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IRS Issues Guidelines to President’s Payroll Tax Deferral Order

9 Sep

By CalChamber   August 31, 2020

The U.S. Department of Treasury and Internal Revenue Service (IRS) issued guidelines to President Donald Trump’s payroll tax deferral executive order on Friday night, Aug. 28.

The guidelines are available at: https://www.irs.gov/pub/irs-drop/n-20-65.pdf

President Trump signed an executive order on August 8 calling for a deferral of employees’ portion of the Social Security payroll tax from September 1 through December 31, 2020.

The executive order applies to the 6.2% Social Security payroll tax normally deducted from an employee’s pay and would affect workers whose biweekly pay is less than $4,000 on a pretax basis. The determination of whether the deferral applies is to be made on a paycheck to paycheck basis.

Employers are responsible for withholding and paying any deferred taxes. Specifically, employers “must withhold and pay the total Applicable Taxes that the [employer] deferred under this notice ratably from wages and compensation paid between January 1, 2021 and April 30, 2021 or interest, penalties, and additions to tax will begin to accrue on May 1, 2021, with respect to any unpaid Applicable Taxes.”

Unanswered Questions

The guidance leaves a number of questions unanswered, such as:

  • Is the payroll tax deferral voluntary for the employer or employee?
    The notice makes clear that the employer is the affected taxpayer. While the notice does not explicitly say it is voluntary for the employer, it also does not make it mandatory. The notice makes no mention of nor seems to contemplate the employee making the election to defer. Therefore, this would appear to be a decision left to the employer.
    What happens if an employee no longer works for an employer once the deferral is over?
  • Is the employer responsible for the unpaid taxes?
    The notice implies that the employer is responsible for the deferred taxes but provides that the deferred taxes are to be withheld from employees beginning in January. The notice goes on to state, “If necessary, the [employer] may make arrangements to otherwise collect the total Applicable Taxes from the employee.” But the notice provides no further guidance as to what this might mean. It also provides no guidance on what happens if the person is no longer an employee and the employer is unable to collect the unpaid taxes.
  • Must an employer decide by September 1 whether to defer withholding or not?
    The notice is silent on whether an employer must defer the withholding for the entire deferral period (September 1 to December 31) or whether an employer can start deferring at any point during the deferral period.

California Announces New COVID-19 Reopening Plan

Friday, August 28, 2020 | Sacramento, CA  Andrew Nixon /CapRadio

Gov. Gavin Newsom unveiled a retooled process for loosening and tightening COVID-19 restrictions Friday.

Labeled a “Blueprint for a Safer California,” the system puts California’s 58 counties into four tiers based on the number of new daily cases and the percentage of positive tests.  

“We’ve learned a lot the past few months,” Newsom said. “We’re looking now to a uniform framework.”  

The tiers are color-coded:

California Department of Public Health

  • Purple for Widespread (more than 7 daily new cases  per 100,000;  more than 8% positive tests; most non-essential indoor businesses closed)
  • Red for Substantial (4-7 daily new cases per 100,000; 5-8% positive tests; some non-essential indoor businesses closed
  • Orange for Moderate (1-3.9 daily new cases per 100,000; 2-4.9% positive tests; some business operations open with modifications)
  • Yellow for Minimal (fewer than one daily new case per 100,000; less than 2% positive tests; most business operations open with modifications).  

“We don’t put up green because we don’t believe that there is a green light that says go back to the way things were, or back to a pre-pandemic mindset,” the governor said.

A new state website allows you to look up your county and see what restrictions exist for specific industries and businesses. 

The new system allows some businesses to open statewide regardless of what tier a county is in.

Starting Monday, counties in the widespread tier may open some businesses with modifications, including all retail, shopping centers at a maximum 25% capacity, and hair salons and barbershops indoors. Restaurants can only operate outdoors under the strictest tier, but under the substantial (red) tier, they could open at 25% capacity.

Counties in the widespread tier aren’t permitted to reopen schools for in-person instruction unless they receive a waiver from their local health department for TK-6 grades. Schools can reopen for in-person instruction once their county has been in the substantial tier for at least two weeks.

The tier system replaces the state’s previous COVID-19 watch list.

California Department of Public Health

The new plan requires 21 days before a county can move to a less-restrictive tier in order to know what may be adversely affecting public health. And it features a new process for tightening up if and when conditions worsen.

Counties will also be required to provide rates of positive COVID-9 tests and test positivity data and to show they are targeting resources and making the greatest efforts to prevent and fight COVID. Until now, each of the counties had their own rules and were allowed to simply give their word to the state about critical metrics. 

Newsom said the new guidelines will allow the state to measure progress against COVID-19 in a more meaningful way. 

As of Friday, only three counties — Alpine, Modoc and Tuolumne — are in the yellow or “minimal” category. Sacramento is one of 38 counties in the purple or “widespread” tier. The state has modified the covid19.ca.gov website, allowing you to search for county-specific and business sector-specific information about what services and activities are allowable within that county’s current tier. 

Employment-Related Urgency Bills Await Governor’s Signature

HRWatchdog  September 4, 2020

Last Monday, the California legislature concluded its 2019-2020 legislative session. Several of the bills that were passed will go into effect immediately should the Governor sign them. Governor Newsom has indicated he plans to sign the following urgency measures: 

SB 1159 (Hill) — Workers’ Compensation/COVID-19

This bill establishes presumptions about whether an employee who tests positive for COVID-19 can successfully file for workers’ compensation. The bill has three key components: 

  1. Establishes a disputable presumption that an employee suffered a workplace injury if they are diagnosed with COVID-19 or test positive within 14 days after a day on which the employee worked at their place of employment (other than their own home) and that date was between March 19, 2020, and July 5, 2020. Employers have 30 days to reject the claim. Basically, codifying the Governor’s executive order for worker’s compensation. 
  2. Establishes a disputable presumption that firefighters/rescue services, peace officers, certain medical providers and providers of in-home supportive services have suffered a workplace injury if they test positive for COVID-19 within 14 days after a day on which the employee worked at their place of employment and that date worked was after July 6, 2020. The employer has 30 days to reject the claim. 
  3. Establishes a disputable presumption that an employee suffered a workplace injury if: (1) they are diagnosed with COVID-19 or test positive for COVID-19 within 14 days after a day on which the employee worked at their place of employment (which does not include their residence); (2) the date worked was on or after July 6, 2020, and 3) their employer has five employees or more and the positive test occurred during an “outbreak” at the employee’s specific place of employment. There are additional elements in the bill that define an “outbreak.” Employers have 45 days to reject a claim under this provision.

AB 2257 (Gonzalez) — Exemptions and Clarifications to AB 5

AB 2257 adds additional clarifications and exemptions to AB 5, a bill passed in 2019 that codified the Supreme Court’s decision in Dynamex Operations West Inc. v. Superior Court 4 Cal.5th 903 (2018). Dynamex held that workers should be classified as employees instead of independent contractors unless they pass the “ABC Test”. AB 5 had exempted certain jobs from the rule and many groups worked this year to add clarifications to the law as well as more exemptions. The full list of exemptions can be found here.

AB 1867 (Budget Committee) — Mediation Pilot Program and Supplemental Paid Leave for COVID-19

AB 1867 includes several provisions related to labor and employment and deals primarily with supplemental paid sick leave in relation to COVID-19. 

The bill sets up a mediation pilot program within the Department of Fair Employment and Housing (DFEH) for small business related to claims about paid family leave. It further sets forth provisions that create new requirements for employees in the food sector. For example, under the new legislation, employees working in any food facility must be permitted to wash their hands every 30 minutes and additionally as needed. The bill further codifies Executive Order N-51-20 by mandating supplemental paid sick leave for food sector workers if they’re unable to work due to any of the specified reasons relating to COVID-19. This provision applies retroactively to April 16, 2020. In addition, the bill establishes COVID-19 supplemental paid sick leave for certain employers with 500 or more employees, if the employee works outside the home. The employer must provide 80 hours of supplemental sick leave for COVID-related reasons, unless the employer has a more generous policy than required in the bill (with regard to both length of time and rate of pay) or has already provided COVID sick leave as required by federal, state or local law

The Law Requires Accommodating an Employee – Going Beyond the Strict Limits of Family Leave or Pregnancy Leave!

9 Mar

What do you do when employee has been out on pregnancy leave is unable to return to work? What if this employee has used all the time available under California’s Pregnancy Discrimination Leave (PDL) and California’s version of Family Medical Leave (FMLA) – known as the California Family Rights Act (CFRA)?
A California court answered that question in the past few weeks in no uncertain terms. The employee is entitled to reasonable accommodation of disabilities and protection from pregnancy discrimination. Sanchez v. Swissport, Inc., (2013). Recently enacted PDL regulations also specifically address this issue and mandate the same conclusion.
Ana Fuentes was employed as a housekeeping employee. Ana’s physician determined that she had a high-risk pregnancy requiring bed rest for the entire duration of the pregnancy. After 4 months’ time, Ana still had approximately three months until the anticipated delivery of her baby.
Unfortunately Ana’s employer fired her. She sued the company, alleging pregnancy discrimination and failure to accommodate. Ana claimed that her employer did not contact her or try to engage in a good faith interactive process to determine whether there were any available accommodations for her continuing disability, including extension of her leave.
The Court of Appeal ruled that an employee who is disabled by pregnancy is entitled to the four-month PDL leave entitlement in addition to other rights afforded by FEHA, including the right to a reasonable accommodation of her disability so long as the reasonable accommodation does not impose an undue hardship on her employer.
California’s new pregnancy disability regulations, which took effect on December 30, 2012, also deal with this issue, specifically providing that the right to four months of pregnancy disability leave is “separate and distinct” from the right to take a leave of absence as a form of reasonable accommodation for a disability.
So, what is an employer to do? If you terminate an employee who has finished her PDL but still can’t return to work because of health issues, you run the risk of a lawsuit.
What should an employer do in this situation to try to avoid a legal misstep?
• Engage in the interactive process with employees who are unable to return to work. Meet with them and ask them what limitations they experience in their ability to work and what suggestions they have. (You do not need to respond immediately, but you do need to listen and give their ideas consideration.)
• Assess what accommodations might work.
• Seek legal advice before making a decision to terminate the employee, even when you believe further accommodation poses an undue hardship. Such a decision exposes you to significant liability risk.

If You Want To Protect At-Will Status You Have to Put It in Writing

16 Dec

I recently assisted a client in the termination of a long term employee who had become a cause of dissension in their office as well as a significant expense.  In talking with the – about to be ex-employee, he said, “but I was told several years ago that I had done such a favor to the owner that I had a job as long as I wanted”. 

There is little doubt that such a discussion probably did occur.  Such informal remarks happen in the workplace, whether intended or not.  Often the owner or manager may not remember them, but the employee involved does.  Later, when discipline or even time to fire the employee arises, all these comments come back to face the employer.

But they do not have to stop a well prepared employer from doing what he has to do to run his business effectively and lawfully.  You do need to have a well written employee handbook, and employee policies, however. 

This was demonstrated again just recently in Faigin v. Signature Group Holdings, Inc.  a California Court of Appeals, 2nd District, decision issued December 5. 2012.

This case involves damages for breach of an implied-in–fact agreement to terminate an executive’s employment only for good cause.  In this instance, the person was fired because the business was in financial trouble and new executives were brought in to replace him.

The Court of Appeals held: “The existence and content of such an agreement are determined from the totality of the circumstances, including the employer‘s personnel policies and practices, the employee‘s length of service, actions and communications by the employer reflecting assurances of continued employment, and practices in the relevant industry.  [Citations] An implied-in-fact agreement to terminate only for good cause cannot arise if there is an express writing to the contrary, such as a written acknowledgement that employment is at will or an at-will provision in a written employment agreement. [Citations]

The court went on to state, “There cannot be a valid express contract and an implied contract, each embracing the same subject, but requiring different results. [Citations]

So, what does this mean for you as an employer:  make sure you have a well written Employee Handbook with an “integrated at-will” provision.  And if you want to learn more about what that means or how to make sure you have one, just call me or email: DonDressler1@hotmail.com