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Pay Matters! February 2020

Posted by Malka Trump, CPA, CPP & Yonina F. Shineweather, CPA | February 04, 2020

Welcome to Pay Matters, our monthly roundup of all the payroll and compliance news that you must know. Stay informed and in compliance with our monthly payroll alerts and insights. DOL Issues Final Joint- Employment Rule On January 12, the US Department of Labor issued its anticipated Final Rule interpreting joint employer status under the FLSA. This rule, to take effect on March 16, will limit the wage and hour liability of franchises and staffing firms. In the final rule, the DOL clarifies that joint employment is when an employee performs work for an employer and that work also benefits another entity that is acting, directly or indirectly, in the employer’s interest with regard to the employee. Thus, if Jane works for Bob’s Bookkeeping Business and that work also benefits Sam’s Staffing Service, and Sam’s carries the disability and worker’s compensation policies for Bob’s with regard to Jane, then both Bob’s and Sam’s may be joint employers of Jane. Similarly, if Joe works as a home health aide for Mr. Bob Boss and that work also benefits Andy’s Home Care Agency, and Andy’s serves as a fiscal intermediary for Bob with regard to Joe, then both Bob and Andy’s may be joint employers of Joe. The rule further clarifies that an employee’s “economic dependence” on a potential joint employer is not taken into consideration when determining a joint employer relationship., nor are certain contracts or business practices. Instead, the rule outlines a 4-factor test to weigh the joint employer status of the “other entity”, checking if it:

hires or fires employees,
supervises and substantially controls work schedules and employment conditions,
determines workers’ wage payment rates and methods, and
maintains employment records.:

One consequence of a joint employment determination is that the joint employer must aggregate all hours worked by an employee for all employers and pay overtime once that aggregated total exceeds 40. For more information please visit the DOL site. ACA Challenges Continue Although complying with employer provisions of ACA have become a familiar routine, legal challenges to the law continue. On December 18, 2019, a Federal appeals court confirmed a prior finding that the Individual Mandate is unconstitutional, but sent the case back to a lower court for further research. As part of Tax Reform at the end of 2017, Congress lowered the individual responsibility payment to 0. Subsequently, the State of Texas filed a suit claiming that since the individual payment was now 0, it was not a tax and therefore exceeded Congress’s authority to impose. In fact, Texas argued, since this one part of ACA is unconstitutional, the entire ACA is unconstitutional. The US Department of Justice decided that the individual mandate was indeed unconstitutional, but that the provisions of ACA were independent of each other, and the unconstitutionality of one part did not strike down the other parts. However, a district court ruled that the unconstitutionality of the individual mandate indeed struck down the rest of ACA, including its employer provisions, since Congress would never have passed the law without the individual mandate. The case then went to the aforementioned Federal appeals court, which upheld the unconstitutionality of the individual mandate, but declined to address the remainder of the law, referring the issue back instead to a lower court for continued analysis. The case may go to the US Supreme Court, but until there is a clear decision, the employer mandate remains in effect and employers should continue to comply with all aspects of ACA. Viventium is following developments closely and will keep you informed. IRS releases 2020 Publications 15, 15-A, 15-B, and 15-T The IRS has released the 2020 versions of the Publication 15 series: 15, 15-A, 15-B, and 15-T. Publication 15, also known as Circular E, provides general instructions to employers on their responsibilities for payroll and nonpayroll withholdings. This publication used to include the federal withholding tables, but they are now contained in Publication 15-T. Publication 15-A, the Employer’s Supplemental Tax Guide, provides more details to employers on the general topics mentioned in Publication 15. Publication 15-B, the Employer’s Tax Guide to Fringe Benefits, provides employers with guidance on the tax treatment of various fringe benefits. Publication 15-T, Federal Income Tax Withholding Methods, provides detailed instructions on withholding taxes for both pre-2020 and post-2020 Forms W-4. IRS Releases 2020 Form W-4P The IRS has issued the 2020 version of Form W-4P. The form still maintains the old system of claiming withholding allowances. Viventium and other industry stakeholders are awaiting IRS guidance on whether the IRS intends to eliminate the “allowances” line of the 2021 W-4P. We will continue to monitor the latest developments and keep you updated. New York to End Tip Minimum Wage Credit for Miscellaneous Industries The New York State Department of Labor issued an order to end tip credits in the miscellaneous industries. This change will affect 70,000 workers including car washers, nail salon workers, hairdressers, and valet parking attendants. The tip credit will remain in place for those employed in the hospitality Industry including restaurants and hotels. The tip credit elimination will be phased in as follows:

On June 30, 2020, the difference between minimum wage and minimum tipped wage will be cut in half.
On December 31, 2020 the tip wage will be eliminated and employees in the miscellaneous industry must be paid regular minimum wage,

The decision to eliminate the tip credit came following extensive research by the New York State Labor Commissioner who found there to be widespread confusion regarding tip credits leading to rampant wage theft. You can read the Subminimum Wage Report and Recommendations here. Massachusetts 2020 Parking and Transportation Limits Massachusetts has announced its 2020 monthly parking and transportation fringe benefits limits. Unlike federal law, which created parity between parking and transportation limits, Massachusetts sets different limits for the income tax withholding exclusion for parking and transportation. The 2020 Massachusetts monthly exclusion amount for transportation is $270, while the monthly exclusion amount for parking is $140. For a copy of the MA Technical Information Release click here. Pittsburgh, PA Paid Sick Leave Effective March 15, 2020, employers in the City of Pittsburgh must provide paid sick leave to their employees. This legislation was originally enacted in 2015 but was struck down by a court. After a series of appeals by the City of Pittsburgh, the State Supreme Court finally ruled in favor of Pittsburgh. The Paid Sick Leave law covers all employees working within the city limits and requires employers to accrue 1 hour of paid sick leave for every 35 hours worked. Employers with 15 or more employees must accrue up to 40 hours of paid sick leave annually. Employers with 15 employees or less can cap the accrual at 24 hours annually. In addition, for the first year after the effective date of the Ordinance, employers with fewer than 15 employees are only required to provide unpaid sick leave. Employees can use sick leave to care for their own physical or mental illness or that of a family member. Employers must provide all employees with written notification of their rights under the Ordinance. For the final guidelines of the Ordinance click here . Chicago, IL to Increase Minimum Wage Effective July 1, 2020, Chicago minimum wage will increase according to the following schedule: Employers with more than 20 employees:

July 1, 2020 $14.00 per hour
July 1, 2021 $15.00 per hour

Employers with 4-20 employees:

July 1, 2020 $13.50 per hour
July 1, 2021 $14.00 per hour
July 1, 2022 $14.50 per hour
July 1, 2023 $15.00 per hour

Denver, CO Minimum Wage Increase Effective January 1, 2020 minimum wage in Denver, Colorado increased and will continue to increase as follows:

January 1, 2020 $12.85 per hour
January 1, 2021 $14.77 per hour
January 1, 2022 $15.87 per hour

Mountain View, CA Minimum Wage Increase Mountain View, California, has announced that effective January 1, 2020, the minimum wage in the city will increase from $15.65 per hour to $16.05 per hour.

This information is for educational purposes only, and not to provide specific legal advice. This may not reflect the most recent developments in the law and may not be applicable to a particular situation or jurisdiction.

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Pay Matters! February 2020

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