2021 Workplace Compliance: What You Need to Know

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October 8, 2021

2021 Workplace Compliance:

What You Need to Know

2021 Virtual Illinois Statewide Payroll Conference

“Creating Payroll Magic”!

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This presentation is not:

• Legal advice

• The final word on today’s topics

• A political opinion

Disclaimer

Before taking any actions on the information contained in this presentation, employers should review this material with internal and/or external counsel.

Before taking any actions

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Today’s speakers

Tracy L. Sigmann

Legal Compliance Director ADP, Inc.

tracy.sigmann@adp.com

Tracy Sigmann, CPP, PHR, SHRM-CP is Legal Compliance Director supporting ADP’s Human Capital Management (HCM) compliance team. Tracy has been with ADP for over 10 years, joining ADP after working as a Payroll and HR leader for several small and large companies with U.S. and international employees. Tracy is a regulatory compliance expert in a number of HCM areas and she is currently responsible for providing regulatory compliance support to ADP service offerings, including ADP Workforce Now®, Next Gen HCM®, and outsourcing services. Tracy is a frequent speaker and presenter on regulatory compliance topics on behalf of ADP for ADP’s external events as well as outside Industry sponsored events and conferences. Tracy received her undergraduate degree from St. Thomas Aquinas College and has over 25 years of

experience in a variety of industries in the areas of payroll, human resources, benefits, finance and HCM technology.

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Agenda 1

3 COVID-19

Federal and state requirements impacting payroll compliance Independent contractors

Q&A Appendix

2

4

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Polling question

How many U.S. states does your employer have employees working in?

a) Only in Illinois

b) California, do the other states matter?

c) Several states and NOT California

d) All 50

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COVID-19

6

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COVID-19 Federal response:

Key provisions impacting employers

March 27, 2020 H.R. 748 Coronavirus Aid,

Relief, and Economic Security Act (CARES Act)

December 27, 2020 H.R. 133 Consolidated Appropriations Act,

2021 March 18, 2020

H.R. 6201 Families First

Coronavirus Response Act

(FFRCA)

Stimulus Update Stimulus

April 24, 2020 H.R. 266 Paycheck Protection Program and

Health Care Enhancement

Act

Update June 5, 2020

H.R. 7010 Paycheck Protection

Program Flexibility Act

Stimulus

March 11, 2021 H.R. 1319 American Rescue

Plan Act (ARPA) Stimulus

7

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Path Out of the Pandemic:

President Biden’s Action Plan, Six-Pronged Approach*

*Source: https://www.whitehouse.gov/covidplan/ 8

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IRS provides guidance for employers claiming the employee retention credit

The Internal Revenue Service issued guidance for employers claiming the employee retention credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act)

• Notice 2021-23 explains the changes to the employee retention credit for the first two calendar quarters of 2021, including:

• the increase in the maximum credit amount,

• the expansion of the category of employers that may be eligible to claim the credit,

• modifications to the gross receipts test,

• revisions to the definition of qualified wages, and

• new restrictions on the ability of eligible employers to request an advance payment of the credit.

https://www.irs.gov/pub/irs-drop/n-21-23.pdf

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IRS provides guidance for employers claiming the employee retention credit (cont.)

Under the American Rescue Plan Act of 2021 (ARPA), enacted March 11, 2021, the employee retention credit is available to eligible employers who pay qualified wages after June 30, 2021, and before January 1, 2022

• Notice 2021-49 addresses changes made by the ARPA to the employee retention credit that apply to the third and fourth quarters of 2021 and answers questions about the employee retention credit for tax years 2020 and 2021, including:

• definition of full-time employee

• treatment of tips

• timing of the qualified wage deduction disallowance

• Revenue Procedure 2021-33 provides a safe harbor for

• the amount of forgiveness of a Paycheck Protection Program (PPP) loan

• a grant under the Economic Aid Act

• a restaurant revitalization grant

https://www.irs.gov/pub/irs-drop/n-21-49.pdf https://www.irs.gov/pub/irs-drop/rp-21-33.pdf

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CARES Act Social Security Tax Deferrals: Late Repayment Would Subject All Deferrals to Penalty

Internal Revenue Service (IRS) Program Manager Technical Assistance (PMTA) document, 2021- 007, dated June 21, 2021

• Late payment penalties apply to all employer Social Security taxes deferred under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Public Law 116-136 (March 27, 2020), if repayments are late

• PMTA 2021-007 outlines and provides helpful clarification of how the IRS will handle late repayment of the employer Social Security tax deferred in 2020, confirming that if any deferred amount due is not deposited by the applicable due date, the entire deferral is subject to penalty, and how the IRS will apply the penalty to any late repayments of amounts deferred

• Employers that deferred employment taxes in accordance with the CARES Act should plan carefully to meet the December 2021 and December 2022 due dates for repayment.

• It is advisable to remit amounts in time to allow for any unforeseen problems or delays..

https://www.adp.com/spark/articles/2021/09/cares-act-social-security-tax-deferrals-late-repayment-would-subject-all-deferrals-to-penalty.aspx

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Reporting of FFCRA Wages on 2021 Forms W-2

September 7, 2021, the Internal Revenue Service (IRS) issued Notice 2021-53,"Guidance on Reporting Qualified Sick Leave Wages and Qualified Family Leave Wages Paid For Leave Provided in 2021"

.

• Notice 2021-53 provides details and model language for use in reporting qualified sick and family leave wages paid either in Box 14 of Form W-2, or on a separate statement

• Provides employees, including self-employed, with information to claim the qualified sick or family leave credits

• Reporting requirements applicable only if the employer takesthe related tax credits

• If the employer is either ineligible or does not comply with all aspects of the Families First Coronavirus Response Act (FFCRA)— or simply chooses not to take the related tax credits —then such payments would simply be treated as regular wages, and no Form W-2 reporting (or separate statement) would be necessary

• If a separate statement is provided…

• Employee receives a paper Form W-2, the statement must be included along with the Form W-2 sent to the employee

• Employee receives an electronic Form W-2, then the statement must be provided in the same manner and at the same time as the Form W-2

https://www.irs.gov/pub/irs-drop/n-21-53.pdf

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Best practice guidance

• Monitor compliance

• Consider the most-up-to-date guidance from all applicable sources

• Comply with applicable laws and regulations

• Employers should generally consult with appropriate legal counsel to consider possible actions that may be warranted

• Continue to communicate to your employees

• Prepare your employees for what’s next

• Ensure your policies and procedures are updated

• Maintain a safe and secure workplace

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COVID-19 Resources

https://www.adp.com/resources/events.aspx

https://www.adp.com/resources/covid-19.aspx

ADP Webinars & Events

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Polling question

Which one of the states listed below does not impose a payroll income tax?

a) Alabama

b) Delaware

c) New Mexico

d) North Dakota

e) South Dakota

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Solution

• South Dakota

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Federal and state requirements

impacting payroll compliance

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Types of Wage and Hour Lawsuits

•

Misclassification

◦

exempt vs. non-exempt

◦

employee vs. independent contractor

•

Unpaid overtime

•

Meal and rest breaks

•

Recordkeeping violations

•

Wage statement errors

•

Pre- and post-shift activities (including donning and doffing)

•

Off-the-clock work

•

Use of biometrics

•

Pay protections

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Fair Labor Standards Act and related state laws

19

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U.S. Department of Labor

“Joint Employer Status under the FLSA”

Final Rule to Rescind March 2020 “Joint Employer Rule”.

Effective Date September 28,2021

By rescinding, the department will ensure more workers receive minimum wage and overtime protections of the Fair Labor Standards Act.

“Joint Employer Rule”

• Under the FLSA, an employee can have more than one employer for the work they perform. Joint employment applies when – for the purposes of minimum wage and overtime requirements – the department considers two separate companies to be a worker’s employer for the same work.

• For example, a joint employer relationship could occur where a hotel contracts with a staffing agency to provide cleaning staff, which the hotel directly controls. If the agency and the hotel are joint employers, they are both responsible for worker protections..

https://www.dol.gov/newsroom/releases/whd/whd20210729-0

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The Fair Labor Standards Act (FLSA)

2 1

• All employers must be aware not only of the FLSA, but of the state wage-hour laws and municipal pay ordinances. In addition, international labor standards, and foreign labor laws impact global employers.

• The FLSA applies to employers who have an annual gross volume of sales made or business done of at least $500,000 and are engaged in interstate commerce. 29 U.S.C. § 203.

Sets the minimum wage

Overtime rates employees must receive for their work

Required recordkeeping by

employers

Restrictions on the type of work children

can do and the hours

they can work Mandates equal pay for equal work

F L S A C o v e r s

https://www.dol.gov/agencies/whd/compliance-assistance/handy-reference-guide-flsa

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FLSA does not require…

• Pay increases or fringe benefits

• Severance

• Discharge notice, reason for

discharge or immediate payment of final wages upon termination

These are generally a part of employee/employer agreement

and/or state law

• Meals or rest breaks

• Vacation and/or sick pay

• Holidays

• Double time pay

• Premium pay for weekend or holiday work, or

• Limit number of hours in a day or days in a week for work schedule and overtime calculation for

employees over 16 years of age

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FLSA Exempt vs. Non-Exempt Status

Non-Exempt:

Under the FLSA, non-exempt employees must be:

• Paid at least the minimum wage for each hour worked; and

• Paid overtime (1.5x the employee's regular rate of pay) whenever they work more than 40 hours in a workweek

• Note: Your state may require overtime in additional circumstances

• Most non-exempt employees are paid on an hourly basis

Exempt:

Under the FLSA, to be classified as exempt, an employee must generally:

• Be paid a set salary each week;

• Be paid a minimum amount per week;

• Receive their full salary in any workweek in which they perform work; and

• Meet certain duties tests

See DOL Fact Sheet #17A:

http://www.dol.gov/whd/overtime/fs17a_overview.pdf

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FLSA overtime rules recap

2 4

The 10 % Rule Up to 10% of the Minimum Salary may be Commissions and

Incentive pay

» All Commissions

» Bonuses based on individual performance, productivity or hours worked

» Bonuses based on company performance

» Safety bonuses

Minimum Salary Level

Don’t forget the salary basis and duties test!

January 1, 2020

$684 per week

$35,568 annually

Highly Compensated Total annual compensation of

$107,432

Must include the minimum guaranteed weekly salary of $684 ($35,568

annually)

https://www.dol.gov/sites/dolgov/files/

WHD/legacy/files/fs17g_salary.pdf

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FLSA Exemption Tests

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Salary level test Must meet a minimum

specified amount Salary basis test

Paid a fixed salary each pay period

Duties test

Job duties meet established criteria

* Generally, white collar workers not subject to the salary level test include teachers, academic administrative personnel, physicians, lawyers, judges and outside sales workers.

State requirements generally are similar to the federal tests, but differences and nuances exist in some states

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Minimum wage - key trends and observations

• No increase in the Federal minimum wage since 7/24/09, remains at $7.25 (tipped employees minimum wage remains at $2.13); Federal Contractor: $10.95 (tipped employee $7.65) per hour effective 1/1/21

◦ Certain states do not permit the use of a tip credit (AK, CA, MN, MT, NV, OR and WA)

◦ Tip Regulations Under the Fair Labor Standards Act (FLSA) final rule

• In the absence of Federal increase, states and localities are increasing their own minimum wage

◦ Some states are passing laws to prohibit localities from passing minimum wage increases

◦ Creates complexity, also impacts garnishment calculations and tip credits

◦ Employer must pay the highest applicable rate

• Monitor various sources, including ADP, news outlets and associations to keep up with changes

• Review, update current systems and communicate to managers and employees (including

required pay notices) to ensure compliance

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Polling question

The terms “hourly” and “salary” can be used to classify employees.

• True

• False

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Solution

• False

• Employees are designated as exempt or non-exempt under state and federal wage and hour laws.

• Nonexempt employees are employees whose work is covered by the Fair Labor Standards Act (FLSA). They are not exempt from minimum wage and overtime. Under federal law, non-exempt employees must be paid 1.5 time their regular rate of pay for all hours worked over 40 in a workweek.

• Exempt employees are generally executives, managers, professional,

administrative or outside sales staff who are exempt from the minimum wage and overtime provisions of the FLSA. Exempt employees hold jobs that meet the standards and criteria established under the FLSA by the U.S. Department of Labor.

• The terms “salary” and “hourly” refer only to how an employee is paid – not

how they are classified.

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States Where No Tip Credit Permitted

Alaska California Minnesota

Montana Nevada Oregon Washington

Federal Minimum wage:

$7.25 per hour

(last updated July 2009)

Minimum Wage

Federal Tipped Employee Minimum wage:

$2.13 per hour

(last updated July 2009)

Tipped employees

https://www.dol.gov/agencies/whd/minimum-wage/state https://www.dol.gov/agencies/whd/state/minimum- wage/tipped

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U.S. DOL final rule:

tip sharing and employer penalties

Final Rule expands employer liability and clarifies specific occasion when managers or supervisors can keep tips

• Takes effect on November 23, 2021

• U.S. DOL may fine employers who take tips earned by their employees

• “repeated or willful”

• “reckless disregard” for the FLSA’s requirements

• impose civil money penalties up to $1,100 for each violation

• Managers and supervisors

• may not receive tips from mandatory tip pools

• are not prohibited from contributing tips to eligible employees in tip pools

• may keep tips only when received directly from customers for service a manager or supervisor directly and “solely” provides

https://www.dol.gov/agencies/whd/flsa/tips https://www.dol.gov/newsroom/releases/whd/whd20210923

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Maine

service tip minimum amount

Effective October 18, 2021 Legislative Document 1489

• increases the amount of tips an employee must receive to be considered a “service employee”

• $175 the amount that an employee must receive in tips for the employer to utilize a tip credit

• if the employee does not receive at least $175 in tips for the month, the employee must be paid at least the state minimum wage for non-tipped employees (currently $12.15 per hour) plus tips

• provision for inflation adjustments beginning January 1, 2022

http://www.mainelegislature.org/legis/bills/getPDF.asp?paper=HP1103&item=1&snum=130

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Maryland

tip credit wage statement

Effective October 1, 2020

• no later than 2 weeks following the end of the pay period

• to each employee for whom the employer utilizes a tip credit

• all reported tips for tip credit hours for each workweek of the pay period

• "tip credit wage statement" means a written or electronic statement that shows the employee's effective hourly rate of pay, including employer paid cash wages plus all reported tips, for all tip credit hours worked for each workweek in the pay period.

• can be satisfied by providing an online system

https://www.dllr.state.md.us/labor/wages/esstipcreditfaqs.shtml

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Important FLSA definitions

Employers may change as long as the change is permanent and not designed to evade overtime

obligations

Hours worked

• Employ includes "to suffer or permit to work”

• Workweek includes all time during which an employee is necessarily required to be on the employer's premises, on duty or

• Workday means the period between the time on any particular day when such employee

commences his/her "principal activity" and the time on that day at which he/she ceases such principal activity or activities.

• "Suffered or Permitted" to work- work not requested but suffered or permitted to be performed is work time that must be paid for by the employer.

Workweek

• A period of 168 hours during 7 consecutive 24- hour periods

• May begin on any day of the week or any hour of the day

Workday

• A workday is a consecutive 24-hour period beginning at the same time each calendar day

https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs22.pdf

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FLSA Regular Rate of Pay (RROP)

For each pay code ask, “Are the earnings part of the regular rate?”

WHAT’S INCLUDED? WHAT’S NOT INCLUDED?

• Nondiscretionary bonuses (tied to work production)

• Shift differentials

• Retroactive pay

• On-Call pay

• Longevity pay

• Attendance bonuses

• Educational Safety bonuses

• Certification bonuses

• Gifts (not tied to hours worked, production or efficiency)

• Paid time off (holidays, vacations, etc.)

• Reimbursed business expenses

• Discretionary bonuses (e.g., Holiday bonus)

• Volunteer work counted toward bonus

• Benefit plan contributions

• Overtime premium pay

https://www.dol.gov/agencies/whd/overtime/2019-regular-rate/faqs

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The FLSA formula to compute the regular rate of pay

Total compensation in the workweek (except for statutory exclusions)

÷

Total hours worked in the workweek

=

Regular Rate for the workweek

https://www.dol.gov/agencies/whd/fact- sheets/56a-regular-rate

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Overtime Requirements – Federal vs. State

• Alaska

• 1 and ½ for hours worked in excess of 8 in a day

• No OT for hours in excess of 8 if Labor Dep has approved a 10hr – 4 day work week

• California

• Double time for hours worked in excess of 12 in a day and double time for hours worked in excess of 8 on 7th consecutive day in workweek

• Colorado

• Overtime after 12 hours worked in a day for employees in retail and service, food and beverage and health and medical

• Nevada

• No OT for hours in excess of 8 if employees have agreed to a 10hr – 4 day work week

• Oregon

• 1 and ½ for hours worked in excess of 10 in a day for employees in canneries, driers or packing plants

• Minors under 18 receive OT for hours worked in excess of 8 in a day

•

1.5x regular rate for hours worked over 40 per workweek

•

Paid on regular rate of pay, not base rate

•

Generally, “Comp Time” cannot offset overtime pay

requirements (Private Sector)

•

Unauthorized overtime is still overtime

•

“Off-the-Clock” work is still work

*Some “Workweek” Exemptions:

Firefighters, Law Enforcement, Workers in hospitals and nursing homes

Federal State Examples*

https://www.dol.gov/agencies/whd/overtime

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Virginia enacts overtime pay law

https://www.doli.virginia.gov/labor-law/faqs-virginia-overtime-law/ 37

Effective July 1, 2021 : Virginia Overtime Wage Act

o

Previously Virginia relied on the federal rules under the FLSA

o

Under the FLSA, an employee’s regular rate of pay is the sum of all remuneration for

employment (barring certain statutory exclusions) divided by total hours worked in a workweek

o

New law relies on a different regular rate of pay calculation for employees paid “hourly” or “salary”

o

longer statute of limitations to bring claims

o

damages and penalties

“Salaried Employees”

o

For employees paid on a salary or other regular basis, the regular rate is one-fortieth of all wages paid for that workweek.

o

For example, if a salary employee was paid $800 per week, their “regular” rate of pay would be

considered $20 an hour. Therefore, any overtime they work must be paid out at a $10 an hour

premium for all hours worked after 40.

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Calculating overtime pay based on the FLSA regular rate

Overtime pay is calculated based only on payments to the employee that are required to be included in the regular rate of pay. The following steps can be used to calculate the regular rate of pay and overtime compensation due when the employee is paid on an hourly, piece rate, day rate, job rate, commission, or salary basis.

Step 1: Total compensation for the week (except the statutory exclusions) ÷ Total hours worked in the week = Regular Rate per hour for the week (must be at least the federal minimum wage) Step 2: Regular rate x (.5) = Half-time premium for each overtime hour (note the straight time for the

overtime hours is included in Step 1)

Step 3: Half-time premium pay rate x Overtime hours = Overtime compensation due

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FLSA – bonuses and overtime

• The amount of overtime pay due to an employee is based on the employee’s regular rate of pay and the number of hours worked in a workweek regardless of whether the employee is paid on a piece rate, day rate, commission, or a salary basis

• A bonus is a payment made in addition to the employee’s regular earnings. Under the FLSA, all compensation for hours worked, services rendered, or performance is included in the regular rate of pay.

◦ Discretionary bonuses are excludable from the regular rate of pay. A bonus is discretionary only if all the statutory requirements are met

◦ A nondiscretionary bonus is a bonus that fails to meet the statutory requirements of a discretionary bonus. Nondiscretionary bonuses are included in the regular rate of pay, unless they qualify as excludable under another statutory

https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses

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FLSA - How a bonus is included in the regular rate

https://www.dol.gov/agencies/whd/field-operations-handbook/Chapter-32#B32c03

32c03 How a bonus is to be included in the regular rate.

a) If a bonus covers only one weekly pay period, the amount of the bonus is merely added to the other earnings of the employee (except statutory exclusions) and the total divided by the total hours worked by the employee.

b) Where the calculation of a bonus is deferred over a period of time longer than 1 workweek, the employer may disregard the bonus in computing the regular hourly rate until the amount of the bonus can be ascertained. At the time the amount of the bonus is ascertained, it must be apportioned back over the workweeks of the period during which it may be said to have been earned, so that the employee will receive an additional amount of compensation for each week in which he/she worked overtime during the period. This additional amount will be based on one-half the hourly rate of pay allocable to the bonus for that week multiplied by the number of overtime hours worked during the week.

c) If it is impractical to allocate the bonus among the workweeks of the period in proportion to the amount of the bonus actually earned each week, some other reasonable and equitable method of

allocation should be adopted. For example, it may be assumed that the employee earned an equal amount of bonus each hour worked in the bonus period. The hourly increase is then determined by dividing the total bonus by the number of hours worked by the employee during the period for which it is paid.

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Calculating Overtime Pay Based on the FLSA Regular Rate

Nondiscretionary bonus

A non-exempt employee is paid $10.00 per hour and receives a $50.00 bonus in a particular week that was promised for helping to produce a special order for a customer two weeks earlier than previously scheduled. The employee worked 43 hours that week. The following is an example of how to compute overtime pay based on the employee’s regular rate:

$10.00 per hour x 43hours = $430.00 (total compensation for straight time)

$430.00 + $50.00 (bonus) = $480.00 (total compensation)

$480.00 ÷ 43 hours = $11.16 (regular rate)

$11.16 x .5 = $5.58 (half time premium pay rate)

$5.58 x 3 overtime hours = $16.74 (overtime pay due)

$480.00 + $16.74 = $496.74. (total due)

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California – Flat Sum Bonuses

• California Supreme Court decision March 5, 2018

o Alvarado v. Dart Container Corp

• Clarifies how to calculate overtime pay when non-exempt employees receive a flat-sum bonus

o

No longer follow the federal formula for calculating a non-exempt employee’s “regular rate of pay” for flat-sum bonuses (i.e., bonuses whose amounts do not vary depending on employee productivity, efficiency, or effort)

o

More favorable to the employee

❑ Results in a higher “regular rate of pay” and total compensation o

Examples of flat-sum bonuses include:

❑ Attendance bonuses

❑ Seniority/longevity bonuses

❑ Safety bonuses

❑ Certification bonuses

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California example of calculation for bonus

when employee has multiple rates of pay

Flat Sum Bonus per Alvarado v. Dart (2018) 4 Cal.5th 542

• Where a flat sum bonus was paid to incentivize weekend attendance, that must be factored into regular rate of pay for purposes of calculating overtime

• When calculating the overtime premium pay rate, a flat sum bonus must be treated as if it were earned on a per-hour basis throughout the relevant pay period, augmenting the employee’s other hourly wages.

• Where paying 2 or more rates during the workweek, the regular rate is the "weighted average" which is determined by dividing your total earnings for the workweek, including earnings during overtime hours, by the total hours worked during the workweek, including the overtime hours.

Example:

An employee during a workweek works 32 hrs at $15/hr and 10 hrs at $20.00/hr, plus receives a $50 daily flat sum bonus 1st OT - (32hrs x $15/hr) + (10 hrs x $20/hr) = $680

$680/42 hrs = $16.19 x .5 = $8.10 x 2 hrs = $16.20 + $680 = $696.20

2nd FSB - $50/40hrs = $1.25/hr x 1.5 = $1.88 x 2 hrs = $3.75 + 696.20 = $699.95

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Time Rounding

• Non-exempt workers must be paid for all time worked, however, some businesses round start and stop times

• Rounding is permitted, provided half of employees' time is rounded down and half is rounded up

• Things to consider for rounding practice implementation:

◦ Mitigating risk by having a written policy in place

◦ Explain how the rounding system works, neutral application

◦ Regularly audit pay records to ensure the system averages out in a way that fully compensates employees for all time worked

• Small increments of time?

• Must track all time worked, no matter how small

https://www.dol.gov/agencies/whd/fact-sheets/53-healthcare-hours-worked

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Rest and Meal Periods under the FLSA

Meal Periods

• Bona fide meal periods of 30 minutes or more may be unpaid (not counted as hours worked)

• Employee must be completely relieved from duty for the purpose of eating regular meals

Rest Periods

• Rest breaks lasting 20 minutes or less must be paid

• Short periods must be counted as hours worked

• Lactation breaks required

https://www.dol.gov/general/topic/workhours/breaks https://www.dol.gov/agencies/whd/state/meal-breaks

https://www.dol.gov/agencies/whd/fact-sheets/73-flsa- break-time-nursing-mothers

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State-Specific Meal and Rest Break Rules

State Meal Periods Rest Breaks

California 30 minutes when work period more than 5 hours An additional 30 minutes is required if the employee works more than 10 hours

“Net” 10 minutes for every 4 hours (or major fraction thereof)

Colorado 30 minutes when work shift exceeds 5 consecutive

hours of work 10 minutes for every 4 hours worked

(or major fraction thereof) Connecticut 30 minutes for every 7.5 consecutive hours of work No provision

Delaware 30 minutes for every 7.5 consecutive hours of work No provision Illinois 20 minutes for every 7.5 consecutive hours of work No provision

Kentucky A “reasonable period” for a meal 10 minutes for every 4 hours worked

Maine 30 minutes for every 6 consecutive hours of work

Maryland No specific requirement for meal or rest breaks, but if offered, employer must follow requirements that are generally consistent with FLSA

Massachusetts 30 minutes for a day with 6 hours of work No provision Minnesota “Sufficient time” to eat a meal if 8 or more

consecutive hours of work Restroom breaks required if 4 consecutive hours of work

Nevada 30 minutes for a workday with at least 8 continuous

hours of work 10 minutes for every 4 hours worked

(or major fraction thereof)

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State-Specific Meal and Rest Break Rules

State Meal Periods Rest Breaks

New Hampshire 30 minutes for every 5 consecutive hours of work No provision New York 30 minutes for a shift of more than 6 hours that extends

over the “noonday meal period” (11am-2pm).

For shifts that begin before 11am and extend until after 7pm, an additional 20-minute meal period.

For shifts longer than 6 hours starting between 1pm and 6am, a 45-minute meal period is required.

No provision

North Dakota 30 minutes for shifts exceeding 5 hours when there are 2

or more employees on duty No provision

Oregon 30 minutes for 6 or more consecutive hours of work.

Additional meal periods required for employees working 14 or more consecutive hours in a shift

10 minutes for every 4 hours worked (or major fraction thereof)

Rhode Island 20 minutes for a 6-hour shift or 30 minutes for an 8-hour

shift No provision

Tennessee 30 minutes for a shift of 6 consecutive hours or more No provision Vermont A “reasonable opportunity” to eat and use the restroom

Washington 30 minutes for a shift of more than 5 consecutive hours of work. An additional 30 minutes is required if the employee works 3 or more hours beyond normal workday

10 minutes for every 4 hours worked

West Virginia 20 minutes for a shift of 6 or more hours of work No provision

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Rounding of Meal and Rest Breaks

Only two states have specifically addressed whether meal and rest breaks can be rounded

• California

◦ In February 2021, the California Supreme Court ruled that rounding a meal period’s start and end times is noncompliant

◦ Rounding creates a rebuttable presumption of noncompliance, meaning the burden of proof shifts from the employee to the employer

• Washington

◦ Employers cannot round, deduct or average any time for a meal or rest period

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Payment of Meal and Rest Break “Premiums”

Some states require an employee who is not allowed to take a meal or rest break to be paid for the time worked, plus a meal or rest period premium

• California

◦ Employee must be paid for time worked, plus one hour of pay for each day in which an employee missed one or more meal or rest periods.

◦ California requires meal break premiums to be paid at the employee’s “regular rate of compensation”

• Washington

◦ Employee must be paid for time worked plus time that should have been a meal

or rest break period

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California Supreme Court Decision

Ferra v. Loews Hollywood Hotel, LLC

Effective July 15, 2021

• Premium pay for failing to provide meal, rest and recovery periods must be paid at the employee’s “regular rate”

◦ employee must be paid for time worked, plus one hour of pay for each day in which an employee missed one or more meal, rest or recovery periods

◦ an employee is limited to one premium per break category (rest, meal, recovery) in the same day

◦ hours and earnings for missed meal, rest and recovery premiums are not included in overtime calculations

A copy of the opinion is available at: https://www.courts.ca.gov/opinions/documents/S259172.PDF

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Meal and Rest Break Best Practices

Create written policy

•

Require employees to acknowledge receipt of the policy (written or electronic acknowledgement)

•

Review and update as applicable

Require employees to:

• Record all time worked and all meal breaks taken

•

Report meal and rest breaks that missed voluntarily

•

Attest that meal or rest periods we provided, and employee voluntarily chose not to take them

• Review and attest to the accuracy of their weekly or biweekly time records, including meal periods and

rest breaks

•

Expressly indicate on the time record if they did not receive proper meal or rest periods

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Polling question

Under FLSA requirements, each employer shall preserve for at least ___________ years payroll records, collective bargaining agreements, sales and purchase records.

a) One year

b) Three years

c) Five years

d) Seven years

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Solution

• b) Three years

• Under the FLSA requirements, each employer shall preserve for at least three years payroll records, collective bargaining agreements, sales and purchase records.

• Records on which wage computations are based should be

retained for two years, i.e., time cards and piece work

tickets, wage rate tables, work and time schedules, and

records of additions to or deductions from wages.

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Wage statement requirements

54

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Recent trends

• States have continued to revise and expanded wage statement requirements in recent years

• Focus on wage theft, providing employees with sufficient information to confirm they were paid correctly

• Similar trend of requiring wage notices at time of hire (for example, California, District of Columbia, Maryland, New York)

• Increased reporting for tipped employees in the District of Columbia and Maryland

• States modeling wage statement requirements on other states

• New York → Hawaii, Oregon → Minnesota (July 1, 2019)

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Most Recent Wage Statement Changes

• Colorado – Effective March 16, 2020 (grace period until April 16, 2020, with some

modifications effective July 15, 2020) , updated regulatory guidance (COMPS Order 36) expanded definition of “employer” to include most private employers, extending reach of wage statement requirements.

• District of Columbia – Effective January 1, 2020, revised law (B22-0913) will require employer to provide certain reporting for tipped employees.

Requirement is pending regulatory guidance.

• Maryland – Effective October 1, 2020, regulations expand information required to be disclosed to tipped employees each pay period

• Minnesota – Effective July 1, 2019, the

Minnesota Wage Theft law (HF2) is designed to create additional protections for workers,

including adding criminal penalties for employers who commit wage theft. The law created

additional wage statement requirements.

• In response, Minneapolis created additional requirement that, effective July 1, 2020, wage statements must include number of hours of Sick and Safe Time accrued but unused

• New Jersey - Effective May 19, 2020, revised law (SB 1791) to expand wage statement

requirements to public employers and added new requirements for all employers with more than 10 employees

• New York – Effective October 1, 2020, revised law (2020-21 Budget Bill) to add requirements for home care aides

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Federal requirements

• No wage statement requirements under the Fair Labor Standards Act (FLSA)

• Every employer covered by the FLSA must keep certain records for each covered, nonexempt worker.

• Certain other federal statutes may require wage statements for certain types of employees

• Example: the Migrant and Seasonal Agricultural Worker Protection Act requires wage statements to be provided to employees each pay period by agricultural associations, agricultural employers, and farm labor

contractors.

• Several bills have been introduced in Congress to create federal wage

statement requirements under FLSA, but bills have not advanced

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State wage statement requirements

No requirement

• Alabama

• Arkansas

• Kansas*

• Louisiana

• Mississippi

• Ohio

• South Dakota

• Tennessee

*Often not applicable for exempt employees

Only for certain types of employees

• Georgia

• only for employers that contract with labor pool to provide

temporary, short-term workers for casual labor

• Florida

• only for farm labor contractors

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Wage statement common elements

• Date of payment

• Pay period beginning and ending dates

• Name of employee

• Name, address, and phone number of employer

• Rates of pay

• Basis of pay

• Gross wages

• Net wages

• Itemized deductions and purpose of deduction

• Allowances claimed as part of the minimum wage (e.g. tip credits or meal allowances)

• Regular hours worked* and compensation

• Overtime hours worked* and compensation

• Total hours worked*

*Often not applicable for exempt employees

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Common elements for other states - examples

(other types of employees; in addition to common elements)

Hawaii, New York, Oregon,

Pennsylvania, Texas and Washington

• Specific requirements for piece rate employees

Michigan

• Similar requirements for hand harvesters paid on a piece rate basis

Maine, Massachusetts, and Pennsylvania

• Specific requirements for railroad employees

Georgia and Illinois

• Specific requirements for employees who are temporary service employees (temp

workers/day laborers)

Maryland and District of Columbia

• Specific wage statement

requirements for tipped

employees

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State-specific wage statement requirements - examples

(in addition to common elements)

Alaska

• Amounts paid for board and lodging; advances;

federal income tax, FICA and Alaska Employment Security Insurance deductions

District of Columbia

• For commissioned employees, amount of commissions and amount of non-commissioned earnings

Florida

• For farm labor contractors, amount and rate of compensation, number of hours worked,

employer’s name, employer’s FEIN and detailed itemization of all deduction from wages

Massachusetts

• Amount of deductions or increasesmade for the pay period

Minnesota

• Operating name of the employer, if different from employer name; the physical address of the employer's main office or principal place of business, and a mailing address if different

New York

• Effective October 1, 2020, for home health care aides,“the benefit portion of the minimum rate of home care aid total compensation” as defined by the Wage Parity Law, and each type of “home care aide benefits” provided

Oregon

• For all employees, business registry number or business identification number

• For forestry industry employees, a statement, no less than monthly, of scale or quantity produced Puerto Rico

• For all employees, order number of the payroll, occupation or work performed

• For domestic services employees, employee mailing address and attachment(s) of invoice(s) or

receipt(s) of discount(s) allowed when the employee in the domestic service stays at the employer's home

Rhode Island

• For commercial construction employees, the hourly regular rate of pay

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State-specific wage statement requirements

Year to Date Totals

Illinois

• Requires year to date wages and deductions to be displayed on wage statements

Arizona

• Requires year to date

information for amounts of

paid sick leave taken and paid • No other state requires year to date information to be

displayed

• Best practice is to display year

to date information as no state

prohibits

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Paid sick leave disclosures

• As many state and local jurisdictions have been adding paid sick leave requirements in the past few years, some are requiring disclosure of paid sick leave to employees.

• In some cases, disclosure on the wage statement is required.

In others, wage statement is one way (but not the only way) employers can comply.

• Paid sick leave is a rapidly changing area – important to

watch for updates and review disclosure requirements

carefully for each jurisdiction where you have employees.

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Paid sick leave disclosures – examples

The following jurisdictions with paid sick leave requirements also require that employees be notified of certain PSL information on a regular basis.

NOTE: Other jurisdictions may require the employer to provide paid sick leave information to an employee upon request.

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Wage statement recordkeeping - example

Fair Labor Standards Act (FLSA)

• No wage statement requirement!

• Each employer shall preserve for at least three years accurate payroll records, collective bargaining agreements, sales and purchase records.

• Records on which wage computations are based should be retained for two years, i.e., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages.

• The records may be kept at the place of employment or in a central records office.

• There is no required form for the records, but the records must include accurate information about the employee and data about the hours worked and the wages earned.

Colorado

• An employer shall retain records reflecting the information contained in an employee’s itemized pay statement for a period of at least three years after the wages or compensation were due.

• The records shall be available for inspection by the division, and the employer shall provide copies of the records upon request by the division or the employee.

• The director may impose a fine of up to two

hundred fifty dollars per employee per month

on an employer who violates; a maximum fine

of seven thousand five hundred dollars

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Polling question

Jeremy owns several companies across the U.S. If all the companies issue wage statements that comply with the Illinois requirements, is Jeremy’s company in compliance with all other jurisdiction requirements?

• Yes

• No

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Solution

• No.

• Certain states have more stringent requirements, such as California, Hawaii, Minnesota, New York and Oregon.

• Remember there are certain states that require employers

to display information that is not required in any of the

other states, such as the year-to-date information that is

required by Illinois..

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California wage statement

requirements

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California wage statement requirements

• Piece rate employees – California Labor Code 226.2

• Overtime paid in arrears – California Labor Code 204

• Paid sick leave – California Labor Code 246(i)

• Corrections and adjustments – DLSE Opinion Letter 2002.05.17

• Commissions – DLSE Enforcement and Interpretations Manual, 14.1.1

• Employees of Garment Manufacturers – 8 California Code of Regulations 13659

California Labor Code 226(a) includes most (but not all!)

wage statement requirements

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Itemized wage statement requirements

California Labor Code 226(a)

An employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing

• Gross wages earned

• Total hours worked

• The number of piece rate units earned and any applicable piece rate

• All deductions

• Deductions on written order of employee may be aggregated

• Net wages earned

• Inclusive dates of the period for which the employee is paid

• Both beginning and ending dates

• The name of the employee and either (i) the last four digits of the employee’s social security number or (ii) an employee identification number other than an SSN

• The name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer

• The name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer

• All applicable hourly rates in effect during the pay period and the

corresponding number of hours worked at each hourly rate by the employee

• if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment.

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Itemized wage statement requirements

Specific situations

Piece rate employees

In addition to all other applicable requirements, wage statements for piece rate employees must include the following information:

• The number of piece-rate units earned and any applicable piece rate.

• The total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period.

• The total hours of other nonproductive time…the rate of compensation, and the gross wages paid for that time during the pay period.

• California Labor Code 226.2

Note: The last two requirements added effective January 1, 2016 by AB 1513. This law also specified how to calculate pay for rest and recovery periods and the required rate of pay for nonproductive time.

Paid sick leave or PTO available

Effective July 1, 2015, California employees must be provided with paid sick leave at a rate of no less than one hour of leave for every 30 hours worked

• Each designated pay date, an employer must disclose to employees the amount of paid sick leave that is available for use

• This balance can be included on the wage statement or provided to the employee separately in writing

• California Labor Code 246(i)

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Itemized wage statement requirements

Specific situations

Commission

The California DLSE Enforcement and Interpretations Manual, 14.1.1, interprets the requirements for piece rate employees to apply to commissioned employees who are not exempt from the minimum wage

• In addition to all generally applicable requirements, wage statements for commissioned employees must also include:

• Commission rate

• Amount of sales per rate

• If commissions are advanced but subject to adjustment (e.g., for returns, no starts, etc.) before they are

considered “earned”, wage statement must reflect final adjusted commissions when earned

Prior period earnings

Overtime

California permits overtime earned in one pay period to be paid to an employee in the next regular pay period

• When doing so, overtime must be itemized as a

correction on the wage statement when paid and include:

• Total hours

• Inclusive dates of the pay period in which overtime was earned

Adjustments and corrections

For adjustments and corrections to a prior pay period, in addition to generally applicable requirements, the statement with adjustments and corrections must also include:

• Hours being adjusted/corrected and

• The pay period to which those hours are attributable

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California wage statement recordkeeping

• Copies of wage statements must be kept on file by the employer for at

least three years at the place of employment or at a central location within the State of California

• “Copy” includes a duplicate of the itemized statement provided to an

employee or a computer-generated record that accurately shows all of the information required by this subdivision

• Upon request, current or former employees must be provided access to copies of these statements

• Access must be provided as soon as practicable, but no later than 21 calendar days after request

• Employee can be charged the actual cost of copying statements

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How can employers protect themselves?

• Know applicable local laws

• Pay close attention to wage statement requirements

• Know when there is a change in the law

• Work with inside or outside legal counsel familiar with specific requirements

• Review applications

• Review manual check wage statements as well (if applicable)

• Consider how information will appear for different types of employees – e.g., exempt, non-exempt,

commissioned, piece rate

• Upon implementation or upgrade to new payroll product

• When adding new company code(s)

• When purchasing an entity

• When expanding into another state

• Periodically, even in the absence of the events above.

Monitor developments and

legislation

Examine

add review to regular process checklist

Determine when to review wage

statements

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Important payroll compliance areas for review…

• New Hire Reporting (including independent contractors)

• Pay periods and pay day laws

• Electronic delivery of wage statements

• Deductions from wages

• Overpayments

• Paid leave laws, including paid sick leave and all-purpose leave

• Paid family and medical leave requirements

• Wage payment methods - incl. direct deposit and pay card laws

• Multi-jurisdiction employees

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Employee or independent contractor?

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Misclassification of employees as independent

contractors

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Some consequences of misclassification

Taxes

• Income tax withholding

• Medicare / Social Security (employer and employee)

• Unemployment

Benefits

• Health insurance

• Retirement plan(s)

• Paid leave

Audits

• IRS

• DOL Wage and hour claims

• Minimum wage

• Overtime

• Wage statements / recordkeeping

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Resources – Independent Contractors

U.S. Department of Labor

Get the Facts of Misclassification Under the Fair Labor Standards Act https://www.dol.gov/agencies/whd/flsa/misclassification

Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA) https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship

Internal Revenue Service

Announcement 2012-45 -https://www.irs.gov/irb/2012-51_IRB#ANN-2012-45 Publication 1976 -https://www.irs.gov/pub/irs-pdf/p1976.pdf

Publication 15-A –https://www.irs.gov/pub/irs-pdf/p15a.pdf

Form SS-8 and Instructions -https://www.irs.gov/forms-pubs/about-form-ss-8 Form 8952 and Instructions -https://www.irs.gov/forms-pubs/about-form-8952

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