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The New York Unemployment Insurance Appeal Board recently ruled that three Uber drivers and “all others similarly situated” are employees, rather than independent contractors, and therefore entitled to unemployment insurance (UI) benefits. Uber has indicated it will appeal the ruling to a higher level of the Appeal Board. After that, any future appeal would be heard in state court [New York Unemployment Insurance Appeal Board, A.L.J. Case No. 016-23858, 6-9-17].
Issue of Control
The administrative law judge (ALJ) concluded that “Uber did not employ an arms’ length approach” to the drivers that would be found in an independent contractor arrangement. According to the ALJ, Uber remained involved with the means by which the drivers provided transportation services for passengers. The drivers were responsible for their own cars and associated costs. The drivers testified that Uber provided them with weekly direct deposit services, and issued weekly pay statements. The pay statements were prepared by Uber, and included the fares the drivers earned based on completed rides, deductions from the fares for Uber’s fee, and any withholdings (including payments by Uber to third-party vendors on the drivers’ behalf for leases of cars that met Uber’s standards). Uber set the base rate charged to drivers, and drivers did not negotiate the terms of Uber’s fee.
The ALJ concluded that the drivers were each “subjected to substantial supervision and control by Uber.” Though the ALJ found there were some indications of the drivers’ independence, “the overriding evidence establishes that Uber exercised sufficient supervision, direction, and control over key aspects of the services rendered” by the drivers, establishing an employer-employee relationship.
Subscribe to PayState Update to keep up with the latest status of the appeal.
Recently, New York City and Emeryville, California, enacted “Fair Workweek” ordinances that will set scheduling requirements for employers in certain industries. Scheduling ordinances have previously been enacted in Seattle and San Francisco. It is important for payroll professionals to be aware of these ordinances, as more cities and possibly states start to pass them. Some key elements of the ordinances in each city are explained below.
New York City
Several bills were enacted together and are collectively called “Fair Workweek” legislation. Effective November 26, 2017, there are requirements for retail employers and fast food employers [Bill Nos. 1384-2016, 1387-2016, 1388-2016, 1395-2016, 1396-2016, L. 2017].
• Retail employers
Covered retail employers include those with 20 or more employees at one or more stores in New York City. The practice of on-call scheduling is banned, and employers are prohibited from canceling an employee’s shift or requiring an employee to come to work with less than 72 hours’ notice.
• Fast food employers
A fast food establishment is defined, in part, as one that is part of a chain of more than 30 or more establishments nationally. If changes are made to the schedule, the employer must pay schedule premiums to the employee ranging from $10 to $75 for each change to the work schedule. The amount depends on how much notice is given (less than 14 days, 7 days, or 24 hours), whether hours are added or subtracted to a shift, and whether a shift is changed or canceled. The employer is required to pay the schedule change premiums at the same time the employer pays the employee wages owed for the work performed during that workweek and must be separately noted on the pay statement. The premiums are not due under certain circumstances.
The Fair Workweek Ordinance is effective July 1, 2017. Covered employers include retail firms with 56 or more employees globally, and fast food firms with 56 or more employees globally and 20 or more employees in Emeryville. The ordinance will require employers to provide good faith estimates of work schedules and allow employees to request modifications to the schedule. Employers must provide notice of any change to the schedule. Employees have the right to decline any previously unscheduled hours if less than 14 days’ notice is provided. Compensation is required if the employee works the changed schedule:
• If the changes are made with less than 14 days but at least 24 hours’ notice, one hour of predictability pay is required.
• If the changes are made with less than 24 hours’ notice, four hours or the number of hours in the scheduled shift, whichever is less, of predictability pay is owed [Ordinance No. 16-007, L. 2017].
Read PayState Update to learn more about the “Fair Workweek” ordinances.
On May 23, the Trump administration released its proposed budget for fiscal year 2018 (October 1, 2017 – September 30, 2018). The budget proposal includes many items that would affect payroll operations.
Trump Administration Priorities
In his budget message to Congress, President Trump listed “eight pillars of reform”. Two would directly affect payroll processes.
• Health care reform
Trump reiterated his campaign promise to repeal the Affordable Care Act (ACA) and “its burdensome regulations and mandates, and replace it with a framework that restores choice and competition.” With the House of Representatives’ approval of the American Health Care Act, Congress has taken the first step in the process to repeal and replace the ACA. The Senate is reportedly working on its own health care legislation, which the Republican leadership has indicated it would like to try to pass before the July 4 recess.
The budget projects $250 billion in deficit savings associated with health care reform. It also would expand health savings accounts.
• Immigration reform
Although Trump did not specifically mention any program in his message, the budget requests necessary funding for the continued modernization of E-Verify as well as to begin the implementation of nationwide mandatory use of the E-Verify program.
Parental Leave Proposal
The budget also proposes a new parental leave program. The program would provide six weeks of paid family leave for new mothers and fathers, including adoptive parents. States would be required to establish these programs using the Unemployment Insurance (UI) system as a base. The funding for the program is described as “fully offset by a package of sensible reforms to the UI system,” including reforms to reduce improper payments, help unemployed workers find jobs more quickly, and encourage states to maintain reserves in their Unemployment Trust Fund accounts. The budget’s description of the program concludes that “the Administration looks forward to working with the Congress on legislation to make paid parental leave a reality for families across the Nation”.
Individual Agency Budgets
The budget proposal requests specific dollar amounts for various agencies, including:
• Department of Labor
The 2018 budget proposal is $9.7 billion (down from $12.1 billion), a 19.8% budget reduction. However, the Wage and Hour Division would see a slight increase from $230 million to $233 million.
The 2018 budget provides $10.975 billion for the IRS to administer the tax code and implement key strategic priorities. This is a reduction from $11.2 billion for 2017. The budget proposal also renews two provisions related to payroll service provider (PSP) fraud. First, change-of-address confirmations relating to an employer making employment tax payments must be sent to both the old and new addresses. Second, the IRS must give special consideration to an offer-in-compromise from a victim of PSP fraud.
• Social Security Administration (SSA)
The SSA would see a 0.3% increase in its budget, from $9.0 billion to $9.1 billion.
Additional informational materials, such as fact sheets and historical tables, are also available on the Office of Management and Budget website. The Appendix page contains budget estimates for individual federal agencies. It is important to remember that the items listed above are merely proposals and have not yet been enacted into law.
Check back with Pay News Now as we continue to monitor the 2018 Fiscal Year Budget Proposal.
The American Payroll Association’s Government Relations Task Force Subcommittee on IRS Issues recently formed a new work group on e-Services, a suite of web-based tools that allow tax professionals and payers to complete certain transactions with the IRS online. Chaired by Bruce Phipps, CPP, and Karen Settembrino, CPP, the purpose of the group is to identify difficulties for payroll professionals when using electronic communication systems at the IRS, such as registration and authentication procedures.
The work group would like to hear the stories of payroll professionals like you. After receiving your feedback, the work group will compile the information, identify priorities, and share a comprehensive report with the IRS. Without identifying payroll professionals or employers by name, the report will include the priorities and a wish list of what payroll professionals would like to see in IRS e-Services. In addition, APA’s work group will offer recommendations on solutions to the identified problems with an eye toward the agency’s new crowdsourcing efforts.
Please send your stories to Alice Jacobsohn, Esq., at email@example.com or Kristine Willson, CPP, at firstname.lastname@example.org by June 30, 2017.
Visit the APA website for more information on the Government Relations Task Force IRS Subcommittee.
Effective July 1, 2017, Georgia employers with 25 or more employees that already provide paid sick leave (PSL) must allow employees who work at least 30 hours a week to use up to five days of already accrued PSL to care for an immediate family member.
What Is Kin Care?
Kin care laws require employers that already provide PSL to allow eligible employees to use that leave for the illness of a family member. It does not require an employer to provide PSL.
Who Is Considered an Immediate Family Member?
Qualifying family members include an employee’s: child, spouse, grandchild, grandparent, parent, or dependents on the employee’s most recent tax return.
Employees must follow the terms and conditions of the company policy (e.g., time off request requirements). The law will automatically be repealed on July 1, 2020, unless extended by the state legislature [S.B. 201, L. 2017].
Read PayState Update, Issue 11, to learn more about changes to Georgia’s Kin Care requirements.
A bill was recently introduced in the Massachusetts legislature that would place several restrictions on an employer’s ability to recover an overpayment of wages from an employee (H.B. 3141). The employer would be required to provide the employee with a two week notice prior to the deductions beginning, and then could only recover an overpayment that was made eight weeks prior to issuing the notice to the employee. Employers would be allowed to make wage deductions only to recover overpayments for a period of six years from the original overpayment.
If the employee did not voluntarily agree in writing to the validity of the claim of overpayment, the employer would be prohibited from making any deductions from the employee’s wages to recover the overpayment. The recovery of an overpayment could not exceed 10% of the gross wages earned in any pay period, unless an employee voluntarily opted otherwise (in advance and in writing).
If more than 500 Massachusetts employees were affected by a payroll system failure that results in inaccurate payroll records and payment of wages, the employer would be required to provide notice to the state attorney general within one week of discovering the problem. This notice must include a course of action to remedy the problem.
The bill would have to be passed by both houses of the state legislature and signed by the governor to become law. Check back with Pay News Now as we continue to monitor the progress of H.B. 3141.
On May 4, the House of Representatives narrowly passed H.R. 1628, the American Health Care Act (AHCA) of 2017. If enacted, the AHCA would effectively repeal and replace many provisions of the Affordable Care Act (ACA). The full text of the bill and its amendments are available on the House’s website.
Payroll-related provisions of the AHCA would include:
- Eliminate the employer and individual mandates
- Revise employer reporting
- Require insurer reporting
- Repeal the Additional Medicare Tax
- Allow reimbursements for over-the-counter medications
- Eliminate FSA contribution limits
- Increase HSA contribution limits
- Reduce penalties for HSA and MSA distributions
- Delay the “Cadillac tax”
Despite passing in the House of Representatives, the AHCA still faces an uncertain future. The bill must be passed by the U.S. Senate and signed into law by President Trump before it can take effect.
Pay News Now will continue to track any proposed changes to the Affordable Care Act and the progression of the American Health Care Act.
The New York State Department of Labor (NYSDOL) has filed an appeal of the New York Industrial Board of Appeals’ decision revoking burdensome regulations regarding payment of wages by direct deposit and paycards because they were invalid. The appeal will be heard in state court (not by the Board) [Reardon v. Global Cash Card and New York State Industrial Board of Appeals, Petition No. 02643-17, 4-17-17].
Paycard Provider Challenged Regulations
Global Cash Card (GCC), a national provider of paycards, filed a petition with the New York Industrial Board of Appeals on October 21, 2016, alleging that the regulations were invalid or unreasonable. GCC claimed the regulations:
- Exceeded the NYSDOL’s authority
- Violated the separation of powers between the state legislature and the executive branch of state government
- Were preempted by federal banking law
- Included vague and unreasonable provisions
On February 16, 2017, the Board agreed with GCC. It found that the regulations were invalid because they exceed the NYSDOL’s rulemaking authority by regulating banking services. The regulations go beyond New York Labor Law §192, which deals with the relationship between employers and employees, by placing restrictions on financial institutions, the Board said. The regulations were scheduled to take effect on March 7, 2017, but did not take effect due to the Board’s ruling.
The NYSDOL’s Argument
On appeal, the NYSDOL is arguing that GCC did not have standing to challenge the regulations before the Board because GCC is not an employer whose payment of wage practices are regulated by New York labor law. The NYSDOL is also arguing that the regulations do not go beyond the scope of the labor law and do not violate the separation of powers doctrine (meaning that the NYSDOL had the authority to make the regulations and a new or amended law is not needed).
The NYSDOL issued eight opinion letters, beginning in 2001, describing permissible methods of wage payment via paycards under the labor law. According to the NYSDOL, “All the letters made clear both that Labor Law §192 prohibits such payment except to employees who provide advance written consent and, that such consent is not sufficient for the program to be legal.” The NYSDOL argues that no one, including GCC, challenged these letters or the NYSDOL’s power to interpret the labor law to prohibit employers from charging fees that limit their employees’ access to their full wages.
Paycards Remain Permissible in NY
The use of paycards for New York employees remains generally permissible as long as certain conditions are met (see The Payroll Source®, p. 5-23).
So What Happens Next?
The case will next move to state court and will likely not be argued until this summer, at the earliest. The rules will remain revoked pending the outcome of the case. It is also possible that the state legislature could pass a law regulating paycard use before a final decision is issued.
Pay News Now will continue to monitor the New York paycard situation as it unfolds in court this summer.
On April 5, representatives from the Pennsylvania Child Support Program (PCSP) answered questions during an APA Government Relations Task Force (GRTF) Child Support and Other Garnishments subcommittee phone conference regarding the change to a one-time $50 administrative fee. Previously, employers could withhold up to 2% of the amount paid under the order. Federal and regional representatives from the Office of Child Support Enforcement (OCSE) also participated.
Answers, Clarification Provided
The following are some of the answers and clarification provided by the PCSP:
- The one-time $50 administrative fee, which took effect August 30, 2016, applies per employee, rather than per order.
- Employers are allowed to take the full, one-time $50 fee, even for orders already in place prior to the change from the 2% fee per order.
- If the employee is transferred to a different employer identification number (EIN) within a company, the employer can take the $50 fee again after the transfer. This applies as long as the EINs are not already linked within the PCSP system.
The APA’s GRTF subcommittee will organize educational materials and lobbying efforts in the future. The material will be aimed at informing state legislators about employer withholding costs in time and money and about the limitations of payroll systems. The OCSE plans to publish guidelines advising that employer fees may be deducted prior to withholding.
Read more in PayState Update and check with Pay News Now for more payroll news.
Vermont state legislators have introduced legislation in both the House of Representatives and the Senate that would create, if enacted, the most generous paid family leave (PFL) program in the country (H.B. 196, S.B. 82). The proposals include a payroll tax – the employee portion would be paid through a payroll deduction. Employers would also pay a portion of the contribution.
Program Funded Through Employer, Employee Contributions
Beginning on July 1, 2018, contributions to PFL equal to 0.75% (0.93% in the House bill) of an employee’s wages would be paid by the employer. One-half of this would be deducted from the employee’s wages and one-half would be an employer contribution. Thereafter, the Commissioner of Labor would determine the rate of the employer and employee contribution (not to exceed 1%) on a biannual basis.
Although the bills vary, in both plans the PFL program would require employers to allow employees to take up to 12 weeks of paid leave to care for a new child or for the employee’s own, or a family member’s, serious illness. Employees would become eligible for the program after working for an employer for six months. Beginning January 1, 2019, an eligible employee who earns an average weekly wage less than or equal to Vermont’s weekly livable wage would receive 90% of his or her average weekly wage.
States With Paid Family Leave Programs
Three states – California, New Jersey, and Rhode Island – and one city – San Francisco – have existing PFL programs (see The Payroll Source®, p. 7-43). New York enacted a PFL program last year that will take effect January 1, 2018.
Check back with Pay News Now as we continue to monitor the progress of the proposed legislation.