Employment Archives | Page 57 of 105 | EMPLOYEE BENEFITS BLOG

Employee-Shareholder Status

by McDermott Will & Emery | Apr 30, 2013 | Employment

by Katie Clark and Richard Cook

On October 8, 2012, George Osborne announced that the UK Government was proposing a new type of employment contract, dubbed the “employee-shareholder” contract.

The proposals were designed to allow employers to offer their employees shares in the business, at a minimum value of £2,000. In exchange, the employee would forgo certain statutory rights including, most pertinently, unfair dismissal and the right to a redundancy payment. The employees would receive favourable tax treatment on the disposal of the shares, up to a value of £50,000.

During the consultation process, the Government received little positive feedback on the approach, but confirmed in its consultation response that it intended to implement the proposals in any event.

On 24 April 2013, having twice rejected the Government’s proposals, the UK House of Lords accepted concessions made by the Government and voted to accept employee-shareholder status. The proposals are expected to become law in the autumn of 2013.

Details of The New Regime

Employers will now effectively be able to buy certain of their employees’ statutory rights for as little as £2,000.

For the rights to be effectively waived, however, a number of criteria must be met:

Each individual must be given a written statement of the particulars of their employee-shareholder status. This must specify the employment rights that he/she will forgo and detail the rights, restrictions and other conditions attached to the shares.
The individual must be given independent legal advice as to the terms and effect of entering into the scheme. Unless independent advice is received, and the individual has been given seven days to consider the advice, the employee’s employment rights will not have been waived.
The employer will need to meet the reasonable cost of the legal advice, even if the offer is not taken up.

The right to claim discrimination and claims of automatically unfair dismissal, including whistleblowing, are excluded from the waiver.

What Does This Mean for Employers?

In theory, employee-shareholder status will provide more flexibility for employers in recruitment, and the potential to mitigate legal risk, by offering an up-front payment, in the form of shares, of as little as £2,000.

In practice, however, the intricacies of the offer-acceptance process are likely to mean that employees will be very well informed, making them less likely to “sell” their valuable employment rights for as little as £2,000. There is also scope for technical errors to be made in the new, more complex, process that may result in the employee receiving £2,000 but still retaining his or her statutory rights.

Nonetheless, if implemented properly, employee-shareholder contracts could be a valuable tool for employers who are looking to build flexibility into their workforce. The question is whether employees, given the inherent value of the rights they are being asked to give up, and the risk of a fall in the value of their shares, will find the proposition an attractive one.

For further information, or for assistance in setting up an employee-shareholder arrangement, please [...]

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Final Rule Implementing FMLA Amendments Expands Protections for Military Families and Airline Flight Crews

by McDermott Will & Emery | Apr 11, 2013 | Employment, Health and Welfare Plans

by Stephen D. Erf, Heather Egan Sussman and Sabrina E. Dunlap

The U.S. Department of Labor recently issued a final rule implementing new expanded rights for families of military members and veterans, and greater access to Family and Medical Leave Act (FMLA) leave for airline flight crews. Companies should review and update their FMLA policies to account for this new rule.

To read the full article, click here.

UK Employment Alert: Increase in Employment Protection Awards

by McDermott Will & Emery | Apr 9, 2013 | Employment

by Katie Clark and Paul McGrath

The compensation limits on Tribunal awards will increase as of 1 February 2013. The key changes are set out below.

Statutory Redundancy Pay

The maximum amount permitted for calculation of a week’s pay will rise from £430 to £450; the maximum entitlement to Statutory Redundancy Pay will therefore rise from £12,900 to £13,500.

Basic Award

The current maximum amount for a week’s pay will rise from £430 to £450; the maximum Basic Award will therefore rise from £12,900 to £13,500 (which would be awarded to an employee aged 61+ with 20+ years service).

Minimum Basic Award for Defined Dismissals

The minimum Basic Award a Tribunal can award for certain dismissals, i.e., those relating to certain employee representative, health and safety and working time cases, will rise from £5,300 to £5,500.

Maximum Compensatory Award

The maximum Compensatory Award a Tribunal can award in most cases of unfair dismissal will rise from £72,300 to £74,200.

The maximum total award for unfair dismissal (i.e. maximum unfair dismissal compensation plus maximum basic award) will therefore rise from £85,200 to £87,700.

What Does This Mean for Employers?

The changes will take effect on 1 February 2013 and will be applicable to dismissals taking effect on or after that date.

It is important for employers to note that:

If an employee is given notice prior to 1 February 2013, but the notice period will expire on or after 1 February 2013, the new limits set out above will apply to that dismissal.
If an employee is paid in lieu of notice, the effective date of termination (EDT) is the actual date, plus the amount of statutory notice applicable to the employee, i.e., one week per year of employment, up to a maximum of 12 weeks. If the statutory notice would take the EDT to or beyond 1 February 2013, the new limits will apply (but see also our most recent employment alert How to Terminate Employment and Exercise a Payment in Lieu of Notice Clause).

Employers’ exposure in the event of an unfair dismissal claim will rise and should be factored into decision making regarding litigation or settlement strategies.

New Regulations Pave The Way for Increased Employee Owned Companies

by McDermott Will & Emery | Apr 4, 2013 | Employment

by Hugh Nineham and Tara Walsh

The UK Department for Business, Innovation and Skills (BIS) published on 4 July 2012 the final report from the Nuttall Review of Employee Ownership (the Nuttall Review). It identifies a number of barriers to the creation and uptake of employee ownership arrangements. The Nuttall Review identified significant economic and social benefits in employee ownership, which the UK Government has endorsed.

As a result, the UK Government has published new regulations to deregulate the current share buyback regime, which are to take effect later this year and intend to simplify the current overly burdensome rules.

To read the full article, click here.

Demystifying Roth 401(k): Old and New Rules and New Opportunities

by McDermott Will & Schulte | Mar 28, 2013 | Employee Benefits, Employment

Tuesday, April 9, 2013
12:30 pm – 1:30 pm EDT

To register, please click here.

Recent legislation that expands the availability of in-plan Roth conversions has reinvigorated 401(k) plan sponsors’ interest in adopting or expanding a Roth 401(k) feature. Even before the new legislation, studies showed Roth 401(k) gaining significant traction. Join McDermott Will & Emery as we demystify the mechanics of Roth 401(k) and help your organization determine whether to adopt or expand a Roth 401(k) feature. Specific topics will include:

Roth 401(k) history and basics
Pros and cons of adopting a Roth 401(k) feature
Mechanics of in-plan Roth conversions under old and new legislation
Interaction of Roth 401(k) with automatic enrollment and safe harbor 401(k) plans

McDermott Speakers
Nancy S. Gerrie, Partner
Diane M. Morgenthaler, Partner
Elizabeth A. Savard, Partner

For more information, please contact Carolyn Verscaj.

IRS Provides Additional Favorable Guidance on Recently Modified Voluntary Classification Settlement Program

by McDermott Will & Schulte | Mar 21, 2013 | Employment

by Jeffrey M. Holdvogt, Ruth Wimer and David Diaz

On February 27, 2013, the Internal Revenue Service (IRS) issued News Release IR-2013-23 to provide additional favorable guidance regarding modifications to the Voluntary Classification Settlement Program (VCSP) issued in Announcements 2012-45 and 2012-46 addressing worker classification issues. The VCSP allows eligible employers to voluntarily reclassify their workers for federal employment tax purposes and obtain considerable “forgiveness” for previous non-employee treatment. The IRS describes the program as a “low-cost option” for achieving certainty under the law by reclassifying workers as employees for future tax periods.

To read the full article, click here.

IRS Releases Draft Revised Form 5300 and Instructions

by McDermott Will & Emery | Feb 26, 2013 | Employment, Retirement Plans

by Anne S. Becker, Natalie M. Nathanson and Brian A. Benko

The Internal Revenue Service (IRS) recently released a draft revised Form 5300 and its instructions. Form 5300, the Application for Determination for Employee Benefit Plan, is generally used to request an IRS determination that an individually designed retirement plan meets the requirements for tax qualification under Sections 401(a) and 501(a) of the Internal Revenue Code. Because the draft revised Form 5300 contains numerous changes, plan sponsors and their advisors will need to carefully review the revised instructions, once they are finalized, in anticipation of submitting a Form 5300. Although the IRS did not propose an effective date for the revised Form 5300, it could replace the current version effective for determination letter submissions filed as early as February 1, 2013 (i.e., effective for Cycle C filers).

To read the full article, click here.

UK Employment Alert No 206: How to Terminate Employment and Exercise a Payment in Lieu of Notice Clause

by McDermott Will & Emery | Feb 12, 2013 | Employment

by Sharon Tan and Paul McGrath

The UK Supreme Court has provided guidance about two issues of importance for employers wishing to dismiss a UK employee:

What happens when an employer dismisses an employee in a manner that breaches the terms of the employee’s employment contract? Is the employment relationship immediately brought to an end despite the employer’s breach, or does it continue?

If an employer wishes to rely on a payment in lieu of notice (PILON) clause, is it enough simply to make the payment of money required by the PILON clause, or is something more required?

To read the full article, click here.

Employers Can Obtain Refund for Excess FICA Tax Paid as Result of Increased Excludable Limit for Transit Benefits

by McDermott Will & Emery | Jan 24, 2013 | Employment

by Maureen O’Brien and Ruth Wimer

On January 11, 2013, the Internal Revenue Service published Notice 2013-8 providing a special administrative procedure for employers with respect to 2012 transit pass benefits. The American Taxpayer Relief Act retroactively increased the monthly transit benefit exclusion under Section 132(f)(2)(A) of the Internal Revenue Code for commuter highway vehicles or transit passes from $125 per participating employee to $240 per participating employee for the 2012 calendar year (the monthly transit benefit exclusion for parking remains at $240). The notice addresses employers’ questions regarding the retroactive application of the increased exclusion, which can result in both decreased FICA and federal income tax liability. Employers acting promptly, in many cases by January 31, may have less administrative burden in obtaining a benefit for themselves and their employees with respect to the retroactive increase for employer-provided transit benefits.

To read the full article, click here.

April 15th Deadline for Filing FICA Refunds for Severance Pay

by McDermott Will & Emery | Jan 22, 2013 | Benefit Controversies, Employment

by Robin Greenhouse, Andrew Liazos and Ruth Wimer

Severance pay due to an involuntary separation from employment resulting from a reduction in force, plant shutdown or similar condition may be exempt from FICA taxes. As we reported in September 2012, the U.S. Court of Appeals for the Sixth Circuit found in Quality Stores that severance pay is not required to be tied to continued eligibility for unemployment benefits in order to be exempt from FICA. (Click here for more details regarding the Quality Stores decision.) Shortly after this decision the Internal Revenue Service (IRS) requested that the Sixth Circuit reconsider its decision in an en banc review (i.e., a hearing before all judges on the circuit court). Earlier this month, the Sixth Circuit denied this request.

The Quality Stores decision creates a clear split with the U.S. Court of Appeals for the Federal Circuit. In light of the Sixth Circuit’s denial, the IRS will likely file a writ of certiorari with the Supreme Court of the United States seeking a reversal of the Quality Stores decision. For now, the IRS is refusing refund claims outside of the Sixth Circuit and taking no action with respect to refund claims within the Federal Circuit (states within the Sixth Circuit are Kentucky, Ohio, Michigan and Tennessee). For now, employers should continue withholding FICA taxes on severance pay that is not tied to unemployment benefits.

Employers that have made severance payments due to reductions in force, plant shutdowns or similar conditions should consider filing protective FICA tax refund claims. Only a limited period of time is available to file. In general, the statute of limitations for tax refund claims is three years. As a result, April 15, 2013, is the due date for taxpayers for filing a refund claim with respect to the 2009 calendar year. A refund claim cannot be filed with respect to severance payments made before 2009.

Filing a protective claim is relatively simple to do. It is not necessary that the protective claim include exact calculations and employee consents for the refund filing. This information and the required employee consents can be provided at a later time in a supplemental filing. It is recommended that all employers file protective claims, particularly with respect to severance payments made to employees located in the Sixth Circuit.

If a FICA tax refund has been filed and the IRS has issued a notice of claim disallowance, the taxpayer must either (i) bring suit to contest the disallowance within two years after the issuance of this notice or (ii) obtain an extension of the time to file such a suit with the IRS—this process can be initiated by filing IRS Form 907, Agreement to Extend the Time to Bring Suit.

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