1. David Duff Presents Payroll & Labor Law Issues

2. Payroll and Labor Law Issues SCASBO Fall Conference ~ November, 2012 David T. Duff Joseph D. Dickey, Jr. Duff, White &Turner, LLC 803.790.0603 www.dwtlawfirm.c om

3. Gross Pay Check Withholdings (W-2 Income) Payroll Taxes State and Federal Income Taxes FICA (Social Security and Medicare) State and Federal Unemployment Taxes (SUI and FUTA) Other Deductions – State Retirement, health/dental coverage, 401 k, 403 b

4. Gross Pay Check Penalties for NOT Withholding Payroll Taxes Penalties for misclassifying independent contractors Penalties for improperly handling taxes in lawsuit settlements

5. Penalties for misclassifying independent contractors Employer liable for income tax penalty of 1.5 % of the employee’s wage (3 % if no 1099 filed) Employer liable for FICA penalty of up to 20 % of the employee’s share of FICA taxes (40 % if no 1099 filed) and the full employee’s share of FICA taxes Employer can be liable for unpaid taxes

6. Independent contractor Right to control the manner and means Dictate details of the work and supervise it on an hour-by-hour basis Length of time for which person is retained Free to work elsewhere

7. Tax consequences of settling employment claims – p. 1 Nearly all settlement payments are included in plaintiff’s taxable income Exception: payments to compensate for personal physical injuries or physical sickness 1099 incomes or W-2 wages?

8. Tax consequences of settling employment claims – p. 2 Many employment lawsuits have claims for back and “front” pay These are wages (W-2 income), not 1099 income

9. Tax consequences of settling employment claims – p. 3 What if a settlement payment is not only taxable but also “wages” and payroll taxes are not withheld – Employer remains legally liable for the amount of the tax that should have been withheld If employer fails to pay FICA/FUTA, it is liable for a.5 % per month of the amount up to 25 % plus an additional 10 % penalty If suit is insured, how will carrier handle?

10. S.C. Wage Payment Law – p. 1 Notify each new employee in writing (individually or by posted notice) of the normal wages agreed upon, the time and place of payment, the deductions that will be made from wages, and other benefits due to the employee Offsets vs. deductions

11. S.C. Wage Payment Law – p. 2 Notify all employees in writing, at least 7 days in advance, of any changes in these matters Pay separated employees within 48 hours of the time of separation or by the next regular paycheck, not to exceed 30 days, whichever is longer

12. Overtime issues “Volunteer” problem -- non-exempt staff assisting with coaching or other extra- curricular activities Intermittent secondary employment Dual job problem

13. OT issues – “volunteers” – no OT due If services are different from those normally performed and person is a true “volunteer” May receive up to 20 % of what district would otherwise pay as a “nominal fee”

14. OT issues – dual jobs – OT owed Weekly hours added together Pay for hours over 40 per week with a “blended rate”

15. Recovery of overpayments – p. 1 Under the FLSA, employer can recover overpaid wages from employees’ future pay checks S. C. Wage Payment Act considers recovery of overpayments as “offsets” not deductions

16. Recovery of overpayments – p. 2 For repayment made in the same year, the employee should repay the net overpaid wages received instead of the gross overpaid wages For repayment made in a year other than the year the overpayment was made, the employee should repay the gross overpaid wages

17. Recovery of overpayments – p. 3 Recovery deductions cannot put the employee below minimum wage for a 40- hour workweek

18. Garnishment of wages – p. 1 In S.C., wages may only be garnished when specifically authorized by statute Title III of the Consumer Credit Protection Act (CCPA) limits the amount of employee’s disposable earnings that may be garnished and protects an employee from being fired if pay is garnished for only one debt

19. Garnishment of wages – p. 2 CCPA restrictions do not apply to garnishments for child and/or spousal support, bankruptcy, or actions to recover state or federal taxes Other accounts exempt: Veterans benefits, unemployment compensation, SSI payments