a day, without breaks of any kind.

“When scofflaw employers exploit their workers by circumventing wage and labor laws, it puts honest businesses at a disadvantage,” said Christine Baker, Director of the Department of Industrial Relations (DIR.) The Labor Commissioner’s Office, officially known as the Division of Labor Standards Enforcement (DLSE), is a division of DIR.

A few of the janitors contacted the Maintenance Cooperation Trust Fund (MCTF), a janitorial watchdog organization, about the workplace abuses. MCTF helped them file a complaint with the Labor Commissioner’s Office.

“Janitors’ work is often hidden from public view, which can lead to abuse by unscrupulous employers. I applaud MCTF for assisting these workers in exercising their labor rights,” said Labor Commissioner Julie A. Su. “MCTF’s partnership with my office has helped us tremendously in our effort to level the playing field for honest janitorial businesses and protect the wage floor in California.”

The sanctions against Norcal Floor Services include $456,073 in assessments for unpaid minimum wages and overtime, liquidated damages, and rest and meal period premiums.  Additionally, the Labor Commissioner assessed $3,500 in penalties for violating overtime, minimum wage, rest and meal period requirements, and for failing to provide itemized wage statements. The janitors’ payments range from $560 to $81,915, based on the amount of time worked during the audit period.

Norcal Floor Services was subcontracted to provide janitorial services at nine Food 4 Less and six Rancho San Miguel markets located in Ceres, Greenfield, Lodi, Los Banos, Merced, Madera, Manteca, Modesto, Sacramento, Salinas and Stockton. The Food 4 Less and Rancho San Miguel market chains are owned by PAQ Inc., which entered into a contract with Reflectech, Inc. for general janitorial services. Reflectech then hired subcontractor Norcal Floor Services, Inc.

Source: The California Department of Industrial Relations (DIR)

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

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Federal court rulings send clear message to employers who misclassify workers as ‘independent contractors’

Two recent and very significant legal victories for California workers send a strong message to employers nationwide: if you misclassify your employees, you will face the consequences.

Misclassification is a practice used by some employers to cut costs by declaring their workers to be independent contractors — ducking their obligations to pay at least the minimum wage and overtime pay, and legally required contributions to unemployment insurance and workers’ compensation funds. These employers also fail to remit payroll taxes, resulting in huge losses to state treasuries, and the federal Social Security and Medicare programs.

The U.S. Department of Labor, which has made combatting worker misclassification a major focus of its enforcement efforts, has announced that federal courts have ruled against two Bay Area companies and sided with their employees after investigations revealed that the companies deliberately misclassified the workers as independent contractors to cheat them out of their wages and other critical workplace benefits.

National Consolidated Couriers Inc., based in San Leandro but with clients across the country, has agreed to a court judgment requiring it to pay $5 million in back wages and damages to more than 600 drivers it misclassified as independent contractors, having cheated them out of minimum wage and overtime pay. The judgment reveals that, during the course of the Labor Department’s investigation, the employer tried to destroy records showing an employment relationship with its drivers, and had been misclassifying the workers over at least five-year period.

In another major win for workers, a federal judge ruled that drivers for Mountain View-based Stanford Yellow Taxi Cab, Inc. were also misclassified. In this case, the department had to file suit to stop Stanford Cab from threatening and intimidating its drivers who were cooperating with investigators, including an instance where Stanford fired a worker just days before trial to discourage his witness testimony. The court’s decision allows the department to continue with litigation forcing the company to pay nearly $3 million in back wages and damages to dozens of drivers.

“Misclassification is workplace fraud, plain and simple,” said U.S. Secretary of Labor Thomas E. Perez. “It hurts workers by denying them a fair day’s pay for a fair day’s work, and it also undermines the competitiveness of businesses that are playing by the rules. At the Labor Department, through vigilant and vigorous enforcement, we are cracking down on irresponsible employers who game the system and cheat their employees — and that’s what they are: not contractors, but employees.”

In both the NCCI and Stanford Cab cases, the courts rejected arguments that the drivers were independent contractors in business for themselves as their employers alleged.

In the case of Stanford Cab, the company required drivers to be on the job six days per week for 12-hour shifts but did not compensate them for all of those hours. Stanford also did not allow drivers to change their schedules or operate independently by reaching out directly to passengers. Drivers also had to abide by a dress code. They were and are employees under every reasonable interpretation of the law.

Wage and Hour Division Administrator Dr. David Weil, who in July issued official guidance to employers about avoiding misclassifying workers, said that his agency takes this matter seriously.

“We are attacking this problem head on through education and outreach as evidenced by our recent guidance to the employer community,” Weil said. “But make no mistake. We are also engaged in a nationwide, data-driven strategic enforcement initiative across all industries to ensure that workers are correctly classified and properly paid, and that those employers who are playing by the rules aren’t operating at a competitive disadvantage to those who aren’t.”

Typically, the Wage and Hour Division finds misclassification in low-wage industries. And while the misclassification of an employee as an independent contractor is not in and of itself illegal under the laws the department enforces, it typically leads to violations of the minimum wage and overtime provisions under the Fair Labor Standards Act which it does enforce.

In Fiscal Year 2014, Wage and Hour Division investigations resulted in more than $79 million in back wages for more than 109,000 workers in low-wage industries such as janitorial, food service, construction, day care, hospitality and garment.

The Wage and Hour Division currently has agreements with 25 states to jointly combat misclassification. The partnerships have led to better information sharing and coordinated enforcement to ensure resources are used strategically, effectively and efficiently to protect workers.

On July 28, 2015 the California Attorney General Kamala D. Harris and the U.S. Department of Labor’s Wage and Hour Division (WHD) signed a cooperative agreement to crack down on employer wage theft and other illegal labor practices. The Memorandum of Understanding signed by both agencies will facilitate the sharing of information and enhance enforcement of labor violations.

“As these court rulings indicate, the tide is turning against those employers who misuse independent contractor status to take advantage of workers,” said Regional Solicitor Janet Herold of the department’s Western Region, who litigated both cases. “The courts recognize the nature of this problem and stand ready to ensure that justice is served. America’s workforce deserves no less.”

Although there are some exceptions, almost all employees in California must be paid the minimum wage as required by state law. Effective July 1, 2014, the minimum wage in California is $9.00 per hour. Effective January 1, 2016, the minimum wage in California is $10.00 per hour. Click here for California Overtime Rules. Employers also must maintain accurate time and payroll records.

Want more info about this? Contact Payroll Masters.

Source: DOL

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

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IRS is Launching an Initiative for Employers Delinquent on Payroll Taxes

In a notice posted on August 7, 2015 the IRS announced that the IRS Collection is launching an Early Interaction Initiative to make early contact with employers who may be falling behind on their payroll taxes. The goal of the initiative is to help employers understand and meet their payroll tax responsibilities, prevent missed payments from becoming delinquencies and delinquencies pyramiding out of control.

For many years, IRS Collection’s field staff has been assigned Federal Tax Deposit Alerts (FTD Alerts) where their records indicate that an employer’s payroll tax deposits have declined. These cases were sent to Field Collection staff near the end of the quarter but before the quarterly payroll tax return was due. Then as now, the goal was to meet the employer, determine whether there was a missed payment or delinquency, and if so, help to get it paid and the employer to sustain payroll tax compliance.

The Early Interaction Initiative will accelerate and enhance the FTD Alert process. IRS Collection’s work plans have been adjusted to allow field officials to work more FTD Alerts more quickly.

IRS does not have the resources to visit every employer whose payroll tax deposits decline. So many will receive a letter saying that the IRS has reviewed their federal payroll tax deposit history and their deposits appear to have decreased. The letter will ask the employer to contact the IRS, by letter or phone, and help the IRS Collection to understand the reason for the decrease in deposits. In addition, the letter will remind the employer of their payroll tax responsibilities, advise them of the consequences of not complying with those responsibilities and provide assistance to help them comply.

Other FTD Alerts will be assigned to Field Collection with priority given to cases where the employer has preexisting delinquencies. The number of cases assigned to Field Collection will increase under the early interaction initiative. Where the employer has an explanation for the decline in payroll tax deposits, a cut in staff or a reorganization for example, the case will be closed. Where a delinquency exists, Field Collection will work with the employer to correct the delinquent condition going forward and address the unpaid tax, penalty and interest.

Finally, IRS is currently adjusting systems to monitor federal payroll tax deposits to get FTD Alerts out even more quickly. The sooner a potential problem is identified the better the chances it can be successfully addressed and corrected for both the employer and the IRS.

Payroll taxes withheld from employees’ wages and salaries are a trust fund. Employers withhold income and Federal Insurance Contribution Act (FICA) taxes from employees’ gross pay and hold it in trust until required to deposit it, along with their share of FICA taxes, with the Treasury. When FICA taxes are not deposited, the Social Security and Medicare trust funds suffer. When withheld income taxes are not deposited, the employees still get credit for those “withholdings” on their tax return, and will get their benefits later by proving the withheld amounts, and the rest of the American taxpaying public effectively makes up the difference and pays for their refunds and benefits.

Businesses are informed about their employment tax responsibilities by IRS, SSA, SBA and others in the business community and marketplace upon their establishment and advised about the consequences of missing required payments. The reason for the advice and early alerts is that missed payments mount quickly to employment tax delinquencies, along with interest and penalties, which accumulate or pyramid beyond the ability of the business to repay the amounts owed.

Businesses, especially when encountering liquidity difficulties, may use monies withheld from employees’ pay for working capital or other purposes. This may be an innocent diversion of the employment tax funds initially but the withheld pay and matching amount owed quickly pyramid and become a liability beyond the ability of the employer to repay. By the time the employer, IRS, or other creditors realize the pyramiding condition, the options for repayment decrease and the viability of the ongoing operation comes into question. Due to privacy and disclosure laws, these pyramiding employment tax delinquencies are not known to the business community or marketplace, beyond IRS liens placed on business assets. Banks, suppliers, and others may, therefore, unwittingly continue to extend credit to the delinquent business without knowing their true repayment risk.

Applying the tax laws with fairness for all requires that the IRS address payroll tax delinquencies as soon as possible. This involves proactively precluding delinquencies where we can and keeping delinquencies to a minimum.

Employers who need information on how to comply with their payroll tax responsibilities are encouraged to explore the many resources on the IRS website, IRS.gov. A search on the phrase “employment tax” is a good start. More specifically, employers may want to visit any of the following IRS.gov pages.

What Are FTDs and Why are they Important?
Employment Taxes
Understanding Employment Taxes
Depositing and Reporting Employment Taxes
Employment Tax Publications
Small Business Taxes – The Virtual Workshop (video)

Learn more about Payroll Masters Full Electronic Tax Service

Want more info about this? Contact Payroll Masters.

Source: IRS

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

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FREE Webinar — California’s New Paid Sick Leave Law

On Tuesday, September 1, from 2:00 pm –3:00 pm, the Fresno District Office of the U.S. Small Business Administration (SBA) is hosting a free training for small businesses to learn about California’s new Paid Sick Leave Law which went into effect July 1, 2015.  This interactive, one hour training will be held via webinar and conference call to make it easy and convenient for you to participate, and will help you:

  • Learn how California’s new Paid Sick Leave Law affects your small business and employees. Effective July 1, most of your employees are entitled to paid sick days.
  • Find out how employees accrue paid sick days, how they can use the leave and what reporting/tracking is required of employers.
  • Get educated about California’s Paid Family Leave (PFL) program including a discussion on what your employees are eligible for and how PFL intersects with the California Family Rights Act and the federal Family Medical Leave Act.

This training is being offered for free, and will include a speaker with Small Business Majority.  We hope you can participate and learn how this new law affects your business, employees, and bottom line.

Please click below to register for this free event.  The webinar access information will be emailed along with your confirmation once you have registered: https://www.eventbrite.com/myevent?eid=18124704479

Once you have finished the webinar give Payroll Masters a call 707-226-1428. Payroll Masters can handle all of your paid sick leave accruals, pay stub compliance and record keeping/tracking required by state and local jurisdictions. Visit our website to learn more!

Source: SBA

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

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Accurate Affordable Care Act reporting will require payroll, HR, and benefits to work together

While employers should already be tracking the data necessary to determine their status under the Affordable Care Act and complete the new ACA reporting forms, they may not have determined whether the payroll, human resources, or benefits department will be responsible for the filings. Regardless of which department is ultimately tasked with the responsibility for completing the forms, it is clear that they will have to work together because each department will probably control the system housing some of the data that must be reported.

Basic ACA requirements

The ACA requires an applicable large employer (ALE) to offer its full-time employees and their dependents minimum essential coverage that is affordable and provides minimum value. An ALE is defined as an employer that has a combination of 50 or more full-time and full-time equivalent employees. Companies with a common owner or that are otherwise related under certain rules of section 414 of the Internal Revenue Code are generally combined and treated as a single employer for determining ALE status. See Payroll Masters article “Holding Companies and Determining the ACA Employer Mandate”. For 2015, health coverage is considered affordable if the amount of the premium paid by the employee is no more than 9.56% of an employee’s household income. However, because employers often do not know an employee’s actual household income, there are safe harbors in place including one that deems coverage affordable if it is equal to or less than 9.5% of the employee’s Form W-2, Box 1 wages. Under the ACA, a health plan that covers 60% of the cost of benefits expected to be incurred meets minimum value requirements.

ACA penalties

There are two types of penalties for employers that don’t provide the required coverage under the ACA. If an ALE does not offer coverage, or offers coverage to less than 95% (reduced to 70% for 2015) of its full time employees and their dependents and at least one employee receives a premium tax credit, then the ALE is subject to an Employer Shared Responsibility payment. The ESR payment is calculated by multiplying the number of full-time employees by $2,000, with an exclusion for the first 30 full-time employees (increased to 80 for 2015).

If an ALE offers coverage to 95% or more (reduced to 70% for 2015) of its full-time employees and their dependents, but there are full-time employees that receive a premium tax credit because the offered coverage was not affordable or did not provide minimum value, then the ALE will be subject to a second type of ESR payment. In this case the payment will be $3,000 per employee that received the premium tax credit.

Importantly, both of the penalties are calculated on a monthly basis. For 2015 there are two types of transition relief for ALEs. For ALEs with 100 or more full-time employees, the relief is in the form of a lower percentage of full-time employees who must be offered coverage or a larger exclusion of full-time employees subject to the $2,000 penalty. For ALEs with 50 to 99 full-time employees, no ESR payment will be due even if the coverage requirements are not met. However, these employers are still subject to the ACA reporting requirements. Because ACA penalties are calculated on a monthly basis, ALEs must be able to track their full-time employees for each month as well as corresponding health coverage status. This is even more important in 2015 because of the various indicator codes that will be used on the forms to claim the applicable transition relief.

Data required to complete ACA reporting

ALEs will generally file two ACA forms that follow a procedure similar to that for filing Forms W-2 and W-3. Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, will function much like the Form W-2 with copies going both to the IRS and full-time employees. Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, will function like a Form W-3. For ALEs that have different divisions, each may file a 1094-C for each entity, but one must be marked as an authoritative transmittal and provide data on all the Forms 1095-C filed by the ALE.

IRS Publication 5196, Getting Ready for Monthly Tracking, provides an overview of the data that will be required to complete the ACA reporting forms.

To complete Form 1095-C, ALEs must report the following information, for each full-time employee, broken down by month: 1) information about the offer of coverage to each employee, 2) whether the employee was enrolled in the plan, 3) the employee’s share of the lowest-cost self-only mini mum value coverage, and 4) whether the affordability safe harbor or other transition relief applies.

To complete an authoritative transmittal on Form 1094-C, ALEs must report: 1) whether coverage was offered to 95% (70% for 2015) of the organization’s full-time employees, 2) the total number of Forms 1095-C that the organization issued, 3) the number of full-time employees and total number of employees by month, 4) if applicable, information about members of the aggregated ALE group, and 5) whether the organization qualifies for transition relief.

Payroll, HR, Benefits must work together

Payroll will have the necessary information concerning the W-2 wages or rate of pay needed to determine the affordability of the offered coverage if the employer relies on one of those affordability safe harbors. However, that is only part of the reporting equation. HR or Benefits will likely have the data on the lowest-cost self-only minimum value coverage that was offered by the employer. Beyond this basic calculation, there are other data elements that one department or the other must be able to provide. For instance, HR may have the data to determine whether a newly hired full-time employee was in a waiting period before an offer of coverage was made, while a time and attendance system may be used to determine whether an employee who has shifting schedules qualified as a full-time employee throughout the reporting period. For employers that are self-insured, additional data elements must be provided in Part III of Form 1095-C, some of which may be especially difficult to track. Self-Insured ALEs must report the name and SSN of all the individuals covered by the employee’s choice to enroll in employer-provided health coverage (employee, spouse and/or dependents). If an SSN is not available for a covered individual, the ALE may report the individual’s birthdate instead. This is information that the ALE may not have and will need to get from the employee or a third-party administrator prior to completing Form 1095-C. Either payroll or HR may be asked to solicit this information.

Questions?

If you are a Payroll Masters client and subject to ALE reporting requirements please call Paul Hicks, Vice President of Development,  707-307-6112. Payroll Masters has an Online ACA Reporting Platform.

Sources: SAA/IRS Reporter

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

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Holding Companies and Determining the ACA Employer Mandate

Provisions of the ACA employer mandate might come as a surprise to holding companies and their subsidiaries.

Decentralized subsidiary companies with fewer than 100 employees that are selecting their own benefit plans need to take a close look at the employer mandate of the Affordable Care Act (ACA).

“Companies with a common owner or that are otherwise related under certain rules of section 414 of the Internal Revenue Code are generally combined and treated as a single employer for determining ALE status.”

The determination of whether separate companies within a controlled group are subject to the mandate (and the effective date of compliance) must be made on the employee head count of all the companies combined. So, if all the subsidiaries combined have more than 50 employees, the ACA employer mandate will apply.

Please visit the IRS website  “Determining if an Employer is an Applicable Large Employer” and read Employer Aggregation Rules, Example 3.

See Q&A #s6 and 42 on the IRS Website employer shared responsibility provisions questions and answers page for more information.

For more information on the IRS Controlled Group Rules: http://www.irs.gov/pub/irs-tege/epchd704.pdf

Sources:

1. Coan, Mike. “Holding Companies, Beware: The Affordable Care Act is Here.” PSA Perspective – PSA Financial, 17 September 2014. Web. 11 August 2015.

2. IRS

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

Posted in Affordable Care Act, Applicable Large Employer (ALE) | Tagged , , , , | Leave a comment

The Wage and Hour Division of the DOL is tackling employee misclassification

Whether a worker is an employee under the Fair Labor Standards Act is a legal question determined by the economic realities of the working relationship between the employer and the worker, not by job title or any agreement that the parties may make. The Labor Department supports the use of legitimate independent contractors − who play an important role in our economy − but when employers deliberately misclassify employees in an attempt to cut costs, everyone loses.

Clarity for Employers
As fissuring and misclassification have spread, providing workers and employers a clear understanding of what makes a worker an employee may be more important now than ever. Accordingly, the Department of Labor has issued an administrator’s interpretation that analyzes how the Fair Labor Standards Act’s definition of “employ” guides the determination of whether workers are employees or independent contractors under the law. It discusses the breadth of the FLSA’s definition of “employ,” and provides guidance on the “economic realities” factors applied by courts in determining if a worker is indeed an employee.

Here is an example from DOL Administrator’s Interpretation:

Example 1: A worker provides cleaning services for corporate clients. The worker performs assignments only as determined by a cleaning company; he does not independently schedule assignments, solicit additional work from other clients, advertise his services, or endeavor to reduce costs. The worker regularly agrees to work additional hours at any time in order to earn more. In this scenario, the worker does not exercise managerial skill that affects his profit or loss. Rather, his earnings may fluctuate based on the work available and his willingness to work more. This lack of managerial skill is indicative of an employment relationship between the worker and the cleaning company. In contrast, a worker provides cleaning services for corporate clients, produces advertising, negotiates contracts, decides which jobs to perform and when to perform them, decides to hire helpers to assist with the work, and recruits new clients. This worker exercises managerial skill that affects his opportunity for profit and loss, which is indicative of an independent contractor.

Fore more examples read more of the Administrator’s Interpretation No. 2015-1

infographic_employee_contractor-

 

Ultimately, the goal of the economic realities test is to determine whether a worker is economically dependent on the employer (and is therefore an employee) or is really in business for him or herself (and is therefore an independent contractor). The Department of Labor believes in providing employers all of the information that they need to comply, and this document, with its discussion of the relevant law and inclusion of numerous examples, will help employers.

The goal of the Department of Labor is always to strive toward workplaces with decreased misclassification, increased compliance, and more workers receiving a fair day’s pay for a fair day’s work.

Strategic Enforcement
The Wage and Hour Division continues to attack this problem head on through a combination of a robust education and outreach campaign, and nationwide, data-driven strategic enforcement across industries.

The Department of Labor is also continuing to work with the IRS and 22 states on this issue in a variety of ways – through, for example, information sharing and coordinated enforcement.

On July 28, 2015 California Attorney General Kamala D. Harris and the U.S. Department of Labor’s Wage and Hour Division (WHD) signed a cooperative agreement to crack down on employer wage theft and other illegal labor practices. The Memorandum of Understanding signed by both agencies will facilitate the sharing of information and enhance enforcement of labor violations. Read the entire article.

Source: Department of Labor, Dr. David Weil the administrator for the Wage and Hour Division

2015 © Copyright Payroll Masters

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

Posted in DOL, Independent Contractors, Law Enforcement | Tagged , , | Leave a comment

Updates to FLSA White Collar Exemption Requirements Announced

Following a directive from President Obama, the Department of Labor has proposed changes to the federal Fair Labor Standards Act (FLSA) rules regarding the executive, professional, and administrative exemptions (also called the white collar exemptions) (published July 6, 2015).

presmemo_overtime

Under the proposed rule, the annual salary requirement for a white collar exempt employee would more than double to approximately $50,440. This more-than-doubling of the salary requirement would mean that approximately five million workers who are currently exempt from overtime and minimum wage requirements would no longer qualify for an exemption.

In addition to the white collar salary requirement increasing, the proposed rules call for the salary requirement for exempt highly compensated employees to increase from $100,000 to about $122,000 per year. Finally, the rules contain a mechanism by which both the white collar and highly compensated employee salary requirements will adjust annually.

Before these proposed rules can go into effect, there will be a notice and comment period, followed by time for the Department of Labor to review and respond to comments and draft final rules. The last time large revisions were made to the FLSA, in 2004, 13 months elapsed between the introduction of the proposed rules and the release of the final rules.

As before, we expect a large number of comments and much opposition from the business sector, and therefore a similarly long span of time before the rules are finalized. While it will likely be mid-to-late 2016 or even early 2017 before any changes to the FLSA white collar exemptions go into effect, given the sizeable increase to the salary requirement, we recommend employers begin to consider how they will handle the new requirements in their organization.

Visit the Department of Labors Website: http://www.dol.gov/featured/overtime/

The Notice of Proposed Rulemaking (NPRM) published on July 6, 2015 in the Federal Register (80 FR 38515) and invited interested parties to submit written comments on the proposed rule at www.regulations.gov on or before September 4, 2015. Only comments received during the comment period identified in the Federal Register published version of the NPRM will be considered part of the rulemaking record.

Source: Payroll Masters HR Support Center – HR Advisor Newsletter

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This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will not hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information. 

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