Tag Archives: employers

Treasury Releases Guidance Implementing Executive Action on Employment Tax Deferral

On Friday, August 28, the Treasury Department (“Treasury”) released guidance implementing President Trump’s executive directive to defer the employee portion of social security tax.  As part of the continued response to the COVID-19 pandemic, Notice 2020-65 allows employers to make this deferral during the period of September 1, 2020 through December 31, 2020 for employees earning below a threshold amount of $4,000 during a bi-weekly pay period. This threshold is to be determined on a per-pay period basis rather than as an annualized amount. While not clearly stated in the Notice, both Treasury and the Internal Revenue Service (“IRS”) have framed the deferral as optional for employers.

For those employers who do choose to defer the employee share of social security tax, these amounts will be postponed until the period beginning on January 1, 2021 and ending on April 30, 2021. This could mean that absent further legislation affording permanent forgiveness of these amounts, employees would be obligated to make increased payroll payments for that four-month period. If employers fail to withhold and deposit any deferred amounts by May 1, 2021, the Notice states that they will be on the hook for penalties and interest—again, assuming Congress fails to enact legislation that says otherwise.    

What remains unclear is whether employees may choose to opt out of an employer’s choice to defer and how employers should treat the deferred taxes of employees who are terminated before these amounts are fully repaid in 2021. The Notice does, however, state that “[i]f necessary, the [employer] may make arrangements to otherwise collect the total Applicable Taxes from the employee,” suggesting that an employer could, for example, deduct any deferred tax owing from an employee’s final paycheck to the extent permitted by the Fair Labor Standards Act.  

The IRS has released a draft update of Form 941, Employer’s Quarterly Federal Tax Return, on which employers may take into account employee social security withholding that is deferred. The key change appears to be on page 3, line 24, which asks for the “Deferred amount of the employee share of social security tax included in line 13b.”

We hope to see more concrete guidance from Treasury in the coming weeks.

Join Us for a Webinar: Employment Law and Tax Developments Businesses Might Have Missed While Focused on COVID-19

Over the last several months there have been developments in employment law and tax not directly related to COVID-19 that you may have missed. While businesses have been focused on responding to COVID-19—learning about the Families First Coronavirus Relief Act, the PPP, and developments with unemployment—the Supreme Court and government agencies have been making decisions that impact the workplace.

We invite you to join us for a complimentary, one-hour Zoom webinar to discuss some of these decisions and how they may impact the workplace.

TOPICS INCLUDE:

  • Expansion of Title VII protection of sex to include sexual orientation and gender identity
  • Expansion of rights of religious employers
  • Changes to certain provisions of the Fair Labor Standards Act
  • Updates from the National Labor Relations Board on workplace investigations and work email
  • Amendment to the Florida Civil Rights Act
  • Tax planning for 2020
  • Tax provisions supporting businesses

Wednesday, August 12
10:00 – 11:00 a.m. 

REGISTER NOW >

PRESENTED BY:

Jennifer Fowler-Hermes
Board Certified Labor & Employment Attorney | Williams Parker

Gail E. Farb
Labor & Employment Attorney | Williams Parker

Beth C. Ebersole
CPA, ABV | Kerkering, Barberio & Co.

Moderator:
Thomas B. Luzier
Board Certified Real Estate Attorney | Williams Parker

On-Demand Webinar: Novel Issues Relating to Employees Working Remotely

As more employees work from home, employers are facing questions about how to comply with employment laws in a manner that minimizes risks associated with remote work. Our Business Solutions team recently presented a webinar addressing many of the employment-related issues arising from remote work. The head of our Labor & Employment practice, Jennifer Fowler-Hermes and L&E attorney John Getty were joined by Brad Hall, a workers’ compensation defense attorney, to discuss a variety of topics, including how to properly track work hours, complying with employment laws, the importance of telework agreements, and whether and to what extent workers’ compensation laws apply. Watch it on-demand below.

 

IRS Issues Expanded FAQ Guidance on Employee Retention Credit

The Internal Revenue Service (“IRS”) has expanded its FAQ guidance on the Employee Retention Credit (“ERC”), which has been discussed in greater detail in a prior post. Enacted as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the ERC provides a refundable tax credit to eligible employers for certain employment taxes equal to 50 percent of up to $10,000 in qualified wages paid per employee, effective March 12, 2020 through December 31, 2020. However, employers that received loans under the Paycheck Protection Program (“PPP”) are not eligible for the ERC.

The ERC FAQ was originally posted in late March, and the IRS has since continued to update it. The FAQ now has nearly 100 questions posed and answered on major-issue areas such as:

A more recent update relates to the eligibility of an employer who repays its PPP loan in accordance with the Small Business Administration (“SBA”) requirement that a business recertify in good-faith that the PPP loan was “necessary to support ongoing business operations” (previously discussed here, here, and here). Released May 8, 2020, the IRS FAQ 79 states that an employer that applied for the PPP loan, received payment, and “repays the loan by May 14, 2020 . . . will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit.” Therefore, the employer will be eligible for the credit if the employer is otherwise an eligible employer.

The original deadline for PPP loan repayment was May 7, 2020, but was extended to May 14, 2020 with FAQ 43 of the SBA’s PPP FAQs. The SBA then further extended the repayment deadline to Monday, May 18, 2020 in SBA FAQ 47, following its release of guidance which relieved borrowers with loans of less than $2 million from the “necessity” recertification. While the IRS ERC FAQ has not been updated to reflect the new May 18 deadline, we can only assume that those employers who do make repayment by this time would qualify for the ERC all the same. We note, however, that implicit in IRS FAQ 79 is that employers who do not voluntarily make timely repayment may not claim the ERC. In other words, any employer who is ultimately forced by the SBA to repay the loan would not be allowed to take the ERC.

While the PPP loan was at the top of most employers’ COVID-relief wish lists, and for obvious reasons, the ERC may be the next best option for those who erred on the side of repayment. We are happy to answer any questions employers that opted for repayment may have.

Join Virtually: Labor & Employment Strategies Around COVID-19 Relief

We invite you to join our partner Jennifer Fowler-Hermes for a virtual presentation hosted by the Lakewood Ranch Business Alliance this Wednesday, April 8.

The program will answer questions around the new aid packages available to businesses as a result of the COVID-19 crisis. With the rollout of these new programs, business owners are scrambling to quickly understand the details surrounding the offered benefits, applications processes, and eligibility requirements. Jennifer will share guidance on how employers should approach the situation from an HR perspective and will be joined by a partner with Kerkering Barberio to provide insight on the tax and accounting implications.

Participants may join by video or phone. For more details and to register, visit LWRBA.

New Overtime Rules for Employers to Adopt Before the New Year

Employers, the long wait is over. You finally have an answer regarding whether the federal overtime regulations are going to be changed. As discussed in previous blog posts Let’s Try this Again: Department of Labor Proposes Salary Increases for White-Collar Exemptions and Once More, With Feeling: Proposed Increase to Minimum Salary for Highly Compensated Employees, in March 2019, the U.S. Department of Labor abandoned its 2016 attempt to increase the salary threshold for exempt employees when it issued a much-anticipated proposed rule. On September 24, 2019, the DOL formally rescinded the 2016 rule and issued its new final overtime rule.

The new rule, taking effect on January 1, 2020, increases the earnings thresholds necessary to exempt executive, administrative, professional, and highly compensated employees from the Fair Labor Standard Act’s overtime pay requirements from the levels that had been set in 2004.  Specifically, the new final rule:

  • Increases the “standard salary level” from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • Raises the total annual compensation level for “highly compensated employees” from $100,000 to $107,432 per year; and
  • Revises the special salary levels for workers in U.S. territories and in the motion picture industry.

And, for the first time, the final rule allows employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level for executive, administrative, and professional employees (not highly compensated employees).

Employers take note, however, that the new final rule does not change the duties portions of the otherwise affected exemptions. For more information about the new final rule, you can go to the Department of Labor website.

As New Year’s Day will be here before we know it, this is a good time for employers to audit their pay practices to make sure that employees are properly classified, update timekeeping and payroll systems, and train reclassified employees on new processes before the new rule takes effect.

Gail E. Farb
gfarb@williamsparker.com
941-552-2557

This post originally appeared on The Williams Parker Labor & Employment Blog.

The Tax Act May Limit Resolutions of Sexual Harassment Complaints

One aspect of the new Tax Act (the Act) that has not been widely reported impacts employers that amicably resolve claims of sexual harassment. The provision denies tax deductions for any settlements, payouts, or attorneys’ fees related to sexual harassment or sexual abuse if such payments are subject to a non-disclosure or confidentiality agreement. Specifically, Section 162(q) to the Internal Revenue Code provides:

PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE.—No deduction shall be allowed under this chapter for—

(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or
(2) attorney’s fees related to such a settlement or payment.

The intent of this provision is to deter confidentiality provisions in settlements of harassment claims. It is unclear if this provision will actually have the desired impact. Companies may value the confidentiality provisions more than the tax deductions permitted in their absence, and thus continue to enter into confidential settlement agreements. Alternatively, this provision of the Act may end up hurting those bringing harassment claims. Alleged victims may want confidentiality provisions in order to avoid any publicity about their claims. However, by removing tax incentives for employers, an employer may reject a higher settlement amount or settlement of claims altogether.

Section 162(q) of the Act is bound to create confusion as to its applicability as it fails to define key terms. Namely, the Act fails to define “sexual harassment” or “sexual abuse,” both of which are pivotal to the application of the new provision. The Act also fails to contemplate how the provision is to be applied in settlement arrangements involving a variety of claims. Are the sex-based claims separable from a universal confidentiality covenant? Causing further confusion, the Act fails to explain what attorney’s fees are considered to be “related to such a settlement or payment.” Are these only the fees related to settlement negotiations, drafting the agreement, and execution or payment? Or does it extend to the claim’s inception and include the underlying investigation of the claims?

In light of the numerous questions raised by Section 162(q), employers should review their standard settlement agreements and practices and consider revising the breadth of any releases, nondisclosure provisions, or any representations or remedies.

This post was originally posted on the Williams Parker Labor & Employment Blog.

Ryan P. Portugal
rportugal@williamsparker.com
941-329-6626

Should I Pay Exempt Employees Who Miss Work Due to Bad Weather Conditions?

As Florida prepares for a potential direct hit by Hurricane Irma, employers have many concerns. At some point, when decisions have been made about if a business will stay open and if goods or people need to be moved out of harm’s way, the following question will most likely be asked: “Should I pay exempt employees who miss work due to bad weather conditions?”

When it comes to deductions from exempt employees’ salaries it is easy to get into trouble.  The general rule is that an exempt employee is entitled to receive his or her entire salary for any workweek he or she performed work. This means, if the worksite closes for a partial week due to bad weather conditions (such as a hurricane), and the exempt employee has worked during that workweek, the employee is entitled to his or her full salary. However, if the employer has a leave benefit, such as PTO, and the employee has leave remaining, the employer can require the employee to use paid time off for this time away from work. If the employee does not have any remaining leave benefit, he or she must be paid.

If the work site remains open during inclement weather and an employee is absent (even if due to transportation issues), the employee can be required to use paid time off.  If the employee does not have any paid time off remaining, the employer may deduct a full-day’s absence from the employee’s salary. For a more detailed explanation see this opinion letter from the U.S. Department of Labor.

As for non-exempt employees, the FLSA only requires that employees be paid for the hours they actually work. However, those non-exempt employees on fixed salaries for fluctuating workweeks, must be paid their full weekly salary in any week for which work was performed.

 

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
941-552-2558

This post was originally published on Williams Parker’s Labor & Employment Blog. To receive updates regarding labor and employment news and insight, subscribe here