Payroll Legal Alert

Q. Some of our Illinois employees have taken out payday loans and now expect the Payroll department to set up a payroll deduction to repay the loans … We’d like to discourage this behavior by charging these employees a fee for servicing these loans. Can we?

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The DOL has a new fact sheet covering illegal retaliation against employees who complain about possible violations of the Fair Labor Standards Act. Reminder: The FLSA’s anti-retaliation pro­vision applies to all employees, not just non­exempts.

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Clean breaks are always the best. You don’t want any pay problems lingering after an employee terminates. What you must pay a terminating employee, in addition to any final wages, is determined under state law. And mistakes can be expensive. Two recent cases illustrate.

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Q. We are a social services organization. After employees make home visits to clients, they must file reports within 24 hours, even if that means they must work on weekends. Most of these employees have two-year associate degrees; some have bachelor’s degrees. Can we treat these social workers as exempt employees under the FLSA?

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A federal appeals court has ruled that an employee whose wages were subject to a federal tax levy can’t sue his employer for violations of his Fourth and Fifth Amendment rights or for theft of money under state law.

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Under the IRS’ Voluntary Classification Settlement Program (VCSP), you may change workers’ status from independent contractors to employees for future tax periods on favorable tax terms, without in­­curring penalties or interest. Now, however, new questions have arisen. Unfortunately, there are no easy answers.

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The IRS keeps track of your company’s tax liabilities as separate modules in its Business Master File. If, say, your corporate income tax module is short, the IRS can offset that shortfall with an overdeposit from your payroll module. Worse: The IRS can make these offsets without telling you.

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Final IRS regulations exclude from taxpayers’ gross income damage awards for personal physical injuries or illness received from a lawsuit or in settlement of legal claims. The regs delete the requirement that to qualify for the tax exclusion, damages must be based on a tort or tort-type right.

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Q. Employees who don’t use all of their paid time off (PTO) lose it at the end of the company’s fiscal year. Management wants to amend this policy to give employees the option of selling back their unused PTO days to the company at their current pay rates or rolling over the PTO days into the next year. Before Payroll gives its final OK to this plan, we’d like to know if we’re missing anything.

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The IRS recently announced that it has begun conducting correspondence audits of employers that took the 6.2% Social Security tax credit authorized by the 2010 Hiring Incentives to Restore Employment Act. The Treasury Inspector General for Tax Administration has concluded that the audit program remains error-prone, and that those errors affect taxpayers’ rights.

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