April 2024 Compliance Update: Spring Break is in Session

Woman with computer filing taxes

Dive into April with our wave of compliance updates, making your journey smoother than a spring getaway. Let’s navigate through the sea of regulations together, ensuring we stay afloat and enjoy the sunshine of compliance. 

Legislation: What’s New and What’s Next? 

California: Huerta vs. CSI Contractors

On March 25, 2024, the California Supreme Court ruled that workers should be paid for time spent waiting for a visual inspection of their cars at the end of a shift. This follows a court ruling from 2020, holding a company liable after not paying employees for five to twenty-minute bag searches after their shifts. 

California Pay Data Reports  

California Pay Data Reports are due by May 8, 2024. For updated template files and information, visit the California Civil Rights Department website.  

Illinois Day and Temporary Labor Services Act 

In November 2023, Illinois passed the Day and Temporary Labor Services Act, which required that employers pay temporary employees either “equivalent benefits” or “the hourly cash equivalent” of benefits prevented by the Employee Retirement Income Security Act (ERISA). Several staffing agencies and associations sued for an order against enforcement of certain provisions of the new law, claiming that state law was preempted by the National Labor Relations Act (NLRA), the Employee Retirement Income Security Act of 1974 (ERISA) and the due process clauses of the U.S. and Illinois Constitutions.

On March 11, 2024, the U.S. District Court for the Northern District of Illinois agreed that ERISA partially prevents the requirements for “equivalent benefits” or “the hourly cash equivalent” under Section 42 of the Day and Temporary Labor Services Act. The court’s holding did not extend to requirements for equal pay to temporary laborers who work for more than 90 days in a 12-month period for the same third-party client. Employers and staffing agencies should continue to prepare for enablement of the remaining portions of the law. 

Minimum Wage Update for Renton, Washington 

Effective July 1, 2024, residents of Renton, Washington, voted to create a local minimum wage. The minimum wage law will contain two separate rates, one for large employers and another for all other covered employers. Employers are covered if they either have at least 15 employees or have over $2 million in annual gross revenue. Large employers are employers with more than 500 employees. Franchisees associated with franchises that employ more than 500 employees are also considered large employers.

The hourly minimum wage will be $20.29 for large employers and $18.29 for all other employers effective July 1, 2024, through December 31, 2024.

The minimum wage for large employers will annually increase effective January 1, 2025, based on changes to the Consumer Price Index. The minimum wage for all other employers will be $2 less than the large employer minimum wage from July 1, 2024, through June 30, 2025; and $1 less from July 1, 2025, through June 30, 2026. Starting July 1, 2026, both minimum wages will have the same rate.

Renton will not permit employers to take a tip credit to meet their minimum wage obligations, mirroring the Washington statewide minimum wage law.

New York: Convenience of the Employer

The New York rule states that employees are subject to New York state income taxes if they make the choice to work remotely in another state, only exempting employees from this rule if their employer has assigned them to their home state for the employer’s convenience. 

New York also added a qualifier that any work performed out of state that could have been performed in state at the employer’s New York location is considered a New York workday, thus, subjecting the employee to New York taxation.

New York courts have always supported the convenience rule rationalizing that New Yorkers who work from home shouldn’t pay more taxes than other states’ residents who work from home. They also state the rule upholds the tax apportionment rules by taxing income from services connected to New York but performed elsewhere to prevent tax evasion.

New Jersey and Connecticut have passed legislations in response to the convenience of the employer rule. These legislative efforts may start triggering a new understanding by out-of-state courts that could lead to successful challenges to the New York rule, especially if courts outside of New York get involved. 

UKG Pro

Pennsylvania Act 34 

Last month, we informed you about the passing of the Pennsylvania Act 34, which changes the taxability of Section 129 and Section 125 dependent care benefits for 2023.  

UKG has begun changing the taxability of Section 125 and 129 dependent care benefits by making them pre-tax for Pennsylvania state income tax and local earned income tax (except Philadelphia) for 2023 and 2024. No customer action is required. 

For more information, review our PA Act 34: Dependent Care article.  

U.S. Federal Fast Facts 

Child Support Withholding Changes

The federal Office of Child Support Enforcement (OCSE) is considering changing withholding orders to include:

  • Independent Contractors
  • On-Demand Pay
  • Lump-Sum Reporting

Independent Contractors:

The OCSE wants to identify income received by independent contractors and is considering adding an indicator for independent contractors on the income withholding order. Currently, the order does not look different for independent contractors.

On-Demand Pay:

On-demand pay, or daily wage payments, is also a role the OCSE wants to require a check box for on-demand pay withholding. The OCSE believes the best solution is to base child support withholding on whatever tax withholding calculations the IRS plans to use for on-demand pay.

The income withholding order is a tool for collecting child support, but it may not yield full payment.

Lump-Sum Reporting:

Employers should be reporting lump sums allowing employees to pay past-due child support. But differing reporting laws and unclear procedures can make compliance difficult.

The goal is to standardize the lump-sum withholding process providing a clear definition of lump-sums. For example, employers would be able to immediately pay 50% of the lump sum to employees. The remainder would be retained for a certain period in case child support agencies respond with withholding requests.

National Labor Relations Act Joint Employment Rule

In October 2023, the National Labor Relations Board (NLRB) issued a new rule for determining whether two or more entities may be considered joint employers of a set of workers for purposes of the National Labor Relations Act (NLRA). Under the new rule, employers could be considered joint employers if: 

  1. They shared “an employment relationship with those employees under common-law agency principles” 
  2. They “share or codetermine those matters governing employees’ essential terms and conditions of employment,” which the rule defined as having “control (whether directly, indirectly, or both)” over “one or more of the employees’ essential terms and conditions” whether or not the entity actually exercised such control. 

The new NLRB rule was set to take effect on March 11, 2024; however, on March 8, a judge from the U.S. District Court for the Eastern District of Texas blocked the new NLRB rule, arguing that the new rule failed to create a clear standard for employers to follow. The rule will likely continue to be litigated, and employers should continue to monitor these developments for the potential impact on joint employment.

USCIS Form I-9 Instructions Update

According to recently released guidance, if an employer uses the fillable form to complete Form I-9, then they must print and manually sign the form. See guidance online on the U.S. Citizenship and Immigration Services website under the “Special Instructions” tab.

Veterans’ Readjustment Assistance Act Hiring Benchmark Updated

Effective March 31, 2024, the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) hiring benchmark will be 5.2%. The new benchmark is 0.2% lower than the previous benchmark of 5.4% and continues the agency’s trend of reducing the benchmark each year.

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