FEDERAL UPDATES

Taxable Gifts:  As a reminder this holiday season, gifts to employees of cash (including bonuses), gift cards, and gift certificates are subject to both income and employment taxes regardless of value, and must be reported on W-2 forms.  If these gifts are based on the quality, quantity, or efficiency of production or hours worked, then the value must also be included in a non-exempt employee’s regular rate of pay for overtime calculations.  There are a few exceptions:  the IRS lists certain non-cash gifts (snacks, coffee, flowers, fruit, books, occasional tickets for entertainment events, and occasional meal money or transportation reimbursements for working overtime) as non-taxable de minimis items, but generally only if they are worth less than about $100.  Gifts also can be nontaxable if they are in the form of a coupon for a specific small item with no redeemable cash value, such as a coupon for a free turkey redeemable at the local grocery store, or occasional movie passes.  IRS rules are often technical with many gray areas, so when in doubt it’s always worth a call to a tax advisor.

Retirement Plans/Part-Time Employees:  The IRS finally issued proposed regulations related to the ability of “long-term, part-time employees” to participate in certain retirement plans.  Secure 1.0 becomes effective January 1, 2024, and Secure 2.0 becomes effective January 1, 2025.  Secure 1.0 generally requires that employees who are at least 21 years of age and complete 500 hours in three consecutive 12-month periods cannot be excluded from eligibility to participate in 401(k) deferred compensation plans.  Secure 2.0 will reduce that required period of service from three years to two and will include 403(b) plans. A plan must count all 12-month periods beginning the later of the employee’s hire date or January 1, 2021, including periods in which the employee was in an ineligible classification. While a plan must start counting from the employee’s hire date, the computation period can switch from anniversary year to plan year if provided under the plan terms.  As always, the rules are technical, subject to change, and dependent on the particular plan terms and conditions, so employers should be working with their retirement plan administrator to ensure compliance.

Federal Contractors:  The DOL/OFCCP are increasingly focused on enforcement of anti-discrimination laws for federal contractors and have recently re-emphasized their commitment to resolving discrimination issues and ensuring equal opportunity.  At least twelve conciliation agreements were announced in October 2023 alone (all stemming from hiring and compensation disparities), resulting in penalties of over $6.9 million in a single month. Federal contractors are well advised to pay careful attention to compliance efforts, data tracking, recordkeeping, training, and preparation of their affirmative action plans.

STATE/LOCAL UPDATES

California:  Effective January 1, 2024 employers may provide the required Brochure DE 2320 and written notices regarding the change in status (unemployment insurance notices) via email if an employee “affirmatively, and in writing, by email or some form of electronic acknowledgment, opts into receipt of electronic statement or materials”.

Colorado:

Family and Medical Leave Insurance benefits will become available on January 1, 2024.  Employers should already be collecting premiums and notifying employees, and may soon be receiving notices of benefits from the state.  Also remember that employees may use other accrued paid time off before or during their FAMLI leave, but cannot be required to do so.

COMPS Order #39 – The new COMPS order has been finalized and takes effect January 1, 2024.  Among other things, it:

• Changes the definition of a tipped employee for whom an employer may claim a tip credit from an employee who receives more than $30 a month in tips to an employee who receives more than $1.64 per hour in tips averaged over any pay period permitted by Colorado law;
• Narrows employee eligibility for tip pools to include only those employees who perform significant customer-service functions in contact with patrons;
• Provides criteria for determining whether an employer must compensate an activity (or combination of multiple activities consecutively) of less than one minute; and
• Adds tips to the types of pay that can be excluded when calculating the regular rate of overtime pay.

Colorado employers should replace their existing poster on January 1, provide the updated poster to any remote employees, and replace the existing poster in any employee handbooks distributed after 1/1/24.

New York:

Noncompete Agreements – Earlier this year the Governor rejected the legislature’s bill banning nearly all noncompete agreements, citing the effect on NY businesses and the lack of an exception for situations such as the sale of a business.  The expectation has been that the Governor and legislature would reach a compromise at some point enacted through a chapter amendment.  The FTC is adding to the pressure, and sent a letter to the Governor urging her to move forward by recognizing the alleged abuse and harm noncompetes cause employees.  In the first indication of her intentions, Governor Hochul recently announced to reporters that she is looking at “striking the right balance” between protecting low/middle-income workers, and recognizing that higher earners (especially in the NY financial sector) generally have more sensitive positions, access to confidential information, and more resources to negotiate a fair agreement.  Some indications are that she will propose a cutoff of about $250,000/year.

Clean Slate Act–  Although not effective until November 2024, New York’s new Clean Slate Act will automatically seal certain conviction records from public access after a certain period has elapsed, and will prohibit employers from asking about sealed conviction records or discriminating against applicants or employees based on sealed records.  The waiting period will be eight years for felonies and three years for misdemeanors, although the felony waiting period will start over if the individual has other convictions during the waiting period. The waiting period begins on the sentencing date unless the person is incarcerated, in which case it begins once the individual is released.  Certain convictions, such as sex offenses, sexually violent offenses, and Class A felonies (such as murder) will not be sealed.  In addition, there are some exceptions for employers required by law to conduct criminal background checks, such as those who work with vulnerable populations.  New York City’s Fair Chance Act is already in effect and restricts employers from taking adverse employment actions against applicants based on their arrest or criminal conviction histories.

North Carolina:  Civil Air Patrol Leave – As of December 1, 2023, all North Carolina employers must provide up to 14 days of unpaid leave per year to perform duties related to a state or U.S. Air Force-approved mission.  Employers don’t have to allow employees to take more than seven consecutive workdays of leave at a time and can require that employees provide a copy of their mission order to prove their need for leave.  Discrimination and adverse employment actions against members of the North Carolina Wing of the Civil Air Patrol are prohibited.

Washington:

Worker’s Compensation:  L&I announced that average worker’s compensation premium rates will increase by January 1, 2024, by an average of 4.9%.  Rate increases vary by risk classification, and are listed on L&I’s website under Insurance.  The increase is deemed necessary due to rising wages and healthcare costs but is smaller than expected due to the use of contingency reserves and investment income.  Most states charge rates as a percentage of payroll, so when wages increase additional premiums are automatically collected. In Washington, employers are charged an hourly rate, so when wages increase it costs more to provide wage replacement benefits and the hourly rate must be raised accordingly each year.  Increases are announced each fall.

Construction- Paid Sick Leave (eff 1/1/24):  Washington amended its Paid Sick Leave Law to apply to construction workers who frequently move from job to job and therefore rarely meet the 90 days before benefits begin.  After the beginning of the year, NAICS Code 23 employers with construction workers who have not yet reached their 90th calendar day of employment will be required to pay accrued but unused sick leave in the employee’s final paycheck.  Employers engaged solely in residential building construction (under NAICS 236100) are exempt.

Texas:  The Texas legislature doubled down on the state’s commitment to prohibiting mandated Covid-19 vaccination, codifying the various executive orders issued over the past few years banning required Covid-19 vaccination or “vaccine passports”.  Effective February 6, 2024, all private employers in Texas will be statutorily prohibited from imposing or enforcing COVID-19 vaccine mandates as a condition of employment, or from taking any adverse employment actions against employees, contractors, and applicants based on their refusal to be vaccinated. An adverse action is broadly defined as “an action taken by an employer that a reasonable person would consider was to punish, alienate, or otherwise adversely affect an employee, contractor, applicant for employment, or applicant for a contract position.”  Violations may result in a hefty fine of up to $50,000 per infraction.

If you’d like to speak to an Asure HR expert about your business, connect with us.

Asure Software provides this information for general information purposes only.  We are not attorneys, and the information in this update should not be relied upon or regarded as legal advice.  This information may not be accurate or complete as it relates to a particular company or situation, and does not reflect all developments or laws in all jurisdictions.