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2022 Wage Cap Jumps to $147,000 for Social Security Payroll Taxes

2022 Wage Cap Jumps to $147,000 for Social Security Payroll Taxes

Starting Jan. 1, 2022, the maximum earnings subject to the Social Security payroll tax will increase by $4,200 to $147,000—up from the $142,800 maximum for 2021, the Social Security Administration (SSA) announced Oct. 13. The SSA also posted a fact sheet summarizing the 2022 changes.The taxable wage cap is subject to an automatic adjustment each year based on increases in the national average wage index (not the inflation rate), calculated annually by the SSA. Payroll Taxes: Cap on Maximum Earnings Type of Payroll Tax 2022 Maximum Earnings 2021 Maximum Earnings Social Security $147,000 $142,800 Medicare No limit No limit Source: Social Security Administration. The growth of the Social Security wage cap from $127,200 in 2017 to 147,000 in 2022 represents more than a 15.5 percent increase over the past five years.The $4,200 increase for 2022, however, is smaller than the 2021 increase of $5,100, up from the $137,700 maximum for 2020, reflecting constraints on wage increases during the height of the COVID-19 pandemic.Inflation Impacts Benefits PaymentsMeanwhile, monthly Social Security and Supplemental Security Income benefits for more than 64 million people in the U.S. will increase by 5.9 percent in 2022—the biggest cost-of-living (COLA) adjustment since the 1980s—the SSA also announced, reflecting this year’s inflation spike. The adjustment will boost the average monthly retirement benefit by $92 to roughly $1,657. The Senior Citizens League, an advocacy group, called the benefits increase “the highest COLA that most beneficiaries living today have ever seen,” but added that “a high COLA means exceptionally high inflation is impacting consumers.”FICA RatesSocial Security and Medicare payroll taxes are collected together as the Federal Insurance Contributions Act (FICA) tax. FICA tax rates are statutorily set and can only be changed through new tax law.Social Security is financed by a 12.4 percent payroll tax on wages up to the taxable earnings cap, with half (6.2 percent) paid by workers and the other half paid by employers. Self-employed workers pay the entire 12.4 percent.For employers and employees, the Medicare payroll tax rate is a matching 1.45 percent on all earnings (self-employed workers pay the full 2.9 percent), bringing the total Social Security and Medicare payroll withholding rate for employers and employees to 7.65 percent—with only the Social Security portion limited to the taxable maximum amount. FICA Rate (Social Security + Medicare Withholding)Employee7.65%(6.2% + 1.45%)​Employer​7.65%(6.2% + 1.45%)​Self-Employed​15.3%(12.4% + 2.9%) Note: For employed wage earners, their Social Security portion is 6.2% on earnings up to the taxable maximum. Their Medicare portion is 1.45% on all earnings. The payroll tax rates shown above do not include an additional 0.9 percent in Medicare taxes paid by highly compensated employees on earnings that exceed threshold amounts based on their filing status:$250,000 for married taxpayers who file jointly.$125,000 for married taxpayers who file separately.$200,000 for single and all other taxpayers.These wage thresholds, set by law, do not adjust for inflation and therefore apply to more employees each year.Employers must withhold the additional Medicare tax from wages of employees earning more than $200,000 …

Employer’s Failure to Produce Records Justified ‘Slight Windfall’ for Worker

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Employer’s Failure to Produce Records Justified ‘Slight Windfall’ for Worker

​An employer produced no records showing the hours a former employee worked or the compensation he received. So a trial court correctly used the employee’s records in a lawsuit for unpaid overtime, even though the evidence was imprecise and the overtime calculation resulted in “a slight windfall” for the employee, a California appeals court ruled.If an employer has failed to keep employment records, the consequences should fall on the employer—not the employee—the court said. The plaintiff accepted a full-time position with a tile and flooring store in 2016. His duties included cleaning the warehouse, accepting shipments, making deliveries to job sites, picking up tile from distributors and helping customers select tiles. His regular hours were Monday through Friday from 8 a.m. to 6 p.m. and Saturdays from 9 a.m. to 5 p.m. Beginning on March 9, 2018, the plaintiff no longer worked every Saturday. In 2018, after asking to be compensated for overtime hours, he was fired. On Feb. 14, 2019, the plaintiff brought a lawsuit, alleging unpaid overtime wages, meal and rest break compensation, statutory penalties for inaccurate wage statements, retaliation, and wrongful termination in violation of public policy. A trial began on March 4, 2020. The company manager testified that the plaintiff’s employment records were in his truck, which was stolen while parked in his gated complex. When the truck was recovered, according to the manager, nothing was in it. Without records, the manager of the business couldn’t provide accurate testimony regarding the plaintiff’s rate of pay and hours worked. The plaintiff testified he was hired to work for $120 per day, Mondays through Saturdays. He further testified he received 3 percent commission on sales, which was reduced to 1.5 percent at the end of 2017, and eventually cut to zero. At some point, his compensation increased to $150 per day. Beginning on March 9, 2018, he only worked two or three Saturdays per month. The plaintiff offered copies of the weekly checks he received during his employment, which were admitted into evidence. The employer did not produce a single document at trial. In the absence of any evidence to the contrary, the court accepted the plaintiff’s estimate that he worked 18 hours of overtime each week when he worked six days, and 14 hours of average overtime each week after March 9, 2018, when the plaintiff no longer worked every Saturday. The trial court calculated the plaintiff’s regular rate of pay by dividing his weekly paychecks by 40, the number of regular-time hours he worked per week. The trial court entered judgment in favor of the plaintiff for $99,394, which included $42,792 in unpaid overtime wages. The employer appealed, claiming that the trial court erred when calculating the plaintiff’s regular rate of pay and the overtime he was due.  The company alleged that the trial court should have isolated his weekly commissions and divided those dollars by the actual number of hours the plaintiff worked in a workweek (i.e., 50 or 58 hours) as opposed to 40 …

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DOL Issues Final Rule on Tip-Sharing and Employer Penalties

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DOL Issues Final Rule on Tip-Sharing and Employer Penalties

The U.S. Department of Labor (DOL) may fine employers in more circumstances when they violate federal tip-sharing regulations under a recently issued rule. The rule also clarifies when managers and supervisors can keep gratuities they received.”The final rule … strengthens protections for tipped workers—who are largely women, immigrants and people of color—and advances equity in the workplace,” said DOL Wage and Hour Division Acting Administrator Jessica Looman. The rule will take effect on Nov. 23. Who Can Share in Tip Pools?Under the Fair Labor Standards Act (FLSA), restaurants and other hospitality employers may be eligible to take a tip credit, meaning they can pay tipped workers (such as servers and bartenders) less than the standard minimum wage, as long as workers’ tips make up the difference.But employers have more flexibility to pool tips when they pay at least the standard minimum wage. “An employer that pays its tipped employees the full minimum wage and does not take a tip credit may impose a tip-pooling arrangement that includes dishwashers, cooks or other employees in the establishment who are not employed in an occupation in which employees customarily and regularly receive tips,” according to the DOL.  Employers—including managers and supervisors—are prohibited from participating in a tip pool or otherwise keeping employees’ tips, regardless of whether the employer takes a tip credit. However, the final rule clarifies that managers and supervisors may contribute to mandatory tip pools. Additionally, the rule explains that managers and supervisors may keep tips they receive directly from customers for services they “directly” and “solely” provide.  “The DOL’s final rule has now better identified the circumstances under which a manager or supervisor may retain customer tips and share those tips with others under the FLSA,” said Justin Barnes, an attorney with Jackson Lewis in Atlanta, and Jeffrey Brecher, an attorney with Jackson Lewis in Long Island, N.Y., in a joint statement.Although the rule provides some clarity, employers also must consider any applicable state law requirements. “Importantly, some state laws expressly prohibit tip sharing between tipped and non-tipped employees under any circumstances,” they explained. Civil Monetary PenaltiesA now-revoked rule issued by the prior administration would have allowed the DOL to assess penalties for tip-rule violations only when the department found that the employer repeatedly or willfully withheld employees’ gratuities. Under the new rule, employers may face fines of up to $1,100 each time the department finds that an employer retained employee tips, regardless of whether the violation is repeated or willful, noted Christopher Cognato and Steven Suflas, attorneys with Ballard Spahr, based in Philadelphia and Salt Lake City, respectively.”The rule represents yet another move by the agency to protect tipped workers, putting hospitality-sector employers and others with tipped employees on clear notice that it intends to enforce [FLSA] requirements aggressively,” they said.The rule also revises the definition of “willful” in the tip-credit regulations to include employer violations that are committed with “reckless disregard” for the FLSA’s requirements, Cognato and Suflas noted. “An employer is in reckless disregard of the FLSA when, among other situations, the department …

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New Florida Wage Laws Take Effect Soon

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New Florida Wage Laws Take Effect Soon

​Florida employers should be prepared to comply with important changes to the state minimum wage and the requirement to report the use of independent contractors.Minimum Wage IncreaseFlorida’s hourly minimum wage rate (currently $8.56) will increase to $10.00 on Sept. 30. The minimum wage then will increase by $1.00 each year until it reaches $15.00 an hour in 2026.The minimum wage rate applies to all public- and private-sector employers, regardless of size or number of employees.This increase was the result of Amendment 2, passed on Nov. 3, 2020, by over 60 percent of Florida voters, amending Florida’s Constitution.Florida employers may continue to take a tip credit of up to $3.02 per hour for properly classified tipped employees meeting the eligibility requirements under the Fair Labor Standards Act, as Amendment 2 did not change the allowable tip credit. Thus, the minimum cash wage rate for eligible tipped employees will increase to $6.98 per hour on Sept. 30. Updated Florida Minimum Wage Posters are available from the Florida Department of Economic Opportunity’s website.Report Independent Contractors A new law, which takes effect on Oct. 1, requires Florida employers to report newly retained independent contractors in the same manner as new employees to the Florida Department of Revenue’s State Directory of New Hires. This requirement was a component of Senate Bill 1532, which updated state family law. The goal of the new reporting requirement is to increase child support collections.The law requires a service recipient to report to the Florida Department of Revenue’s State Directory of New Hires any newly engaged non-employee to whom the service recipient pays more than $600 in a calendar year for services performed by the individual in the course of the service recipient’s trade or business. Previously, the law required only that employers report newly hired employees to the State Directory of New Hires, while reporting independent contractors was optional.To comply with the law, employers must report: The independent contractor’s name; address; Social Security number (or other identifying number assigned under Section 6109 of the Internal Revenue Code).The date services for payment were first performed by the individual.The name, address and employer identification number of the service recipient.The information may be submitted on the same Florida New Hire Reporting Center website as is used for employees. This information must be submitted within 20 days after the first payment to the independent contractor or on the date the business and independent contractor entered into the contract, whichever is earlier.Employers should consider updating their onboarding procedures and reporting schedules to ensure compliance with this reporting requirement. While there is no indication in the law that the Florida Department of Revenue will use this information for auditing purposes or share it with other agencies, this would also be a good time for employers to review worker classifications to ensure independent contractors are properly classified.Joanne Braddock Lambert and Justin S. Swartz are attorneys with Jackson Lewis in Orlando. © 2021 Jackson Lewis. All rights reserved. Reposted with permission.  …

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Court Says Employers May Require an Unpaid Meal Period During Travel Time

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Court Says Employers May Require an Unpaid Meal Period During Travel Time

​An employer may require a nonexempt, hourly employee to take an unpaid meal period while engaged in travel time, so long as certain conditions are met, according to the 5th U.S. Circuit Court of Appeals. The meal period is not considered work time or compensable travel time if the employee is both relieved from performing any duties during that time and the time otherwise qualifies as a bona fide meal period under the Fair Labor Standards Act (FLSA).In this case, the employer, a contractor with U.S. Immigration and Customs Enforcement (ICE), hired security officers to accompany and be responsible for deportees on flights carrying them to another country. The security officers’ responsibilities ranged from monitoring the deportees to coordinating their trips to the restroom. The security officers were nonexempt, hourly employees for purposes of the FLSA.The employer had a meal-period policy for the return portion of the flight. The policy required the security officers to take a one-hour, unpaid meal period on any return flight that exceeded 90 minutes and did not have any deportees on board. During the meal period, the security officers were expected to fully disengage from work duties and were permitted to use the time as they wished.The security officers sued, seeking class certification and claiming the contractor’s meal-period policy violated the FLSA by not paying minimum wage for the meal period and failing to pay required overtime wages. The security officers argued the meal times were compensable time and did not qualify as bona fide meal periods.The trial court granted conditional class certification and then dismissed the minimum wage claim. The employer then moved for summary judgment on the overtime wage claim. The trial court ruled for the employer, finding the security officers had failed to disprove the employer’s affirmative showing that the officers had been relieved from work-related duties during meal periods and there was no interruption during their meal breaks. The 5th Circuit affirmed, determining that it was permissible to require an unpaid meal period during otherwise compensable travel time. The court distinguished previous case law requiring employers to compensate employees for travel time, even when the employees were engaged in downtime or permitted to sleep or engage in personal activities. The court concluded that the regulations and case law on travel time do not bar an employer from requiring an unpaid meal period on airplane flights.The appeals court also decided that the meal-period policy was permissible, as the facts satisfied the “predominant benefit test,” adopted previously by the 5th Circuit, establishing that the meal break was predominantly for the benefit of the employee, not the employer. The court reasoned that the meal-period policy must be analyzed in the context of the relevant workplace. In this case, the security officers failed to identify any work-related duties that interfered with the bona fide meal periods, and thus each employee could use the time effectively for their own purposes. The court therefore concluded the meal-period policy was permissible in this specific context.Dean v. Akal Security …

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NYC Passes Bills Protecting Food Delivery Workers

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NYC Passes Bills Protecting Food Delivery Workers

​The New York City Council passed bills on Sept. 23 to provide pay, bathroom breaks and other protections to the city’s food delivery workers. We’ve gathered articles on the news from SHRM Online and other media outlets.Bills’ RequirementsThe bills will establish minimum payments for delivery workers and let workers set a maximum distance per trip that they will travel. The Department of Consumer and Worker Protection now is required to complete a study on food delivery workers and establish rules on the minimum payment required per trip. The bills will stop apps from charging workers fees to receive their pay and require pay at least once a week. One bill will make apps disclose their tipping policies and another will stop apps from charging delivery workers for insulated bags that ensure food is delivered hot. Another bill will require that restaurants allow workers to use their bathrooms. Food delivery services need to add a provision in contracts with restaurants that let couriers use bathrooms if the courier is picking up a delivery.(Gothamist) and (CNBC)Mayor Supports the MeasuresMayor Bill de Blasio supported the bills. Underpayment or nonpayment of base pay and tips for food delivery workers worsened during the pandemic.(The New York Times)Bill Proponent’s Statement”Delivery workers have worked tirelessly throughout the pandemic, risking their livelihoods to singlehandedly keep New Yorkers fed and our restaurants afloat,” said Council Member Carlina Rivera, a proponent of the bathroom access bill. (New York Post)Trendsetting Legislation? With the bills, New York City became the first major U.S. city to set minimum protections for food delivery workers. The issue of how far workers can be asked to ride came to the forefront when some deliverers were sent on interborough trips as remnants of Hurricane Ida pounded the city earlier this month. While Grubhub supported the bills, the measures could face legal pushback from other companies. (THE CITY)Judge Says California Gig-Economy Law Is UnenforceableCalifornia voters approved Proposition 22 in November 2020, allowing gig-economy companies to classify app-based ride-hailing and delivery drivers as independent contractors if certain criteria are met. On Aug. 20, a state judge said the law is unconstitutional and unenforceable. California uses a three-pronged “ABC” test to determine worker classification. The stringent test renders most workers employees unless their jobs fall under an exception.(SHRM Online) …

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Wage Disparity Between US Workers and H-2A Workers Was Unlawful

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Wage Disparity Between US Workers and H-2A Workers Was Unlawful

​The U.S. Court of Appeals for the District of Columbia Circuit affirmed that employers are required to pay the “adverse effect wage rate” to all U.S. workers who perform any work that is the same as any skilled or agricultural work that is performed by H-2A workers. The adverse effect wage rate is the average hourly wage for agricultural workers as reported by the U.S. Department of Agriculture.Overdevest Nurseries is a large plant nursery in New Jersey that has participated in the H-2A program since 1999. Overdevest employs both skilled and less-skilled workers. Less-skilled U.S. workers serve as Overdevest’s production workers. Overdevest also employs H-2A workers (workers from other countries hired to perform temporary agricultural work) as order pullers who “hold the paper” and see to it that the correct quantity and quality plants are pulled by the crew. In the work-order forms, Overdevest certified that it expected H-2A workers to perform other general nursery tasks as necessary. In 2013, the U.S. Department of Labor (DOL) investigated whether Overdevest was complying with the H-2A program. Overdevest’s H-2A workers were sometimes performing general production work, but Overdevest was paying the U.S. production workers performing the same work a lower hourly wage than the H-2A workers. The DOL concluded that Overdevest violated the H-2A regulations that require employers to pay the adverse effect wage rate to any U.S. workers serving in corresponding employment. Overdevest alleged that the DOL misapplied the 2010 rule defining corresponding employment against Overdevest. To participate in the H-2A program, an employer must certify to the secretary of labor that there are not sufficient domestic workers who are able, willing and qualified, and who will be available at the time and place needed, to perform the labor or services; and, that the employment of the foreign worker in such labor or services will not adversely affect the wages and working conditions of similarly employed U.S. workers. Under these regulations, employers must pay the adverse effect wage rate to both H-2A workers and non-H-2A workers. Employers must also pay the adverse effect wage rate to workers engaged in “corresponding employment.”In 2008, the regulation did not require employers to pay the adverse effect wage rate to U.S. workers hired prior to the H-2A workers or to less-skilled U.S. workers in a different occupation than the H-2A workers, even though the H-2A workers might occasionally perform the same work as those less-skilled U.S. workers. In 2010, the DOL amended the regulations defining “corresponding employment” by requiring employers to pay the adverse effect wage rate to any and all U.S. workers who perform any work that is the same as any skilled or agricultural work performed by H-2A workers. Overdevest argued that this definition “unreasonably expanded” the protections to any U.S. worker performing the same work as H-2A workers, thereby creating two classes of U.S. workers, where unqualified U.S. workers are placed at an advantage over qualified U.S. workers. Overdevest further contended that the regulation runs contrary to both the statute and other regulations which require employers to continue to hire qualified U.S. workers, if available, even after the employer has been certified to hire H-2A workers. The appeals court found it “eminently reasonable” that by requiring employers to pay non-H-2A workers the same amount they pay the H-2A workers when they are doing the same work, the department was protecting similarly employed workers who are adversely affected. Additionally, the court determined that the secretary’s enforcement against Overdevest was not arbitrary and capricious. The court commented that Overdevest had several methods at its disposal to avoid running afoul of any of the department’s regulations. These methods included drafting narrower work orders and paying the H-2A workers for any idle hours needed to satisfy the “three-fourths guarantee” or simply paying the domestic workers the same wage as H-2A workers whenever the H-2A workers were performing the same work. Overdevest Nurseries LP v. Walsh, D.C. Cir., No. 20-5163 (June 25, 2021).Professional Pointer: Employment of H-2A workers carries additional employment requirements. For example, employers must guarantee to offer each H-2A worker employment for a total number of hours equal to at least 75 percent of the workdays in the contract period—called the “three-fourths guarantee.” Additionally, employers must provide housing at no cost to H-2A workers and to workers in corresponding employment who are not reasonably able to return to their residence within the same day. Roger S. Achille is an attorney and a professor at Johnson & Wales University in Providence, R.I.

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