Effective July 1, 2018, the minimum wage will increase in the following states and localities as follows:

• Maryland: $10.10 per hour
• Oregon: $10.75 per hour ($12.00 per hour in the Portland metropolitan area; $10.50 per hour in nonurban counties)
• District of Columbia (DC): $13.25 per hour
• Los Angeles, CA: $13.25 per hour for employers with 26 or more employees; $12.00 per hour for employers with 25 or fewer employees
• Chicago, IL: $12.00 per hour
• Cook County, IL: $11.00 per hour
• San Francisco, CA: $15.00 per hour
• Minneapolis, MN: $11.25 per hour for employers with 100 or more employees; $10.25 per hour for employers with 100 or fewer employees
• Belmont, CA: $12.50 per hour
• Emeryville, CA: $15.00 per hour
• Malibu, CA: $13.25 per hour for employers with 26 or more employees; $12.00 per hour for employers with 25 or fewer employees
• Milpitas, CA: $13.50 per hour
• Pasadena, CA: $13.25 per hour for employers with 26 or more employees; $12.00 per hour for employers with 25 or fewer employees
• San Leandro, CA: $13.00 per hour
• Montgomery County, MD: $12.25 per hour for employers with 51 or more employees; $12.00 per hour for employers with 2-50 employees

Additional minimum wage rates may apply for tipped employees and in metropolitan areas. Be sure to comply with any local wage requirements that apply to your business.

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The U.S. Department of Labor (DOL) has released guidance clarifying federal law on tip pooling. The guidance was issued in response to a federal law that amended the federal Fair Labor Standards Act’s (FLSA) tip pooling rules. The DOL guidance states that:

1. Employers are prohibited from keeping tips received by their employees, regardless of whether the employer takes a tip credit against the minimum wage for its employees.
2. Federal regulations no longer prohibit tip pooling when employers pay tipped employees at least the full federal minimum wage and do not claim a tip credit.
3. Employers who pay at least the full federal minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped—such as cooks and dishwashers—to participate in tip pools. However, managers and supervisors are prohibited from participating in tip pools.

However, employers should remember that some states have different rules concerning tip pools and tip credits. When there are differences between state and federal laws in this area, the law more favorable to the employee generally applies.

Click here to read the DOL guidance.

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Click here to read the U.S. Supreme Court’s opinion.

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Individuals with coverage through the Health Insurance Marketplace who are receiving advance payments of the premium tax credit—which are paid directly to insurance companies to lower monthly premiums—that certain changes in their income or family size may affect the credit. As a result, if circumstances have changed for such individuals, it would be prudent to perform a “mid-year checkup” via the IRS’s Premium Tax Credit Change Estimator to determine if they need to adjust the premium tax credit they are currently receiving. Performing a checkup now will help individuals avoid large differences between the advance credit payments made on their behalf and the amount of the credit they are allowed when they file their tax returns next year.

Reporting Changes in Circumstances
The estimator tool does not report changes in circumstances to the Marketplace. To report changes and adjust the amount of advance payments of the credit, individuals must contact their Marketplace. Changes that should be reported to the Marketplace include:

• An increase or decrease in an individual’s income;
• Marriage or divorce;
• The birth or adoption of a child;
• Starting a job that provides health insurance;
• Gaining or losing eligibility for other health care coverage; or
• Changing residences.

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The Internal Revenue Service (IRS) has released the 2018 Publication 15-B, Employer’s Tax Guide to Fringe Benefits, which contains information for employers on the employment tax treatment of fringe benefits. The 2018 version of the publication has been updated to include the following changes (among others) from the new tax law and other federal guidance:

• Suspension of the exclusion for qualified bicycle commuting reimbursements.
• Suspension of the exclusion for qualified moving expense reimbursements (with limited exceptions).
• Limitation of the employer deduction for expenses for certain fringe benefits.
• Establishment of qualified small employer health reimbursement arrangements (QSEHRAs).

In addition, the publication contains the following updated guidance for 2018:

• Cents-per-mile rule. The business mileage rate for 2018 is 54.5 cents per mile. This rate may be used to reimburse an employee for business use of a personal vehicle, and under certain conditions, may be used to value the personal use of a vehicle provided to an employee.
• Qualified parking exclusion and commuter transportation benefit. For 2018, the monthly exclusion for qualified parking, commuter highway vehicle transportation, and transit passes is $260.
• Contribution limit on a health flexible spending arrangement (FSA). For plan years beginning after December 31, 2017, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,650.

Click here to view the publication.

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The Internal Revenue Service (IRS) has released a new Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, which contains information for use in preparing 2017 tax returns.

Publication 969 is released annually and provides information on the rules related to health savings accounts (HSAs), health flexible spending arrangements (health FSAs), and health reimbursement arrangements (HRAs), including qualification, contribution, distribution, and employer participation requirements.

Click here to read Publication 969.

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President Trump has signed the Extension of Continuing Appropriations Act, which (among other things) delays implementation of the “Cadillac Tax,” the Affordable Care Act’s excise tax on high-cost employer-sponsored health coverage, until 2022. Previously, this tax—which would impose a 40% tax on plans that cost more than $10,200 (for self-only coverage) and $27,500 (for family coverage)—was set to become effective in 2020.

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Tax season will begin Monday, January 29, 2018, and the filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, according to an announcement by the IRS.

Although the IRS will begin accepting both electronic and paper tax returns on January 29, paper returns will begin processing later in mid-February. The IRS is strongly encouraging people to file their tax returns electronically for faster refunds. However, taxpayers who are using a tax software product for the first time will need their adjusted gross income from their 2016 tax return to file electronically. Using an electronic filing PIN is no longer an option.

According to the IRS, “Where’s My Refund?” remains the best way to check the status of a refund.

Click here to read the IRS announcement in its entirety.

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The U.S. Department of Labor (DOL) has adopted the “primary beneficiary” test for determining whether interns of for-profit employers count as employees under the federal Fair Labor Standards Act (FLSA), according to an agency statement. The statement noted that four federal appellate courts have adopted the standard, which is different from the six-part test the DOL previously used to make this determination.

New Test for Unpaid Interns and Students
The FLSA requires “for-profit” employers to pay employees for their work, and includes minimum wage and overtime requirements. Interns and students, however, may not be “employees” under the FLSA—in which case the FLSA does not require compensation for their work. Courts have previously used the primary beneficiary test to determine whether an intern or student is, in fact, an employee under the FLSA. This test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary of the relationship.” On January 5, 2018, the DOL announced its adoption of this test for purposes of its enforcement of the FLSA.

The primary beneficiary test includes the following seven factors:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The primary beneficiary test is flexible, and no single factor is determinative. Instead, whether an intern or student is an employee under the FLSA depends on the unique circumstances of each case. If analysis of these circumstances reveals that an intern or student is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA. If the analysis confirms the intern or student is not an employee, he or she is not entitled to minimum wage or overtime pay under the FLSA.

To read the DOL statement in its entirety, click here. To read a fact sheet on the issue from the DOL, click here.

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The U.S. Department of Labor (DOL) has published a final rule adjusting for inflation the civil monetary penalties assessed for violations of a number of federal labor laws. The rule increases penalties for employers that do not comply with certain requirements under the federal Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Employee Retirement Income Security Act (ERISA), and the Occupational Safety and Health Act (OSH Act), among other laws. The increases generally apply to civil penalties assessed after January 2, 2018, whose associated violations occurred after November 2, 2015.

Key Penalty Increases
Penalty increases that may be of particular interest to employers include:

• FLSA Requirements. Repeated or willful violations of the FLSA’s minimum wage or overtime pay requirements are subject to a penalty of up to $1,964 per violation (formerly $1,925);
• FMLA Posting. Willful violations of the FMLA’s posting requirement are subject to a penalty not to exceed $169 for each separate offense (formerly $166) (note: covered employers must post this general notice even if no employees are eligible for FMLA leave);
• Employer CHIP Notice. Failure to provide employees with an Employer Children’s Health Insurance Program (CHIP) Notice is subject to a penalty of up to $114 per day per violation (formerly $112);
• SBCs. Failure to provide a Summary of Benefits and Coverage (SBC) is subject to a penalty of up to $1,128 per failure (formerly $1,105);
• Form 5500. Failure or refusal to file an annual report (Form 5500) with the DOL is subject to a penalty of up to $2,140 per day (formerly $2,097); and
• OSH Act Posting. Violations of the OSH Act’s posting requirement are subject to a maximum penalty of $12,934 for each violation (formerly $12,675).

Click here to read the final rule, which features additional penalty increases, in its entirety. The DOL’s summary chart also highlights many of the changes.

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