Tax Withholding Policies in a Work-From-Home Environment

Working from home some or all of the time has become commonplace and seems likely to continue regardless of what happens with the COVID-19 pandemic. New ways of working require new ways of handling tax withholding. Employers may need to withhold at multiple locations for some employees. Employers should consider implementing internal policies to blunt future tax audits. Employers will also need to find new ways to communicate about tax issues with employees no longer working full time in the office.

Back in 2020, the assumption was that work-from-home would be short-lived. Consequently, some, but not all, taxing authorities permitted employers to continue to withhold tax exclusively at the workplace location even for employees working remotely in another jurisdiction. These temporary safe harbors for withholding have been, or shortly will be, terminated. As a result, employers are at risk if they do not withhold taxes for the taxing localities in which their employees actually work.

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Kentucky Federal Court Issues Three-State Preliminary Injunction Against Federal Contractor Vaccine Mandate

By Marc Antonetti and Scott McIntyre

On Nov. 30, 2021, the Eastern District of Kentucky enjoined President Biden’s federal contractor vaccine mandate in Commonwealth of Kentucky v. Joseph R. Biden. Under Executive Order 14042, covered contract employees and employees working at covered contractor workplaces are required to receive their final vaccine shot by Jan. 4, 2022. Unlike the currently stayed federal OSHA vaccine mandate, no testing option is available under the federal contractor vaccine mandate.

In its decision to enjoin the enforcement of the federal contractor vaccine mandate with respect to Kentucky, Ohio and Tennessee, Judge Gregory Van Tatenhove emphasized, in a matter of first impression, that the mandate exceeded the president’s authority delegated by Congress under the procurement statute. The court was careful to note its view that vaccines are effective, but it essentially concluded that the desired ends do not justify the means with respect to the federal contractor vaccine mandate.

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DOL Continues Contractor Regulatory Onslaught with $15-per-Hour Minimum Wage for New and Extended Contracts

It has been a challenging month for federal government contractors. First came the Biden administration’s pronouncement on mandatory vaccinations. Unlike the Department of Labor’s (DOL) Occupational Safety and Health Administration emergency standard, the courts have not to this point stepped in and stayed implementation of this vaccination mandate for government contractors. Now, finalizing the administration’s Executive Order 14026 issued earlier this year, the DOL’s Wage and Hour Division has promulgated new regulations that will require many, if not most, government contractors to pay a minimum wage of $15 per hour beginning on or after Jan. 30. The DOL estimates that the minimum wage of over 325,000 employees will be impacted and increased by this new final rule, which was published in the Federal Register on Wednesday, Nov. 24.

As promulgated by the DOL, the new rule affects new and renewed contracts as well as contracts with options that are exercised after Jan. 30, with contracting agencies being encouraged to apply the new minimum wage to existing contracts as expeditiously as possible. Based upon our experience under the Obama administration’s rule increasing the minimum wage, contracting offices will look for any reason to apply the new minimum wage to existing contracts, such as, for example, potentially in a multiyear contract in which the only change made is the addition of a new wage determination. There is no question that exercised options in a government contract will constitute a new contract that triggers the application of the higher minimum wage.

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UPDATE: Federal Contractor Vaccine Mandate in Flux

The federal contractor vaccine mandate (Executive Order 14042), which we first reported on in September both here and here, apparently will be delayed. Facing industry resistance, multiple lawsuits, and vaccination and accommodation assessment deadlines that are difficult to meet, the White House announced in an evening press call on November 3, 2021 (The White House, “Background Press Call on OSHA and CMS Rules for Vaccination in the Workplace,” https://www.whitehouse.gov/briefing-room/press-briefings/2021/11/04/background-press-call-on-osha-and-cms-rules-for-vaccination-in-the-workplace/ (published Nov. 4, 2021)), that full contractor compliance with the federal contractor vaccine mandate will be delayed until January 4, 2022, to be consistent with the OSHA vaccine ETS applicable to employers employing 100 or more employees.

According to the White House: “[W]e will be aligning the deadline for the previously announced requirement for employees of federal contractors to be fully vaccinated with these new OSHA and CMS rules.” As such, “Any employee covered by the CMS or federal contractor requirement must have their final vaccination dose by January 4th.”

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New York Issues Employer Guidance Regarding Recreational Use of Cannabis

Following the legalization of recreational cannabis in New York by the Marijuana Regulation and Taxation Act (MRTA) earlier this year, which we previously reported on, the New York State Department of Labor has issued guidance in the form of FAQs for employers regarding adults’ use of recreational cannabis as it relates to the workplace. Notably, the guidance does not address the medicinal use of cannabis, which is covered by the Compassionate Care Act.

The MRTA amended Section 201-D of the New York Labor Law (NYLL) to clarify that cannabis used in accordance with New York state law is a legal consumable product. The MRTA prohibits employers from discriminating against employees based on their legal use of cannabis outside of the workplace, outside of work hours and when not using an employer’s equipment or property.

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Department Of Labor Publishes Tipped Employee Final Rule

On Friday, the U.S. Department of Labor (DOL) published its Final Rule governing tipped employees. The DOL kept the sweeping changes to the regulation of employees paid using a tip credit wage, which it introduced this past June in its Notice of Proposed Rulemaking (NPRM). Buttressed by the 11th Circuit’s recent decision in Rafferty v. Denny’s, Inc., which adopted the 80/20 rule, the DOL changed little from the NPRM despite considerable pushback from industry interests. The DOL codified the 80/20 rule and now limits tipped employees’ performance of duties that directly support the tip-producing work to 20 percent of the workweek and no more than 30 continuous minutes. Work that falls outside these limits and work that does not qualify as either tip-producing work or directly supporting work must be paid at full minimum wage.

Amendments Proposed in the NPRM – Duties

The NPRM proposed to replace the regulatory framework that determines what duties are part of the tipped employee’s occupation. Specifically, the NPRM clarified that a tipped employee who performs duties that are not part of the tipped employee’s occupation is disqualified from the tip credit wage because he or she is no longer meeting the requirement of working in a “tipped occupation.” See 29 U.S.C. § 203(t). The key proposed amendment declared that “an employee is only engaged in a tipped occupation under 29 U.S.C. § 203(t) when the employee either performs work that produces tips, or performs work that directly supports the tip-producing work, provided that the directly supporting work is not performed for a substantial amount of time.” See Prop. DOL Reg. § 531.56(f).

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The Department of Labor’s Latest Final Rule Publication Regulates Managers Who Receive Tips and Delineates Willful Violations of the FLSA

“Drip, drip, drip” is the best description of the Biden administration’s staggered attack on the 2020 Tip Final Rule through delays, withdrawals, amendments and notice of proposed rulemaking (NPRM). The latest action by the Department of Labor (DOL) came last week, when the Wage and Hour Division published its final rule addressing managers who receive tips and penalties for violations of the Fair Labor Standards Act (FLSA) (September Tip Final Rule). These regulatory amendments will be effective Nov. 23, 2021.

Managers Who Receive Tips

As expected, the September Tip Final Rule tracks the 2018 Consolidated Appropriations Act (CCA) by prohibiting managers, supervisors and employers from keeping employees’ tips, and it defines managers and supervisors in line with the executive exemption from overtime. See 29 C.F.R. § 531.52(b)(2); see also 29 C.F.R. §§ 541.100(a)(2)-(4) and 541.101 (delineating the executive exemption). Also as expected, the September Tip Final Rule allows mandatory tip pools to include employees who do not customarily and regularly receive tips if the employer pays all employees in the pool the full minimum wage and does not take a tip credit. See 29 C.F.R. § 531.54(c)(3) and (d).

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12 Quick Takeaways from the Safer Federal Workforce Task Force’s Vaccine Mandate for Federal Contractors

On Friday, Sept. 24, 2021, the Safer Federal Workforce Task Force published its new guidance pursuant to the president’s recent executive order directing that all federal contractors’ employees be vaccinated. The detailed 14-page guidance has a number of important clarifications of who must be vaccinated, by when and what other steps a federal contractor must take.

Here are 12 high-level takeaways.

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Sharply Divided En Banc 5th Circuit Opines on Salary Basis Requirement for Day Rate Employees Under the FLSA

In a 12-6 split decision, the en banc 5th Circuit Thursday evening released its ruling in Hewitt v. Helix Energy Solutions Group, Inc., Case No. 19-20023, addressing the issue of when an employee paid a daily rate can qualify for the “salary basis” requirement for certain exemptions from overtime pay under the Fair Labor Standards Act (FLSA). The majority of the 5th Circuit held that, despite earning over $200,000 a year and indisputably performing job duties that qualified for exempt status, the plaintiff was not exempt from overtime pay because he was paid a day rate that did not comport with the “salary basis” requirement.

The FLSA exempts certain “executive,” “administrative” and “professional” employees from overtime pay. The Department of Labor (DOL) regulations interpreting these exemptions require that, in order to qualify, employees must (1) perform certain job duties and (2) be paid at least $684 per week on a “salary basis.” The DOL regulations also exempt certain “highly compensated” employees (HCEs) who (1) receive $107,432 in total annual compensation, which must include at least $684 per week paid on a salary basis, and (2) customarily and regularly perform at least one exempt executive, administrative or professional job duty. Continue Reading

The President’s Vaccine Executive Order – A Prelude of Things to Come for Federal Contractors?

With much fanfare, on Sept. 9, 2021, President Joe Biden announced, among other wide-ranging proposed requirements for employers generally, a COVID-19 vaccine mandate for federal employees and certain government contractors. The president stated that he signed an “executive order that will require federal contractors to” have their employees vaccinated. (“Remarks by President Biden on Fighting the COVID-19 Pandemic,” Sept. 9, 2021.)

Although this recent announcement regarding government contractors and related announcements from the president have generated substantial headlines, their collective effect is by no means immediate, despite the executive order pertaining to contractors stating that it will take effect “immediately.” (“Executive Order on Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors,” Sept. 9, 2021.) Rather, a closer read of the executive order reveals that it may take some time to take full effect, assuming it remains unchallenged, although it can be assumed that the administration will do everything it can to rapidly deliver on the president’s remarks.

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