Prepared by Ted Gentry
IRS and DOL Issue Guidance Regarding Same-Sex Marriage
The IRS and the Department of Labor (DOL) have both issued initial regulatory guidance (Revenue Ruling, 2013-17 and Technical Release 2013-04, respectively) regarding interpretation of the terms “marriage” and “spouse” under the Internal Revenue Code and ERISA. This guidance states that for purposes of federal tax laws and ERISA, a marriage will be recognized if it was lawful in the jurisdiction (state or foreign country) in which it was performed. The current state of residence is irrelevant. However, the terms “spouse” and “marriage” are not applicable with respect to any individuals in a domestic partnership, civil union or other arrangement recognized by state law but not denominated as a “marriage.” For federal tax purposes, this guidance became effective September 16, 2013 (with optional retroactive effect for payroll and tax refunds within the statute of limitations). Note that the Family and Medical Leave Act (FMLA) defines marital status based on the law of the state where an employee currently resides, so an employee legally married to a same-sex partner in one state who moves to a state that does not recognize same-sex marriage will not be recognized as married for FMLA purposes while they remain in that second state. Obviously this guidance does not cover all potential issues related to same-sex marriages or even all laws under the jurisdiction of the DOL, and any current or future guidance issued by federal agencies will not have any effect with respect to state tax or employment laws. Both the IRS and the DOL intend to issue additional guidance.
Payroll Cards — Practical Benefits and Potential Liability
Nationally, employers are increasingly using payroll cards to process and disburse their employees’ wages. Under this payroll method, employers (i) establish accounts with financial institutions for their employees, (ii) deposit employees’ wages into the accounts, and (iii) instead of issuing paychecks or using direct deposit, issue employees payroll cards tied to those accounts. Employees may then use the payroll cards to get cash, transfer money, or make purchases as they would with their debit or ATM cards.
The payroll card system is useful for employers as they can avoid the biggest problems associated with a paper payroll: check delivery fees, lost or stolen checks, and a large carbon footprint. Employees who want the convenience of direct deposit but lack the required bank account can also benefit from a payroll card system. However, depending on how the system is structured, employees using payroll cards may find that their accounts are subject to access fees, withdrawal fees, transfer fees, and balance inquiry fees (collectively the “Services Fees”).
Federal regulators have taken notice. In a recently published bulletin, the Consumer Financial Protection Bureau announced that employers must permit employees to either (i) choose the financial institution where their payroll card account will be issued, or (ii) choose whether to receive a payroll card, direct deposit, or a paper check. Moreover, if the charges by payroll card account providers decrease an employee’s wage below the federal minimum wage, employers may be exposed to Fair Labor Standards Act liability.
In addition to federal regulations, South Carolina employers should be aware of existing South Carolina laws regulating the electronic payment and deposit of wages. Employers may use a payroll card system as South Carolina’s payment of wages statute permits employers to deposit employee wages at a financial institution. However, employers doing so must give their employees (i) written notification of the amount and type of any deductions, including Services Fees, from their wages, (ii) written notification, seven days in advance, of any increase in such deductions, and (iii) one withdrawal of wages free of any Service Fees per deposit.
South Carolina employers with employees in multiple states should know that other states may (i) prohibit the use of payroll cards or (ii) permit the use of payroll cards but have additional or different applicable regulations.
Do not hesitate to contact Wyche for guidance on establishing or reviewing a payroll card policy, or if you have general questions about your payroll system.
State Wage Notification, Posting, and Record Retention Requirements and Penalties
While we are discussing wage payment logistics, South Carolina employers should be aware of the state’s laws regarding wage notification and posting, and the penalties for violating these provisions. South Carolina’s payment of wages statute requires employers to, among other things, (i) notify employees, at the time of hire, of their wages, deductions, and time/place of payment, (ii) keep records of wages paid for each pay period for the past three years, and (iii) pay employees within 48 hours of separation of employment or by the next regular payday after the separation. Employers violating the payment of wages statute face potential fines of $100 for each offense, treble damages for unpaid wage claims, and attorney fees and other costs associated with enforcing the statute. The South Carolina Department of Labor, Licensing and Regulation provides a sample Terms of Employment Notice to meet the wage notification requirements.
Please let us know if we can help you get and stay compliant with South Carolina’s payment of wages statute.
Record Retention Guidelines – Part 2
In an earlier edition of Wyche at Work, we discussed how long certain documents pertaining to applicants and employees should be retained. This month we are following up with more information on recordkeeping practices to ensure compliance with state and federal guidelines.
The U.S. Department of Labor’s Wage and Hour Division’s regulations governing records related to wages do not dictate a particular order or form in which records must be kept. However, federal law requires that some records be maintained in a file separate from the employee’s general personnel file. Here are some guidelines for establishing a sound recordkeeping practice:
- Develop clear guidelines for employee access to files.
- Maintain general personnel files including documents listed in our previous article in a locked cabinet. If you maintain records electronically, make sure you have strong security and password protections. Limit access to a need-to-know basis.
- Keep each of the following files in a locked and secure location (or if maintained electronically, with proper password protections), separate from general personnel files. Limit access to a need-to-know basis.
- Medical, health and safety information, including drug test results
- Form I-9
- EEO data collection
- Information containing protected class information (age, gender, national origin, etc.), social security numbers, or arrest records
- Investigation files for harassment or other complaints.
If we can assist with establishing a sound records retention policy for your company, please let us know.
In Our Next Issue: Social Media and the Workplace
As highlighted by previous editions of Wyche at Work, social media has become a seemingly permanent fixture in the workplace. Accordingly, employers are facing far more legal risk when accessing, regulating and utilizing social media in the workplace. Over the next two editions of Wyche at Work, we will highlight the legal risks associated with social media and how to best navigate those risks. Our discussion will focus on (i) asking for and viewing candidates’ social media accounts to make hiring decisions, (ii) regulating employee conduct on their social media accounts, and (iii) creating manageable bring your own device policies and company social media ownership policies.
Stay tuned to Wyche at Work for this exciting series.
If you have any questions about these or other workplace law topics, please contact Ted Gentry.
This update is provided by Wyche for educational and informational purposes only and is not intended and should not be construed as legal advice.