Vision Payroll

The US Department of Labor recently issued non-Administrator signed Opinion Letter FLSA2008-11NA. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). Unlike signed Opinion Letters, unsigned Opinion Letters do not “provide a potential good faith reliance defense for violations of the FLSA.”

This Opinion Letter discusses whether Adult Detention Officers may volunteer as Reserve Sheriff Deputies under the FLSA. According to the Opinion Letter “[p]ublic safety employees taking on any kind of security or safety function within the same local government are never considered to be employed in a different capacity.” Therefore, volunteering as deputy sheriffs in the same public agency is not allowed for detention officers under the FLSA. The detention officers may volunteer, however, “[i]f the two employers are not the same public agency”. Opinion Letters FLSA2006-28 and FLSA2006-21NA both discuss how to determine if two employers are the same agency.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

Nonfarm payroll employment fell sharply (-533,000) in November, and the unemployment rate rose from 6.5% to 6.7%, the Bureau of Labor Statistics of the U.S. Department of Labor reported recently. November’s drop in payroll employment followed declines of 403,000 in September and 320,000 in October, as revised. Job losses were large and widespread across the major industry sectors in November.

Both the number of unemployed persons (10.3 million) and the unemployment rate (6.7%) continued to increase in November. Since the start of the recession in December 2007, as recently announced by the National Bureau of Economic Research, the number of unemployed persons increased by 2.7 million, and the unemployment rate rose by 1.7 percentage points.

The unemployment rates for adult men (6.5%) and adult women (5.5%) continued to trend up in November. The unemployment rates for teenagers (20.4%), whites (6.1%), blacks (11.2%), and Hispanics (8.6%) showed little change over the month. The jobless rate for Asians was 4.8% in November, not seasonally adjusted.

Among the unemployed, the number of persons who lost their job and did not expect to be recalled to work increased by 298,000 to 4.7 million in November. Over the past 12 months, the size of this group has increased by 2.0 million.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.2 million in November, but was up by 822,000 over the past 12 months.

This week’s question comes from Janet, a sales rep: I read before that the wage base for 2008 was $102,000. I’ve made over $104,000, but FICA tax is still being withheld. Why didn’t my FICA tax deduction stop? Answer: Even though your gross wages are over $104,000, the FICA tax deduction doesn’t stop until FICA taxable wages reach $102,000 and FICA tax withheld reaches $6,324. Some wage deductions such as cafeteria or §125 plan deductions reduce the amount of FICA taxable wages. So, even though your gross earnings are over $102,000, FICA tax must be withheld until the maximum withholding is reached. Contact Vision Payroll if you have any questions on the Social Security wage base.

According to the US Department of Labor, in the week ended November 29, the advance figure for seasonally adjusted initial claims was 509,000, a decrease of 21,000 from the previous week’s revised figure of 530,000. The 4-week moving average was 524,500, an increase of 6,250 from the previous week’s revised average of 518,250.

Are you planning an end-of year bonus payroll for employees? With only four weeks left in 2008, now is the time to schedule any additional payrolls you need. Many employers like to distribute bonus checks at a firm party or get-together. If the bonus checks are included with a regular pay run, the year-to-date amounts on the employees’ stubs will reflect the bonus. To keep the bonus amounts off the pay stubs, schedule an additional payroll dated after your last payroll before the party or other event where you will distribute the bonuses. Remember to allow at least two days after the day you plan to transmit bonus amounts for the payroll to be processed and shipped. By scheduling bonuses early, Vision Payroll can work with you to help ensure that your bonus checks arrive on time.

The US Department of Labor recently issued Administrator signed Opinion Letter FLSA2008-9. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). This Opinion Letter discusses whether instructors in a cosmetology school are teachers who qualify for the professional exemption of the FLSA.

The instructors in the instant case are licensed cosmetologists in addition to being licensed as instructors by their State Board of Cosmetology. The school is licensed by that board and accredited by the National Accrediting Commission of Cosmetology Arts and Sciences. This accreditation qualifies the school as an “educational establishment”. Although the instructors do not have teaching certificates, their primary duty is “teaching and instructing students in cosmetology theory, as well as in the practical part of the curriculum.” This means that the instructors are “teachers of skilled or semi-skilled trades and occupations.” Therefore, the instructors qualify under the professional exemption of the FLSA.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

The US Department of Labor recently issued Administrator signed Opinion Letter FLSA2008-8. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). This Opinion Letter discusses which revenues of a non-profit shelter for homeless animals count toward “the $500,000 threshold for enterprise coverage under §3(s)(1)(A) of the FLSA”. Revenue for the shelter comes from the following four sources:

• Cash donations
• Fees for adoptions and spay/neuter certificates
• Membership dues
• Interest and dividends

FLSA provides coverage in two ways—enterprise coverage and individual coverage. Among other activities, enterprise coverage applies to enterprises with “sales made or business done” of $500,000 or more and two or more employees engaged in commerce or the production of goods for commerce. Since the US Department of Labor has generally held that income from eleemosynary activity does not count toward the $500,000 threshold, the shelter income from donations or dues would not be included in the calculation. Since services for adoptions and spay/neuter certificates are for a “business purpose…in competition with other businesses” they do not qualify as eleemosynary activities. Interest and dividends must also be counted toward the $500,000 threshold. Since the revenue of the shelter from these sources was less than $500,000, employees of the enterprise do not qualify for coverage under FLSA enterprise coverage.

Employees may still be covered under FLSA individual coverage for “any workweek in which they are engaged in interstate commerce, the production of goods for commerce, or activities closely related to and directly essential to the production of goods for commerce.” Examples given include the following:

• Making or receiving interstate telephone calls
• Shipping materials to another state
• Transporting persons to another state
• Transporting property to another state

The Opinion Letter states that the US Department of Labor does not require coverage for employees who only occasionally spend “an insubstantial amount of time performing” such work.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

In Mullally, et al. v. Waste Management of Massachusetts, Inc., SJC-10181 (Mass. 11/6/2008), the Supreme Judicial Court of the Commonwealth of Massachusetts (SJC) ruled that the defendant (Waste Management) violated Massachusetts law by “calculating overtime wages using a regular hourly rate less than the prevailing wage eligible employees must be paid.” The employees who filed suit were required under Massachusetts General Laws (MGL) c. 149, §27F to receive the prevailing wage rate for “waste disposal employees performing under municipal contracts.” Waste Management had devised a formula under which employees always received the prevailing wage or higher when averaging the hourly rate for straight time and overtime. The SJC ruled that Massachusetts law (MGL c. 151, §1A) requires employees to receive at least the prevailing wage in cash and allowed benefits for straight time and one and one half time the prevailing wage in cash and allowed benefits for overtime. Allowing Waste Management’s formula would evade “the economic disincentive to have an employee work more than forty hours a week” since there would be little or no overtime premium paid regardless of the number of hours worked. The SJC remanded the case to Massachusetts Superior Court for further proceedings to determine the amount of damages. Vision Payroll strongly recommends that you review all overtime calculations with your labor attorney to ensure compliance with all applicable federal and state laws.

The US Court of Appeals for the 7^th Circuit ruled recently in Jefferson v. US, 06-4082 (7^th Cir. 10/8/2008) that the IRS rightfully imposed an Internal Revenue Code of 1986 (IRC) §6672 penalty against a former president of the board of directors of a tax-exempt day care facility since he was a responsible person whose behavior was willful. Charles E. Jefferson was president of the board of directors of New Zion Day Care Center, Inc. (Center) in Rockford, Illinois. Although Jefferson’s position was voluntary and uncompensated, he had check-signing authority and had previously secured loans for, among other things, payment of overdue payroll taxes for the Center. He was aware of the Center’s unpaid payroll tax liabilities from monthly reports and monthly meetings of the directors. Although he was uncompensated, Jefferson did not qualify for relief under IRC §6672(e) since it was determined that he participated in the day-to-day operations of the Center. The court agreed that the Internal Revenue Service (IRS) has failed to comply with §904(b) of Public Law 104-168 (Taxpayer Bill of Rights 2) in that it did not provide the explanatory materials required, but concluded Jefferson did not show “any prejudice from the IRS’s failure”. Finally, even though the IRS may have failed to turn over evidence and lost other documents relevant to the case, the court indicated that the documents would not have had any impact on the outcome of the case. Vision Payroll strongly recommends that all volunteer directors in tax-exempt organizations review the exemption under §6672(e) with their attorney. If the exemption does not apply, directors must ensure themselves all trust fund liabilities are being paid, regardless of their actual involvement with the organization’s daily activities.

This week’s question comes from Becca, a sales rep: I read before that the wage base for 2008 was $102,000. I made over $90,000 at my first job and have earned more than $30,000 at my new job. Why didn’t my FICA tax deduction stop? Answer: The wage base generally must be applied on an employer-by employer basis. Regardless of how much you’ve earned at previous jobs, most employers must withhold the maximum tax again. There are some exceptions, including successor employers and common paymasters, but the general rule is you must reach the maximum again at your second job to stop the withholding. Even though the employer must pay the full tax and withhold it from the employee, amounts withheld above the maximum can be claimed as a credit on Form 1040. For tax year 2008, enter any excess FICA tax withheld by two or more employers on line 65 of Form 1040 and reduce your balance due or increase your overpayment by the amount of the excess. Contact Vision Payroll if you have any questions on the Social Security wage base.