Paid Leave Tax Credit FAQs
Between January 1, 2018, and December 31, 2019, under a new section (45S) of the Internal Revenue Code, employers that voluntarily offer qualifying employees up to 12 weeks of paid family and medical leave may claim a tax credit for a portion of the wages paid during an employee’s leave.
The IRS issued its Section 45S Employer Credit for Paid Family and Medical Leave FAQs to better answer employers’ questions about this tax credit.
- To participate, employers would have to provide at least 2 weeks of leave and compensate workers a minimum of 50% of their regular earnings plus have a written policy to this effect.
- The government will repay employers 12.5% of the benefit’s costs if employers cover 50% of the earnings and provide up to 25% back if employers pay 100% of workers’ earnings.
- The employer tax credit can only be applied to employees who earn less than $72,000 per year.
- If your state or local law mandate paid leave, the federal tax credit is not available.
- If your company doesn’t currently offer paid leave, you could look into enhanced benefits, such as paid parental leave, to use the 2018 tax credit.
New DOL Opinion Letters
The U.S. Department of Labor’s Wage and Hour Division reinstated its Opinion Letters last month and has released a total of three of them.
- Travel time compensation for hourly workers (FLSA2018-18)
- In general, employers don’t have to compensate employees for time spent commuting to and from work even when job sites vary each day.
- However, travel time between job sites during a workday must be counted as hours worked and are payable.
- Traveling out of town for work is considered worktime when it spans an employee’s regular work hours whether it’s on a weekday or a weekend. For example, a Sunday early afternoon flight for a Monday meeting counts as worktime.
- If an employee doesn’t have a regular workday schedule, you’ll need to review an employee’s records to determine what their typical work hours are. If that doesn’t work, you’ll determine the employee’s average start and end times for a month. If that still doesn’t establish a normal workday for the employee, negotiate and agree with the employee on a reasonable amount of compensable travel time.
- Whether certain lump-sum payments count as earnings for garnishment/child support purposes under Title III of the Consumer Credit Protection Act (CCPA) (CCPA22018-1NA)
- Employers must answer the question of whether they paid the amount in question for the employee’s services.” If so, the payment meets the definition of “earnings” under the CCPA and may be garnished.
- These payments count as earnings under the CCPA: commissions, discretionary and nondiscretionary bonuses, productivity or performance bonuses, profit sharing, referral or sign-on bonuses, moving or relocation incentive payments, attendance awards, safety awards, cash service awards, retroactive merit increases, payment for working during a holiday, termination pay, severance pay, workers’ compensation payments designed to replace wages, and back and front pay
- These payments are NOT earnings under the CCPA: reimbursements for medical expenses in workers’ compensation cases, compensatory or punitive damages, and buybacks of company shares.
Multi-month ADA Leave Not Required
The U.S. Supreme Court declined to review the U.S. Court of Appeals for the Seventh Circuit ruling in Severson v. Heartland Woodcraft Inc., which means the Seventh Circuit decision may stand in Illinois, Indiana, and Wisconsin.
In the case, the plaintiff requested 2-3 additional months of leave under the Americans With Disabilities Act (ADA) when his Family and Medical Leave Act (FMLA) time expired. His employer denied the leave and terminated his position, but stated he could reapply after he recovered. He then sued his former employer.
The Seventh Circuit Court ruled that the ADA doesn’t require employers to allow workers with disabilities to be off work for 2+ months. Other appeals courts have not reached the same verdict.
Keep in mind that even in the Seventh Circuit Court states, a few days to a week may be considered reasonable accommodation under the ADA.
Ninth Circuit Court Ruling on Equal Pay Act
The U.S. Court of Appeals for the Ninth Circuit recently ruled on Rizo v. Yovino. Through its latest interpretation of the Equal Pay Act of 1963, it found that state employers can’t use prior salary history to justify a pay differential between male and female employees performing similar work.
There are exceptions for determining wages, but in general, U.S. employers must choose “a differential based on any other factor other than sex” to rationalize pay differences for similar work. The Court did not deem salary history a justifiable exception. This opinion overrules Kouba v. Allstate Ins. Co., in which the Court had found that candidates’ previous salary was a factor employers could consider when determining a current wage.
Additional Compliance Considerations:
- Conduct an internal audit using reputable legal counsel and review pay structures within specific positions and job levels. Pay special attention to pay equity issues in the workplace regarding any salaries that may have been based on prior wage history.
- Train everyone involved in your hiring professes on what questions they can and cannot ask applicants.
- Audit your pre-screening questions to ensure prior salary information is eliminated.
Updated Tip Pool Rules
In March 2018, President Trump signed the Consolidated Appropriations Act into law. Buried in this law, Congress amended the Fair Labor Standards Act (FLSA) to prohibit employers from requiring employees to share their tips with the employer, including any managers or supervisors, whether or not the employer takes a tip credit.
The U.S. Department of Labor (DOL) issued a bulletin to explain how the amendment will be implemented. To enforce the amendment, the DOL says employers should use the non-exempt/exempt duties test to determine whether an employee is a manager or supervisor.
However, under the new federal law, employers can require employees who are paid at least minimum wage in cash to share tips with cooks, dishwashers, and other non-management, non-supervisory “back of the house” employees.
Keep in mind that under the FLSA, employers are still required to pay employees a minimum wage, currently $7.25 per hour. Depending on state laws, employers can count up to $5.12 per hour of employees’ tips against their total minimum wage obligation. Employers can’t take this “tip credit” if they keep any tips or employees share tips with back-of-the-house employees.
More Details on DOL PAID Program
In April’s HR Regulatory Update, we talked about the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) pilot program called the Payroll Audit Independent Determination (PAID) that may help employers catch inadvertent overtime and minimum wage violations. More details have been released.
Employers who meet the following criteria are not eligible to participate:
- Was found within the last 5 years to be in violation of the FLSA’s minimum wage or overtime provisions
- Are currently being litigated
- Are currently being investigated by the WHD
- Are the subject of recent employee complaints that were brought to the attention of the company, the WHD, or state wage enforcement agencies
- Previously had a PAID program submission
Employers that want to participate in the PAID program need to review relevant FLSA compliance assistance materials, coverage information, eligibility certifications, and identify compensation practices. Once you go through the online materials, you’ll earn a Certificate of Completion and you can move onto the next steps. From there, you’ll need to contact your local WHD District Office for further information and discuss your next steps in the PAID self-audit process.
You’ll conduct an audit to assess any back wages that you may owe and the WHD will confirm this. Participating employers will pay 100% of back wages for 2 years, but could benefit from legal fee savings.
EEO-1 Filing Deadline Extended
The U.S. Equal Employment Opportunity Commission’s extended its deadline for employers to file their 2017 EEO-1 Survey until June 1, 2018. Filing details remain the same as originally reported in February.
Drug Testing Law Amended
Beginning July 1, 2018, Iowa employers are able to prosecute employees based on a lower alcohol limit that will decrease from 0.04 to 0.02 grams of alcohol. Iowa’s drug regulations are quite steep when it comes to employer obligations. If drug testing procedures are not carefully followed Iowa employers they may not legally fire employees on these grounds.
- Litigation is on the rise, revisit your drug testing policies to ensure you are compliant.
- Check that you have a written policy that is presented to employees prior to their start date, including specific training about the dangers involved in drug and alcohol use at work and violation penalties.
- If a positive drug test occurs, a voluntary rehabilitation program is in place for employees who have worked more than 12 months and have not previously violated the employer’s drug and alcohol abuse policy.
- Mandatory drug training for supervisory personnel.
Workers’ Compensation Law Changes
Kentucky Governor Matt Bevin signed House Bill 2 into law. It will overhaul workers’ compensation in the state and goes into effect July 12, 2018.
- Terminates workers’ compensation income benefits when an employee reaches age 70 or within 4 years of an injury. This hopes to eliminate the possibility of duplicate benefits.
- If an employee “willfully intended” to injure or kill him/herself, employers will not be liable for compensating the employee’s injury, death, or disease.
- If an employee was voluntarily intoxicated and the substance levels in the employee’s system were sufficient to cause impairment and lead to an injury, occupational disease, or death, employers will be precluded from liability.
- Within 2 years of being diagnosed, employees alleging cumulative trauma injuries from work must notify employers and file an application with the state’s Workers’ Compensation Commissioner’s office. If employees fail to file with the Commissioner within 5 years of an injury, they will be forever banned from workers’ compensation benefits.
- Limits the amount of time employers must pay for employee medical expenses associated with certain permanent disabilities (i.e., amputation, hearing loss, etc.) to 780 weeks/15 years. However, individuals will be allowed to apply for extended benefits, but they must follow 3 specific requirements:
- File an application at least 75 days before the 780-week period ends.
- Demonstrate that continued medical treatment is necessary.
- An Administrative Law Judge rules that continued medical benefits are necessary and related to the original workers’ compensation claim.
New Sexual Harassment Protections
Maryland’s Disclosing Sexual Harassment in the Workplace Act of 2018, SB1010, was recently signed into law and goes into effect October 1, 2018. It prohibits employers from requiring employees to waive their future right to file a sexual harassment complaint or claim.
By July 1, 2020, employers with 50+ employees will also need to submit a survey to the Maryland Commission on Civil Rights about the following items:
- Number of settlements made by or on behalf of the employer after an employee’s sexual harassment allegation.
- Number of times the employer paid a settlement to resolve a sexual harassment allegation against the same employee over the last 10 years.
- Number of settlements made after a sexual harassment allegation that included a provision requiring both parties to keep the terms of the settlement confidential.
- Whether the employer took action against an employee who was the subject of a settlement.
Employers’ survey responses will be publicly available upon request under the Maryland Public Information Act.
In preparation for the law’s enactment, you’ll want to review your policies and ensure that they are updated. You may want to consult legal counsel, if necessary.
Paid Safe Time Law Goes into Effect in Prince George’s County
As reported in January, the Paid Safe Time Law went into effect on May 24, 2018, for Maryland’s Prince George’s County. If you’re behind the eight ball, review the compliance requirements immediately.
New Restrictions on Criminal History Inquiries
As part of the criminal justice reform law that Massachusetts Governor Charlie Baker signed into law, employers will be limited in what they can ask applicants about their criminal histories during the hiring process. The law goes into effect October 13, 2018.
Massachusetts has had a ban the box law in effect since 2010 so employers are accustomed to not asking about criminal histories on job applications. In addition, that law prevented employers from asking applicants about arrests or other situations that didn’t result in a conviction. First offenses for drunkenness, simple assaults, speeding, minor traffic violations, affrays, or disturbances of the peace were also off limits. And if a conviction for a misdemeanor occurred 5 years before the person applied for the job, employers couldn’t ask about it or use it against an applicant.
Under the new law going into effect this fall, there are two additional legal considerations.
- Timeframes — Employers will not be able to ask applicants about misdemeanor convictions or resulting incarcerations that occurred 3+ years prior to the date of the employment application unless applicants were convicted of an offense within the preceding 3 years.
- Sealed Records — The law also prohibits employers from asking applicants about criminal records that have been sealed or expunged.
If you ask applicants about their criminal records after their application is accepted, you will want to update your questions and inform anyone involved in the hiring process about the necessary changes.
Equal Pay Act
Massachusetts’ Act to Establish Pay Equity, which amends the Pay Equity Law, goes into effect July 1, 2018. It applies to all size employers and prevents them from asking an applicant about his/her salary history at any point during the application, interview, or hiring process.
- Anyone involved in your hiring process will need to be informed about what they can and cannot ask of applicants. For example, an interviewer could ask, “What is your salary requirement if you were to work here?”. However, no one can ask, “What is the basis for your requirement?” as a follow-up question because it puts a candidate in a position where they may divulge their previous salary and opens employers to liability.
- Discrimination against employees on the basis of gender in terms of pay, bonuses, benefits, etc. for “comparable work” is illegal.
- Comparable work is broadly defined and encompasses skill, effort, responsibility, and working conditions. For example, when assessing skill, you won’t be able to require a college degree if it’s not necessary for performing the job.
- Pay variations are allowed only through a bona fide seniority system, merit system, objective quantity or quality, geographic location, education, training, or experience tied to job performance, or regular and necessary travel.
- Employees must be allowed to disclose information about their own or other employees’ compensation. You may restrict high-level managers from disclosing other employees’ wages, but they must be permitted to talk about their own salaries.
- Retaliation is prohibited against employees who oppose any prohibited act or practice under the law, make a complaint or participate in an investigation for violation of the law, or disclose their wages or discuss another employee’s wages.
- Attorney General’s Equal Pay Act Guidance
- Massachusetts Equal Pay Law Information, including a Pay Calculation Tool
Passes Equal Pay and Paid Sick Leave Legislation
New Jersey’s Diane B. Allen Equal Pay Act was just signed into law and will go into effect on July 1, 2018. It extends protections not only for gender, but also all other protected classes under the state’s anti-discrimination law.
Under this law, it will be illegal “… for an employer to pay any of its employees who is a member of a protected class at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees who are not members of the protected class for substantially similar work, when viewed as a composite of skill, effort and responsibility.”
Protected categories are: race, creed, color, national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, or liability for service in the armed forces.
Pay differentials are only permitted under the following circumstances:
- Seniority or merit systems
- One or more legitimate, bona fide factors other than protected class characteristics, such as training, education, experience, or the quantity or quality of production
- Each of the factors is applied reasonably
- One or more factors account for the entire wage differential
- The factors are job-related with respect to any given position and are based on a legitimate business necessity, in which there is no alternative that would serve the same business purpose without producing the wage differential
Paid Sick Leave Law
Taking effect October 29, 2018, this bill applies to all employers requiring they provide earned sick leave and allow employees to accrue 1 hour of sick leave for every 30 hours worked; not to exceed 40 hours per year.
The paid leave can be used for a physical and mental illness or condition, care for a family member,
domestic violence related issues, or childcare matters.
One More County Bans Salary History Inquiries
Westchester County in New York signed a salary history ban law. Westchester’s Wage History Anti-Discrimination Law goes into effect on July 9, 2018.
- Employers will be prohibited from asking job applicants about their salary history or relying on it to make a salary determination
- If an applicant voluntarily provides their salary history, employers can use it to support a higher wage than they were planning to offer.
- Employers also will not be able to ask the applicant’s current or former employer for the applicant’s salary history unless you’re seeking to confirm wage information after a candidate voluntarily discloses it to support a higher wage. You’ll need written authorization from the applicant before seeking this confirmation.
- Salary history inquiries must be removed from job applications.
Expanded Anti-harassment Requirements
Both New York state and New York City have enacted legislation targeting sex discrimination and sexual harassment in the workplace.
- “Non-employees,” such as contractors, subcontractors, vendors, consultants, and others will have protections against sexual harassment.
Effective July 11, 2018
- New York State will prohibit the use of mandatory arbitration clauses to resolve sexual harassment claims.
- Nondisclosure provisions and agreements related to sexual harassment claims will also be prohibited.
Effective October 9, 2018
- All New York employers, regardless of their size, will need to provide interactive sexual harassment training to all employees every year and issue a written non-harassment policy to employees.
- The New York State Department of Labor and the State Division of Human Rights will develop a sample non-harassment policy and a model training program.
- Employers must develop a standard complaint form that employees can use to make sexual harassment claims.
- Either as part of employers’ policy or separately, they will need to inform employees in writing of “all available forums for adjudicating sexual harassment complaints administratively and judicially.”
Effective January 1, 2019
- Where competitive bids are required for state or public contracts, bids must contain a statement affirming that the bidder implemented a written policy addressing sexual harassment prevention and that it provides annual sexual harassment prevention training.
New York City Compliance Considerations
New York City Mayor Bill de Blasio recently signed the Stop Sexual Harassment in NYC Act into law. It will go into effect April 1, 2019.
- Like the state law, New York City employers will also need to provide interactive sexual harassment training. It must be provided to new hires within their first 90 days and emphasize that retaliation is prohibited.
- Employers will be required to keep records of this training for 3 years, including a signed employee acknowledgment.
- If your training program already meets these requirements, you may submit a certification of compliance.
- Employees will now have up to 3 years to file a claim of “gender-based harassment.”
- Employers will be required to post an “anti-sexual harassment rights and responsibilities” poster in both English and Spanish in a workplace common area.
- The city will provide an approved poster for employers to use.
Enacts Paid Sick Leave
Rhode Island’s Healthy and Safe Families and Workplaces Act was signed into law and goes into effect July 1, 2018. It mandates that employers with 18+ employees provide paid sick leave.
- Employees are allowed to use sick time for their own or their family’s illness, injury, or health condition; when their workplace or their child’s school is closed due to a public health emergency; and for domestic violence, sexual assault, or stalking-related issues.
- At first, employees will accrue 1 hour of paid sick time for every 35 hours worked, up to a maximum of 24 hours in 2018. It will increase to 32 hours in 2019 and 40 hours after that.
- Employers whose paid time off policies meet the amount and purposes prescribed under the new law will not need to provide additional time off, but your policies will need to state compliance and that additional time won’t be offered.
Equal Pay Opportunity Act
Earlier this year, Washington’s Governor Jay Inslee signed the Equal Pay Opportunity Act (EPOA) into law, updating Washington’s 1943 Equal Pay Act. The new law updates the language from “sex” to “gender” discrimination and amends a few other aspects of the original law. It will go into effect June 6, 2018.
- Employers’ good faith defense for pay differentials may only pertain to business necessity education, training, experience, seniority, merit, and regional differences.
- An employee may recover reasonable attorneys’ fees in a successful private action case.
- Employers will be prohibited from wage secrecy measures. Employees must be allowed to discuss or compare wage information. Employers, however, don’t have to disclose other employees’ wage information to an inquiring employee and managers only have to disclose another employees’ wage information as a result of a complaint, charge, or other legal necessity.
- Employers must not limit or deprive employees of career advancement opportunities based on their gender.
- Employers will need to promptly review their wage secrecy and compensation policies to come into compliance.
Paid Family and Medical Leave Preparation
In 2017, a statewide Paid Family and Medical Leave insurance program was signed into law. It will allow eligible workers in Washington to take necessary time off when they welcome a new child into their family, have a serious illness or injury, need to take care of an ill or ailing relative, and for certain military events. The premiums will be paid by employees and employers.
There are several steps employers need to take by the end of this year since the premium assessment period begins January 1, 2019 (benefits will be available to employees starting January 1, 2020).
- Will you offer paid family leave benefits through a voluntary plan or use the state program?
- If you plan to go outside of the state program, how are you ensuring you’re meeting the law’s requirements? When will you submit your program to the Employment Security Department (ESD) for approval?
- Are you accounting for payroll deductions, premium remittance, and reporting obligations?
Washington State Paid Family & Medical Leave home page
Spokane Bans the Box
The City of Spokane previously enacted a ban-the-box ordinance that will go into effect on June 14, 2018. It dictates when private employers can ask about and consider applicants’ criminal histories.
- Employers are forbidden from including language in job ads or postings that exclude people with arrest or conviction records. For example, you will no longer be able to use terms, such as “no felons.”
- Questions about arrest or conviction histories on job applications will not be allowed.
- Employers cannot ask applicants about their arrest or conviction records or perform criminal background searches until after the individual has participated in an interview or received a conditional offer of employment.
- Employers can’t disqualify candidates solely because of their prior arrest or conviction unless it’s related to “significant duties” of the job.
- Employers are prohibited from rejecting applicants who fail to disclose their criminal record and are otherwise qualified for the position.
- Positions in which applicants will have access to children or vulnerable adults or are related to law enforcement or background screening requirements mandated by other federal or state laws are exempt from this law.
- Employers are advised to revise job applications, interviewing guidelines and policies and procedures for background checks, accounting for the proper sequencing and timing in the hiring process.
Guns Allowed in Employee Cars
On June 8, 2018, the Business Liability and Protection Act, goes into effect for West Virginia employers. It permits lawful possession of firearms locked in vehicles parked in employer parking lots.
In other words, employers cannot prohibit customers, employees, or visitors from storing a lawfully possessed firearm inside of a privately-owned vehicle in a company parking lot, so long as the firearm is out of view and locked inside the vehicle.
Employers also won’t be able to ask anyone about the presence of a firearm locked inside a vehicle or physically search for firearms. Further, conditional job offers in which an employee isn’t allowed to leave firearms in a parked car on company property is not allowed.
However, employers may continue to ban employees from carrying or concealing firearms within the workplace, on sidewalks, or in other areas besides parking lots as well as company vehicles that employers own, lease, or rent.