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Tech Flex: March, 2017 Volume III Topics Covered In This Issue Form I-9 Handbook Updated by USCIS Arkansas Enacts Paid Maternity Leave for State Workers Arizona Supreme Court Rejects Challenge to Fair Wages and Healthy Families Act Arizona Releases Guidance on Fair Wages and Healthy Families Act California Court of Appeal Rules Commission Only Employees Must Receive Separate Compensation for Rest Breaks Missouri Supreme Court Upholds St. Louis Minimum Wage Kansas City, MO Passes Minimum Wage Increase Ohio Prohibits Local Leave of Absence and Paid Sick Leave Laws New York Issues Proposed Regulations for Paid Family Leave Law New York Paycard Direct Deposit Regulations Stopped San Francisco Adopts Final Rules Implementing Paid Parental Leave April 1, 2017 Minimum Wage Increase Reminder 2
Tech Flex: March, 2017 Volume III 3 FORM I-9 HANDBOOK UPDATED BY USCIS The United States Citizenship and Immigration Services (USCIS) has issued an updated version of its Handbook for Employers Guidance for Completing Form I-9 (Employment Eligibility Verification Form). By way of background, an employer must complete a Form I-9 for all of its new employees to verify their identity and authorization to work in the United States. The Handbook for Employers guides employers through the entire Form I-9 process. The handbook is divided into the following eight sections: (1) why employers must verify employment authorization and identity of new employees; (2) completing Form I-9; (3) photocopying and retaining Form I-9; (4) unlawful discrimination and penalties for prohibited practices; (5) instructions for recruiters and referrers for a fee; (6) E-Verify (which is the web-based verification companion to Form I-9); (7) miscellaneous questions about the form; and (8) the acceptable documents for verifying employment authorization and identity. As previously reported, the USCIS recently issued a new version of Form I-9 that employers are required to use no later than January 22, 2017. For a copy of the updated Handbook and the updated Form I-9 please click on the link provided below. Handbook: https://www.uscis.gov/sites/default/files/files/form/m-274.pdf Form I-9 (expiration date is Aug. 31, 2019) https://www.uscis.gov/i-9 IRS ISSUES PUBLICATION 969 FOR USE WITH 2016 TAX RETURNS The Internal Revenue Service (IRS) has issued an updated Publication 969 (Health Savings Accounts and Other Tax-Favored Health Plans) helpful in completing 2016 tax returns. The publication discusses several tax-advantaged plans including health flexible spending accounts (FSAs); health reimbursement arrangements (HRAs); medical savings accounts (MSAs); and health savings accounts (HSAs) and reviews the tax qualifications for these plans. There are only minor changes to the 2016 version. A reminder contains updated information about the federal tax treatment of same-sex married couples. The HSA contribution limits, HDHP deductibles, out-of-pocket maximums, the Archer MSA deductibles and out-of-pocket maximums have all been revised for 2016. The adjusted limits and thresholds for HSAs and HDHPs for 2016 are also provided. The publication also notes that the limit on health FSA salary reduction contributions for plan years beginning in 2016 cannot exceed $2,550. For a copy of Publication 969 (Health Savings Accounts and Other Tax-Favored Health Plans (for 2016 Tax Returns), please click on the link provided below: https://www.irs.gov/pub/irs-prior/p969--2016.pdf 3
Tech Flex: March, 2017 Volume III 4 ARKANSAS ENACTS PAID MATERNITY LEAVE FOR STATE WORKERS On February 16, 2017, Arkansas Governor Asa Hutchinson signed Senate Bill 125 into law on February 16, 2017 which provides paid maternity leave to state workers. The bill became effective on the date of the Governor s signature. Under Senate Bill 125, Arkansas state employees may now take up to four weeks of paid maternity leave within the first 12 weeks after the birth or adoption of a child. The program requires the employee to have been employed by the state for more than one year. The law does not require employees to exhaust sick or annual leave prior to being awarded catastrophic leave for maternity purposes. Upon signing the bill, Governor Hutchinson stated the following: I am pleased that the maternity leave bill passed through the legislature with bipartisan support. Mothers make up a significant portion of our state s workforce and this bill will ensure that we retain their vital contributions, while also allowing them to take care of their new additions. A fair maternity leave policy is crucial to a state s ability to retain valuable employees and I am pleased that this is now the law of the state. In addition, Senate Bill 125 eliminates all agency catastrophic leave banks which are replaced with a single leave bank for all agencies that will be administered by the Office of Personnel Management For a copy of Senate Bill 125, please click on the link provided below: http://www.arkleg.state.ar.us/assembly/2017/2017r/bills/sb125.pdf ARIZONA SUPREME COURT REJECTS CHALLENGE TO FAIR WAGES AND HEALTHY FAMILIES ACT On March 14, 2017, the Arizona Supreme Court issued a ruling upholding the Arizona Fair Wages and Healthy Families Act. Chief Justice Scott Bales issued the order, stating the seven-member court unanimously rejected the arguments from business groups that the law is unconstitutional. A detailed explanation of the court's reasoning will come later, Bales wrote. Background: On November 8, 2016, voters in Arizona approved the Fair Wages and Healthy Families Act (Proposition 206). Proposition 206 raised the minimum wage from $8.05 per hour as follows: $10.00 per hour, effective January 1, 2017; $10.50 per hour effective, January 1, 2018; $11.00 per hour effective January 1, 2019; and $12.00 per hour effective January 1, 2020. Employers are still allowed to pay tipped employees $3.00 less per hour, if combined wages plus tips are not less than the minimum wage rate. In addition, Proposition 206 provides that an employee beginning July 1, 2017 accrues a minimum of one hour of earned paid sick time for every 30 hours worked. Purposes for which employees may use earned paid sick time include the following: (list is not exhaustive). 4
Tech Flex: March, 2017 Volume III 5 Employee s mental or physical illness; Employees need for medical diagnosis; Care for family member with a mental or physical illness; Care of family member in need of medical diagnosis; Employees place if business being closed due to a public health emergency; Care for a child whose school has been closed due to a public health emergency; Medical attention needed for employee or family member to recover from domestic violence, sexual violence or stalking. Family Member for which paid sick time may be used includes: Regardless of age: Biological, adopted or foster child, stepchild or legal ward, a child of a domestic partner, a child to whom the employee stood in loco parentis, or an individual to whom the employee stood in loco parentis when the individual was a minor; A biological, foster, stepparent, or adoptive parent or legal guardian or an employee or an employee s spouse or domestic partner or a person who stood in loco parentis when the employee or employee s spouse or domestic partner was a child; A spouse legally married under any state law or a domestic partner of an employee as registered under the laws of any state or political subdivision; A grandparent, grandchild or sibling (whether of a biological, foster, adoptive or step relationship) of the employee or employee s spouse or domestic partner; Any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship. Proposition 206 Challenged in Court: On December 15, 2016, a group of Arizona businesses, Chambers of Commerce, and individual citizens filed a lawsuit, challenging the constitutionality of Proposition 206, the Fair Wages and Healthy Families Act (the Act ). On December 21, 2016, the trial court denied a motion to temporarily halt implementation of the Act pending resolution of the legal challenge. The trial court s ruling was appealed to the Arizona Supreme Court. On December 29, 2016, the Supreme Court denied a request to temporarily halt implementation of the Act while the Court considers whether to take up the appeal. As a result, employers are required to comply with the minimum wage requirements under the Act beginning on January 1, 2017. The accrual of paid sick leave does not commence until July 1, 2017. The Arizona Supreme Court heard oral arguments in the case on March 9, 2017. Arizona Supreme Court Rejects Challenge: As noted above, the Arizona Supreme Court unanimously rejected the challenge and the provisions of the Fair Wages and Healthy Families Act remain in effect. For a copy of Proposition 206, please click on the link provided below: http://apps.azsos.gov/election/2016/general/ballotmeasuretext/i-24-2016.pdf 5
Tech Flex: March, 2017 Volume III 6 ARIZONA RELEASES GUIDANCE ON FAIR WAGES AND HEALTHY FAMILIES ACT As noted above, Arizona voters approved the Fair Wages and Healthy Families Act (Proposition 206) which provided an increase in the state minimum wage and enacted employee rights in relation to paid sick leave. For further information on Proposition 206 please see previous article above titled Arizona Supreme Court Rejects Challenge to Fair Wages and Healthy Families Act. The Arizona Industrial Commission of Arizona (ICA) has now issued a list of frequently asked questions (FAQs) on Proposition 206. The FAQs include information on the employers covered by the Proposition and posting and recordkeeping requirements. Samplings of the FAQs are as follows: Which employers are subject to Arizona s minimum wage laws? Arizona s minimum wage laws apply to all employers. Arizona law defines an employer in the minimum wage context as any corporation, proprietorship, partnership, joint venture, limited liability company, trust, association, political subdivision of the state, individual or other entity acting directly or indirectly in the interest of an employer in relation to an employee, but does not include the state of Arizona, the United States, or a small business. The definition of employer in the minimum wage context was not changed by Proposition 206, the Fair Wages and Healthy Families Act. Small businesses, as the term is defined by Arizona law, are excluded from the definition of employer and are exempt from the minimum wage requirements. Arizona law defines a small business as any corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than five hundred thousand dollars in gross annual revenue and that is exempt from having to pay a minimum wage under section 206(a) of title 29 of the United States Code. Section 206(a) of title 29 of the United States Code is a subsection of the federal Fair Labor Standards Act (FLSA) that requires employers whose employees or enterprises are engaged in commerce to pay their employees a minimum wage. Under the FLSA, commerce is a broad term that refers to any form of commercial interstate interaction. Commerce includes (but is not limited to) taking payments from out-of-state customers; processing payments that come from out-of-state banks or credit card issuers; using a telephone, fax machine, U.S. Mail, or email to communicate with someone in another state; driving or flying to another state for job duties; and loading, unloading, or using goods that come from an out-of-state supplier (assuming that the goods were purchased from the out-of-state supplier). Due to these restrictive requirements, few businesses in today s economy would qualify as exempt from having to pay minimum wage under either the FLSA or Arizona minimum wage statutes. Examples of small businesses that the ICA Labor Department has determined may meet the exemption are barbers and janitors who buy all of their supplies locally and accept only cash or checks from Arizona banks. Must an employer carry forward balances of earned paid sick time at the end of a year to the next year? Yes, unless an employer elects to pay an employee for unused earned paid sick time at the end of the year and provides the employee with an amount of earned paid sick time that meets or exceeds the requirements of the Article that is available for the employee s immediate use at the beginning of the subsequent 6
Tech Flex: March, 2017 Volume III 7 year. This way, the employer can reduce an employee s unused earned paid sick time balance at the end of a year, provided that the employer gives the employee a year s worth of earned paid time at the beginning of the following year. Take, for example, an employer with more than 20 employees that has an employee with an 80-hour earned paid sick time balance. If the employer wants to reduce that employee s unused earned paid sick time at year s end, it may pay the employee for unused earned paid sick time as long as it provides the employee with a year s worth of sick time at the beginning of the subsequent year (and the employee can use it at the beginning of the subsequent year). For a copy of the FAQs, please paste the following into your browser. https://www.azica.gov/sites/default/files/public%20frequently%20asked%20quest IONS_MasterwTOC.pdf CALIFORNIA COURT OF APPEAL RULES COMMISSION ONLY EMPLOYEES MUST RECEIVE SEPARATE COMPENSATION FOR REST BREAKS The California Court of Appeal ruled on February 28, 2017 in Vaquero v. Stoneledge Furniture, LLC that employees who are paid solely on commission must receive separate compensation for rest breaks. The court also ruled that employers violate this requirement if they pay employees a guaranteed minimum hourly rate as an advance on commissions earned in later pay periods. Background Plaintiff Ricardo Bermudez Vaquero was employed as a sales associate for Stoneledge Furniture, receiving commissions pursuant to a sales compensation plan. The plan guaranteed employees minimum pay of $12.01 per hour or $480.40 per week. If sales associates did not earn at least $480.40 by the end of the workweek, they were paid a draw from future advanced commissions to bring them up to their minimum pay for the week. Mr. Vaquero filed a class action alleging Stoneledge s compensation system failed to provide him and other sales associates with paid rest breaks in violation of California Labor Code Section 226.7 which states: (a) As used in this section, recovery period means a cooldown period afforded an employee to prevent heat illness. (b) An employer shall not require an employee to work during a meal or rest or recovery period mandated pursuant to an applicable statute, or applicable regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health. (c) If an employer fails to provide an employee a meal or rest or recovery period in accordance with a state law, including, but not limited to, an applicable statute or applicable regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, the employer shall pay the employee one additional hour of pay at the employee s regular rate of compensation for each workday that the meal or rest or recovery period is not provided. (d) A rest or recovery period mandated pursuant to a state law, including, but not limited to, an applicable statute, or applicable regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, shall be counted as hours worked, for which there shall be no deduction from wages. This subdivision is declaratory of existing law. 7
Tech Flex: March, 2017 Volume III 8 (e) This section shall not apply to an employee who is exempt from meal or rest or recovery period requirements pursuant to other state laws, including, but not limited to, a statute or regulation, standard, or order of the Industrial Welfare Commission. Trial Court Ruling: Stoneledge moved for summary judgment, and the trial court granted Stoneledge s motion. The trial court found that the compensation system sufficiently accounted for all time worked and guaranteed that [sales associates] would be paid more than $12 an hour for those hours. With this system there is no way that the employees rest period time would not be captured in the total amount paid each pay period. California Court of Appeal Decision: The court of appeal reversed the trial court stating that the plain language of California Wage Order 7-2001 that requires employers to count rest period time as hours worked for which there shall be no deduction from wages. Thus, according to the court of appeals, employers are required to separately compensate employees for rest periods if an employer s compensation plan does not already include a minimum hourly wage for such time. The court decided that this separate compensation requirement applied not only to piece-rate compensation plans but also to commission-only compensation plans. Stoneledge argued that the language of Wage Order 7 does not mandate separate compensation for rest breaks, but requires only compensation for hours worked and that an employer not deduct from such compensation for rest breaks. Stoneledge argued that its compensation plan did compensate sales associates for rest breaks by guaranteeing them an hourly rate for all hours worked (including rest breaks) well above the required minimum wage. The court of appeal disagreed: [W]hen Stoneledge paid an employee only a commission that commission did not account for rest periods. When Stoneledge compensated an employee on an hourly basis (including for rest periods), the company took back that compensation in later pay periods. The court concluded that under this compensation system, the formula it used for determining commissions did not include any component that directly compensated sales associates for rest periods. In this regard, the court found that advances or draws against future commissions were not compensation for rest periods because they were not compensation at all. The court concluded that while it was not questioning the legitimacy of commissioned based compensation...we hold only that such compensation plans must separately account and pay for rest periods to comply with California law....because Stoneledge did not separately compensate sales associates for rest periods as required by California law, the trial court erred in granting summary adjudication on the plaintiffs cause of action for violation of section 226.7. For a copy of California Wage Order 2001-7, please click on the link provided below: https://www.dir.ca.gov/iwc/wageorders2005/iwcarticle7.html For a copy of the Appeal Court decision in Vaquero v. Stoneledge Furniture, LLC, please click on the link provided below: http://law.justia.com/cases/california/court-of-appeal/2017/b269657.html 8
Tech Flex: March, 2017 Volume III 9 MISSOURI SUPREME COURT UPHOLDS ST. LOUIS MINIMUM WAGE On February 28, 2017, the Supreme Court of Missouri upheld the City of St. Louis minimum wage ordinance. Background: In August of 2015, St. Louis passed Ordinance 70078, raising the local minimum wage to $8.25 an hour to be effective on October 15, 2015. St. Louis Mayor Francis Slay signed the measure following approval by the Board of Aldermen. In addition to the initial October wage hike, the ordinance provided that the hourly minimum wage in the city was to be increased further to $9.00 an hour on January 1, 2016; $10.00 an hour on January 1, 2017; and $11.00 an hour on January 1, 2018. Beginning January 1, 2019, and each January 1 after that, the minimum wage rate was to be increased based on the rate of inflation. A trade group sought a declaratory judgment arguing the ordinance was in conflict with Missouri s Minimum Wage Law and, therefore void. A Missouri circuit court judge agreed and struck down the ordinance on October. 14, 2015, noting that the ordinance prohibits the payment of the minimum wage set forth in the state statute, provides for enforcement of the minimum wage by entities and officials other than those identified in the state statute, and provides for penalties separate and distinct from those set forth by state law. The court also found the ordinance exceeds the city s charter authority as granted by the Missouri Constitution. Accordingly, it permanently prohibited the city from enforcing the ordinance. Circuit Court Decision Reversed: In its ruling overturning the October 14, 2015 decision the Missouri Supreme Court stated that the St. Louis minimum wage ordinance had been adopted before the state legislation prohibiting local minimum wages became law and therefore the St. Louis minimum wage ordinance was therefore valid. In response to the Supreme Court decision, St. Louis Mayor Francis Slay said that his administration will work with local business representatives as to the timing of the increases. For a copy of the Missouri Supreme Court ruling, please click on the link provided below: https://www.courts.mo.gov/file.jsp?id=110257 9
Tech Flex: March, 2017 Volume III 10 KANSAS CITY, MO PASSES MINIMUM WAGE INCREASE The Kansas City, Missouri City Council on a vote of 8 to 4 has passed Ordinance 170193 that will increase the minimum wage in the city from the current state level of $7.70 per hours as follows: September 18, 2017 $8.50 January 1, 2019 $9.82 January 1, 2020 $10.96 January 1, 2021 $11.98 January 1, 2023 $13.00 Beginning January 1, 2024 and on January 1 of successive years the Minimum Wage shall be adjusted based upon the increase or decrease in the cost of living. HOWEVER, it is important to note that the Missouri Legislature is considering legislation that would prohibit cities from increasing the minimum wage rate above the state's minimum wage, currently $7.70 per hour. The bill includes an emergency clause allowing it to go into effect immediately after the governor signs it into law. The Missouri House has already approved the bill on a 112-46 vote and now the bill is under consideration in the Senate. We will continue to monitor and report as the situation progresses. OHIO PROHIBITS LOCAL LEAVE OF ABSENSE AND PAID SICK LEAVE LAWS On December 19, 2016, Ohio Gov. John Kasich signed a bill (SB 331) blocking local governments from raising the minimum wage above the level set by the state. In addition to prohibiting local minimum wages, SB 331 prohibits local jurisdictions from passing ordinances in relation to employee fringe benefits. It has now been clarified that fringe benefits includes retirement benefits, leave of absence, vacation, separation, sick or holiday pay. SB 331 in part stated as follows: By enacting section 4113.85 of the Revised Code, it is the intent of the General Assembly to exclusively regulate the hours of labor and fringe benefits arising from the employer employee relationship. 10
Tech Flex: March, 2017 Volume III 11 NEW YORK ISSUES PROPOSED REGULATIONS FOR PAID FAMILY LEAVE LAW The New York Worker s Compensation Board published proposed regulations for the implementation of the New York Paid Family Leave Law (PFLL) on February 22, 2017. New York State passed the PFLL in 2016, and it will take effect in stages, beginning on January 1, 2018. The PFLL will provide paid leave for employees who seek leave to care for a new child, a close relative with a serious health condition or when a family member is called to active military service. The law also provides for the continuation of the employee s health insurance, and requires that employees be reinstated to their positions when their leave ends. The PFLL, funded by employee payroll deductions, will be phased in as follows: Year Max # of Weeks (in 52-week period) Percentage of Employee Salary Cap Percent of the State Average Weekly Wage 1/1/2018 8 50% 50% 1/1/2019 10 55% 55% 1/1/2020 10 60% 60% 1/1/2021 12 67% 67% The proposed regulations for the PFLL, issued by the New York Workers Compensation Board, answer several questions that appeared unclear from the text of the statute. For example, the proposed regulations clarify that, while both the federal Family and Medical Leave Act (FMLA) and the PFLL allow employees to take leave for the birth of a newborn child or the placement of a child for adoption, care of a seriously ill family member or for exigencies related to exigencies arising from military deployment, the PFLL will not apply to leave needed for the employee s own health condition. Also, the definition of serious health condition under the PFLL is the same as the definition of a serious health condition under the FMLA. The definition of fifty-two consecutive weeks (the period for determining how much PFLL leave an employee has available at a given time) provides that PFLL leave is measured backwards from each time an employee uses leave; essentially the rolling backward calculation method established under the FMLA. Employers that use one of the other methods permitted for the tracking of FMLA leave his could face administrative difficulties in administering FMLA and PFLL leave. In some cases, employees of these employers also could stack PFLL and FMLA leave if different methods are used, i.e., an employee could take PFLL followed by FMLA leave, to take more than 12 consecutive weeks of leave. Other key portions of the proposed regulations include: Eligibility: To be eligible for paid family leave, employees must have been employed fulltime for 26 weeks or part-time for 175 days by a covered employer, at the time they apply for benefits. Part-time employees are those employed on a work schedule of less than five days per week. Waivers may be available for employees whose schedules prevent them 11
Tech Flex: March, 2017 Volume III 12 from ever meeting the PFLL eligibility requirements. For purposes of determining eligibility, approved vacation, sick, personal or other time away from work will count, as long as the employee is still making contributions to the cost of PFL benefits during that time, but periods of temporary disability under the New York Short Term Disability law would not. Benefits Available to Part-Time Employees: When a part-time employee will be taking family leave as a daily increment the part-time employee's maximum period of paid family leave may be reduced by the average number of days worked per week as a percentage of the total benefit available for full-time workers. Thus, for example, an employee that works three days per week will receive: on January 1, 2018, 60% of the 40 day (8 week) total available to a full-time worker, or 24 days maximum in any 52 consecutive week period; on January 1, 2019, 60% of the 50 day (10 week) total available to a full-time worker, or 30 days maximum in any 52 consecutive week period; on January 1, 2021, 60% of the 60 day (12 week) total available to a full-time worker, or 36 days maximum in any 52 consecutive week period. A part-time employee taking family leave in weekly increments will be eligible for the maximum number of weeks of leave in any 52 consecutive week period. Weekly benefits are payable in accordance with subdivision 2 of section 204 of the Workers' Compensation Law. On January 1, 2018, a part-time employee taking family leave in weekly increments will be eligible for eight weeks of leave in any 52 consecutive week period. On January 1, 2019, a part-time employee taking family leave in weekly increments will be eligible for ten weeks of leave in any 52 consecutive week period. On January 1, 2021, a part-time employee taking family leave in weekly increments will be eligible for twelve weeks of leave in any 52 consecutive week period. Documentation Required: For leave taken to care for a family member with a serious health condition, the employee must obtain medical certification from the health provider with information about the patient's health condition, and the estimation of frequency and duration of leave necessary, among other information. For a qualifying exigency, the employee must provide a copy of the military member's active duty orders and/or other documentation supporting the leave. For leave to bond with a child, the birth mother must provide a birth certificate or documentation of pregnancy or birth from a health care provider including the mother's name and birth or due date. A second parent must provide a birth certificate, documentation from a health care provider, voluntary acknowledgment of paternity or court order of filiation. An adoptive parent must submit documentation showing an adoption is in process, or documentation illustrating the leave is to further the adoption. A foster parent must submit a letter from the county or city department of social services or local volunteer agency. Average Weekly Wage: The definition of Average Weekly Wage, for the purpose of computing the rate of payment of family leave benefits, is: the amount determined by dividing either the total wages of such employee in the employment of his last covered employer for the eight weeks or portion thereof that the employee was in such employment immediately preceding and including his last day worked prior to the first day of paid family leave, or the total wages of the last eight weeks or portion thereof immediately preceding and excluding the week in which the paid family leave began, whichever is the higher amount, by the number of weeks or portion thereof of such employment. Required Notice to Employer: Similar to the requirements of the FMLA, for foreseeable leave, an employee would be required to provide the employer with at least 30 days advance notice before leave is to begin. If 30 days advance notice is not practicable for reasons such as a lack of knowledge of approximately when leave will be required to 12
Tech Flex: March, 2017 Volume III 13 begin, a change in circumstances, or a medical emergency, notice would need to be given as soon as practicable. Required Notice to Employees: Also similar to the FMLA, employers would be required to provide written notice to employees of their rights and obligations under the PFLL in any employee handbook or written leave policy. Employers that do not have a written handbook or policy describing leave provisions would be required to separately provide written guidance to all employees regarding the PFLL. A notice posting requirement is also created. The posting will be in a form to be determined by the Chair of the Workers Compensation Board. Payment of Benefits by Direct Deposit or Debit Card: Employers must provide certain notification and obtain written consent before they can pay PFLL benefits via direct deposit. Payment of benefits by debit cards is prohibited unless the employee is provided with local access to one or more automated teller machines that offers withdrawals at no cost to the employee; and at least one method to withdraw up to the total amount of benefits for each week or balance remaining on the debit card without incurring a fee. Also, neither the employer nor its agent may charge specific fees associated with the provision of benefits by debit cards. The 45-day comment period for the regulations ends on April 18, 2017 (which is a Saturday). We will continue to monitor the progress of the regulations and advise of any further developments. A link to the proposed regulations can be found here: http://www.wcb.ny.gov/pfl/pfl-regs.jsp NEW YORK PAYCARD - DIRECT DEPOSIT REGULATIONS STOPPED The New York Industrial Board of Appeals (Board) ruled that the New York regulations scheduled to go into effect on March 7, 2017 regarding payment of wages by direct deposit and paycard are invalid and thereby revoked. Background: On September 7, 2016, the New York State Department of Labor (NYDOL) published new regulations related to payment of wages, including rules affecting payment via direct deposit and paycards. Under these rules, which were to go into effect on March 7, 2017, employees were required to receive certain notifications in English and their primary language before being paid by direct deposit or through a paycard. An employee would need to be informed (1) about all their payment options; (2) that they were not required to accept wages by payroll debit card or by direct deposit; and (3) that they may not be charged any fees for services that are necessary to access wages. In addition, employees would need to consent in writing to be paid through any method other than check or cash. Consent could be withdrawn at any time, but the employer will have up to two pay periods to finalize any requested change. If employees did consent to be paid via paycard, there was to be a seven-day waiting period during which the consent is not effective. Once the consent is effective, employees paid with paycards would need to be provided with local access to one or more automated teller machines offering withdrawals at no cost to the employee, as well as at least one method to withdraw up to the total amount of wages for each pay period or balance remaining on the paycard without incurring a fee. Other provisions prohibit employers from charging or passing on any fees associated with paycards. 13
Tech Flex: March, 2017 Volume III 14 Under the regulations employers were required to keep copies of the employee s notice and consent for the duration of their employment and for a period of six years after the employer makes a final wage payment to the employee. Regulations Challenged: A national provider of payroll cards (Global Cash Card) filed a petition with the Board claiming the regulations issued on September 7, 2016 exceeded the scope of the NYDOL authority and violated separation of powers between the state legislature and the executive branch of state government. In addition, it was asserted that the regulations were preempted by federal banking law and included vague and unreasonable provisions. The Board agreed that NYDOL regulations exceeded the NYDOL rulemaking authority by regulating banking services, the relationship between employers and employees, and by placing restrictions on financial institutions. Further the Board ruled the NYDOL prohibitions against charges by paycard providers is not within the NYDOL authority as the rules regarding banks and financial institutions and the fees they may charge is the responsibility of New York Department of Financial Services. Although the regulations released on September 7, 2016 will not go into effect on March 7, 2017, it is important to note that NYDOL has 60 days to appeal the Board s ruling. We will continue to monitor and report as developments occur. SAN FRANCISCO ADOPTS FINAL RULES IMPLEMENTING PAID PARENTAL LEAVE San Francisco s Office of Labor Standards Enforcement (OLSE) recently released final rules implementing the San Francisco Paid Parental Leave Ordinance (PPLO). The PPLO went into effect on January 1, 2017 for employer with 50 or more employees, and requires employers to provide partial wage replacement to eligible employees who take leave to bond with a new child under California s Paid Family Leave (PFL) program. The PPLO's requirements extend to employers with 35 or more employees on July 1, 2017, and on January 1, 2018, to employers with 20 or more employees. OLSE s rules provided some clarifications to the PPLO. These are discussed below. Time for Payment of Supplemental Compensation In cases where all PPLO requirements are met before or during the CA PFL benefits period, employers must make a good-faith effort to issue the first supplemental compensation payment in the next full pay period after the requirements are met and then on subsequent, regular paydays. The total supplemental compensation amount owed to an employee must be paid within 30 days after the last day of the employee s CA PFL period. In contrast, if the PPLO requirements are met after the PFL period ends, the total supplemental compensation due must be paid within 30 days after the requirements were met. Calculation of Supplemental Compensation The OLSE published explanations of how to calculate benefits payable to non-tipped employees employed by a single employer, tipped employees employed by a single employer, and non-tipped and tipped employees of multiple employers. We summarize the calculations for employees employed by a single employer below. You can review the examples for employees employed by multiple employers at the link below. 14
Tech Flex: March, 2017 Volume III 15 Non-tipped employee, single employer Step One: Find the employee s California Employment Development Department (EDD) weekly benefit amount on the EDD Notice of Computation or Electronic Benefit Payment Notification provided by the employee, or use the weekly benefit amount provided to you by EDD. Step Two: Determine the employee s current Normal Gross Weekly Wages based on payroll records. If weekly wages are constant, use the amount for the week immediately preceding the bonding leave period. (For birth mothers, use the amount for the week immediately preceding pregnancy disability leave.) If weekly wages fluctuate, the Normal Gross Weekly Wages must be calculated based on the Paid Parental Leave Lookback Period. The Lookback Period is six bi-weekly or semimonthly, or 12 weekly pay periods preceding the start of the employee s California Paid Family Leave Period (or, for birth mothers, the period immediately preceding pregnancy disability leave). Supplemental Compensation = Normal Gross Weekly Wages (Step Two) EDD Weekly Benefit (Step One). Tipped employee, single employer Step One: Find the employee s California Employment Development Department (EDD) weekly benefit amount on the EDD Notice of Computation or Electronic Benefit Payment Notification provided by the employee, or use the weekly benefit amount provided to you by EDD. Step Two: Determine the employee s current normal gross weekly earnings including reported tips based on payroll records. Since earnings with tips fluctuate, the earnings must be calculated based on the Paid Parental Leave Lookback Period. The Lookback Period is six bi-weekly or semi-monthly, or 12 weekly pay periods preceding the start of the employee s California Paid Family Leave Period (or, for birth mothers, the period immediately preceding pregnancy disability leave). Step Three: determine the amount remaining after EDD benefit by subtracting Step One amount from Step Two amount. Step Four: Calculate the average weekly wages without tips by dividing the sum of wages from the grid above by the number of weeks to determine the weekly wages without tips. Step Five: Divide the weekly wages without tips (Step Four) by the normal weekly wages (Step Two) and multiply by the supplemental compensation to get the preliminary employer weekly supplemental compensation amount. Preliminary Weekly Supplemental Compensation amount (subject to the cap in Step Six) = (Step Four amount/step Two amount) X Step Three amount. Step Six: Ensure that the employee s total weekly benefits do not exceed the maximum benefit cap of $2,133. Sum the EDD Weekly Benefit Amount (Step Five) and the preliminary Supplemental Compensation amount. If the total is less than $2,133, then the weekly Supplemental Compensation amount owed to the employee is the amount Step 5. If the total is greater than $2,133, the weekly Supplemental Compensation amount is subject to the Maximum Weekly Benefit Amount. Subtract the EDD Weekly Benefit from $2,133. 15
Tech Flex: March, 2017 Volume III 16 Eligibility Period To be eligible for compensation under the PPLO, an employee must begin working for an employer 180 days before the PFL benefit period begins. OLSE s final rules provide that the 180-day period runs from the first day an employee s PFL benefits are payable. Currently, there is a seven-day waiting period before employees can begin to receive PFL benefits (note that this waiting period will be eliminated as of January 1, 2018). Employers therefore should be aware that any supplemental compensation obligation begins at the time CA PFL benefits are paid, not at the start of the seven-day waiting period. Also, if an employee leaves employment, but is re-hired by the same employer within one year, the employee need not complete a second 180-day period if he or she met the 180- day requirement during the first period of employment. If the employee did not meet the 180-say threshold in the first period of employment but is re-hired by the same employer within one year, the time worked during the first period of employment will count toward the 180-day requirement. Posting, Notice and Forms The PPLO requires both a posting in the workplace and notice to employees. A link to the poster is below. Additionally, if an employee handbook discusses personal or parental leave available to employees, PPLO supplemental compensation rights must be described in the next handbook published after December 23, 2016. Also, OLSE has created a form for employees seeking compensation under the PPLO to provide to their employers. For additional information, please paste the following links into your browser: OLSE s new rules: http://sfgov.org/olse/sites/default/files/document/31%20final%20pplo%20rules%2012 %2023%2016v2.pdf Required PPLO poster: http://sfgov.org/olse/sites/default/files/document/olse%20parental%20leave%20poster% 201.1.pdf Form for employees seeking PPLO compensation: http://sfgov.org/olse/sites/default/files/document/instructions%20and%20form%20combi ned%20%201.20.17.pdf Sample Calculations: http://sfgov.org/olse/paid-parental-leave-calculations 16
Tech Flex: March, 2017 Volume III 17 APRIL 1, 2017 MINIMUM WAGE INCREASE REMINDER The following are a list of Cities, Counties and states where the minimum wage will increase as of April 1, 2017 where notification was provided in previous editions of the Tech Flex. Jurisdiction Polk County, Iowa April 1, 2017 Minimum Wage $8.75 (currently $7.25). Tipped employees must be paid at least $5.00 (currently $4.35) in cash wages. ADP does not make any representation or warranty that the information contained in this newsletter, when used in a specific and actual situation, meets applicable legal requirements. This newsletter is provided solely as a courtesy and should not be construed as legal advice. The information in this newsletter represents informational highlights and should not be considered a comprehensive review of legal and compliance activity. Your legal counsel should be consulted for updates on law and guidance that may have an impact on your organization and the specific facts related to your business. **Please note that the information provided in this document is current as of the date it is originally published.** 17