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19 September 2017

3 Labor and Compensation Rules That Just Changed

3 Labor and Compensation Rules That Just Changed

While you were gone fishing this summer (or just buried knee-deep in your own business concerns), there have been some changes in federal labor and employee compensation rules you should know. From overtime and misclassification to joint employment, here’s a rundown on what has happened and what it could mean to your business.

Texas court permanently strikes down overtime rule salary increase

Just weeks ago, a Texas federal court made a final ruling against the Obama-era U.S. Department of Labor (DOL) overtime rule that significantly increased the salary threshold for the white-collar exemptions on overtime pay. According to the decision, the DOL cannot use a salary-level test to effectively eliminate the traditional duties test. For now, the salary threshold remains at $23,660 (instead of the proposed $47,000) but beware: There is bipartisan support for some sort of increase of the threshold, which has been in place since 2004. 

Joint employer rules become murkier

The Obama-era joint employer standard, which stated companies could be held liable for labor violations by their franchisees or subcontractors like staffing firms, was rolled back in June. However, despite the DOL reversal, the standard can still be applied to businesses since the National Labor Relations Board (NLRB) was the first agency to adopt the standard and has not rescinded its interpretation. 

Employee misclassification remains a risk

At the same time the joint employer guidance was rescinded by the DOL, so was guidance on classifying independent contractors. However, again, this doesn’t mean the government will turn a blind eye when it comes to employers who are engaging in employee misclassification to avoid payroll taxes and workers’ compensation benefits. In fact, many states are stepping up their efforts in this area. North Carolina just created a new law against misclassification and state agencies like the Texas Workforce Commission continue to monitor employers aggressively.

Attorney Tressie McKeon of Fox Rothschild LLP explains what this could mean to a Texas employer:

“If an audit by the Texas Workforce Commission shows a business has incorrectly classified employees as independent contractors, and therefore failed to properly report wages and taxes, the company could be reported to the IRS. The company could then be liable for back taxes and interest, not to mention a possible IRS audit. And, the IRS audit would likely reveal the company was not eligible to receive the federal tax credit the company claimed with respect to the wages paid out to the contract labor in question.

According to the TWC’s website, a number of scenarios could bring about a TWC audit. It could arise from an unemployment claim, a competitor or former agent making a claim that the company incorrectly classifies workers, a random audit, or the TWC may ‘target a specific industry.’”

If you have any questions about these or other labor and employee compensation changes, contact us.

Image Copyright: mj007 / 123RF Stock Photo

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