Outsourcing agreements are behind the most important vendor relationships. They therefore require a detailed review as part of the due diligence process of any M&A deal or spinout transaction. With more and more businesses relying on outsourcing, the underlying agreements have become an important factor in M&A transactions.
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On September 19, 2017, in the ongoing lawsuit the US Equal Employment Opportunity Commission (EEOC) brought against Orion Energy Systems Inc. (Orion) regarding its wellness program, a Wisconsin federal judge found that Orion’s wellness program was voluntary. The employees have a choice between participating in the program or paying the full price for health benefits. The final results of this case remain to be seen since the judge also held that the EEOC can apply its new rules on such wellness programs retroactivity.
The government has published its response to feedback received on its proposals to simplify the taxation of termination payments, expected to come into force in April 2018.
The following table sets out the main proposals and the effect these will have on employers. Importantly, there is no change to the current £30,000 tax free allowance.
Proposal Change Effect 1. Termination payments above £30,000 to be subject to employer National Insurance contributions (NICs). Currently, termination payments above £30,000 only attract income tax, not NICs.
Currently, contractual and non-contractual PILONs are taxed differently.
Contractual PILONs (that are provided for in the employment contract) are treated as earnings and subject to income tax and both employer and employee NICs. Non-contractual PILONs, which are paid in the absence of the contractual right to do so, are subject to income tax, but not NICs.
It isn’t always straightforward to determine whether a PILON is contractual or not given that HMRC can also have regard to the regularity with which the employer pays PILONs.
This clarification is actually welcome given the differences in opinion which can arise when negotiating a settlement agreement. 3. Injury to feelings awards (such as for harassment or discrimination) will not qualify for general injury tax exemptions.
There is an exemption to income tax on termination payments, in addition to the £30,000 threshold, when a payment is made because of death, disability or injury of the employee.
It is currently unclear whether injury to feelings awards qualify for the exemption as there have been contradictory decisions on the point. This proposal would provide additional welcome clarity, but in common with all 3 proposals, means increased cost to employers.
These changes are likely to come into force in April 2018. Given that items 2 and 3 in the table clarify points that are currently argued either way, a prudent employer might want to veer on the side of caution when considering those issues before April 2018.
Lauren Goda (Trainee) contributed to this article.
On June 22, 2016, the Internal Revenue Service (IRS) issued proposed changes to the regulations under the Internal Revenue Code (Code) §409A. The Code intends to clarify or modify a wide range of very restrictive rules pertaining to “nonqualified” deferred compensation plans as well as other types of compensation arrangements that may defer compensation. The proposed changes are designed to benefit taxpayers, with a few intending to close potential loopholes.
The following PowerPoint highlights key points from the proposed regulations and what employers and employees should know and can expect moving forward.
On July 1, 2016, Occupational Safety and Health Administration (OSHA) increased the maximum penalties under the Occupational Safety and Health Act by about 78 percent to account for inflation. Acting under authority conferred by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. 114-74, 701 (part of the Bipartisan Budget Act of 2015), OSHA published an interim final rule that will on August 1, 2016, increase penalties for OSHA violations as follows:
Other-than-serious violations: From $7,000 to $12,471
Serious violations: From $7,000 to $12,471
Repeated violations: From $70,000 to $124,709
Willful violations
minimum: From $5,000 to $8,908
maximum: From $70,000 to $124,709
Failure to abate: From $7,000 per day to $12,471 per day
Penalties under the Federal Mine Safety and Health Act of 1977 were also changed to account for inflation, as follows:
The maximum penalty for most violations will now be $68,300.
The minimum penalty for unwarrantable failure violations under Section 104(d)(1) of the Mine Act will now be $2,277.
The minimum penalty for unwarrantable failure violations under Section 104(d)(2) of the Mine Act will now be $4,553.
The minimum and maximum penalties for failure to provide timely notification under Section 103(j) of the Mine Act will now be $5,692 and $68,300, respectively.
The maximum penalty for failure to abate will now be $7,399 per day.
The maximum penalty for flagrant violations will now be $250,433.
Questions about these changes should be directed to Art Sapper at +1 202 756 8246.
Now that same-sex marriage is legal in all 50 states, most benefits plans will treat same-sex spouses the same as opposite-sex spouses. But several tricky issues remain. For example, what if an employer with religious beliefs wants to continue to exclude same-sex spouses from receiving benefits under its retirement plans? Or its medical and dental plans? Are employers that deny coverage vulnerable to sexual orientation and/or sex discrimination lawsuits under state and local law or to federal Title VII lawsuits? What has the EEOC said about this issue? In addition, should employers consider dropping benefits for unmarried partners? Is the answer different if the employer’s plans cover both same-sex and unmarried opposite-sex partners?
The following presentation highlights some of these considerations.
Both the State of New York and the City of San Francisco recently granted paid family leave to eligible employees. Paid family leave becomes effective on January 1, 2017, in San Francisco and on January 1, 2018, in New York.
Don’t panic. The United Kingdom will continue to be an EU Member State until procedures are completed for exiting the European Union, which is likely to be at least two years. Until a withdrawal agreement is reached, EU laws and treaties will still apply, including the right for EU nationals to work in the United Kingdom. This means that all current EU-derived employment laws should remain in place for at least two years.
On May 25, 2016, the German Federal Labor Court confirmed a decision of the State Labor Court Berlin-Brandenburg (reference number: 5 AZR 135/16) regarding the statutory minimum wage in Germany. The German Federal Labor court confirmed that, under certain conditions, vacation and Christmas bonuses may also be considered when determining if an employer pays his employees the statutory minimum wage in Germany. This was the first time that the German Federal Labor Court had considered this issue. (more…)
On June 21, 2016 the IRS issued proposed regulations to modify and clarify existing regulations under Section 409A of the Internal Revenue Code. Many of these changes resulted from practitioner comments and the IRS’ experience with Section 409A after issuing the final regulations. Overall, most of the proposed changes are favorable, and may provide some planning opportunities.
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