Puerto Rico Treasury Department Issues Administrative Determination Exempting Employers from Local Income Tax Withholding for December 2010

Posted on December 8, 2010 by Wage and Hour Practice Group

Flag of Puerto RicoPuerto Rico is a unique jurisdiction from a payroll tax perspective because Puerto Rico private sector employees are not subject to federal income tax withholding. Puerto Rico employees generally owe personal income tax on employment wages earned and are subject to withholdings required by the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA).

As part of the tax reform recently proposed by the Governor of Puerto Rico, the Puerto Rico Secretary of the Treasury issued Administrative Determination No. 10-09 (AD 10-09), which exempts employers from their obligation to withhold Puerto Rico income tax from wages paid in December 2010 and from the 2010 Christmas Bonus. (Note: this is not a discretionary bonus.) AD 10-09 exempts employers and withholding agents from their obligation to withhold income tax at source from wages paid in daily, weekly, biweekly, bimonthly, and monthly payroll periods in December 2010. The Administrative Determination also exempts employers from the requirement to withhold income tax from the 2010 Christmas Bonus.

Any income that is not considered wages or designated as the statutory Christmas bonus is subject to Puerto Rico income tax withholding. Employers should continue making the withholdings required by federal law, including the FICA and FUTA taxes, and other applicable local and employee voluntary deductions.

This entry was written by Niza Motola.

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Utah Joins the Growing List of States Allowing Employers to Pay Wages With "Pay Cards"

Posted on April 29, 2010 by Wage and Hour Practice Group

Effective March 24, 2010, employers in Utah are now permitted to use pay cards to compensate their employees for their wages or salary. The new regulation (Utah Admin. Rule R610-3-22) defines a pay card as a “stored value card that can be used at an ATM-type machine to access wages that are credited to the card.” If an employer in Utah intends to pay employees with a pay card, it must ensure that this new practice meets the following conditions:

  1. With one use, or a single transaction, the employee must be able to withdraw the full amount of earned wages without incurring a fee.
  2. The full amount of wages for a pay period shall be available for the employee via the pay card on the applicable payday.
  3. On each payday, the employer must provide the employee with a written or electronic statement of deductions from the employee’s gross wages for the pay period at issue.
     

Utah is not the only state to permit employers to utilize pay cards for the payment of wages. At this time, many states allow this practice, including: Alaska, Arizona, California, Colorado, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Many of these states, however, have different requirements governing the use of pay cards. Moreover, in a number of these states, it may be unlawful to require employees to accept payment via pay card. As a result, before implementing a pay card system, employers should check the laws in states in which they operate to ensure that any change to existing pay practices complies with state law.

This entry was written by Jennifer L. Mora.

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Maryland Amends Wage Payment and Collection Law

Posted on April 21, 2010 by Wage and Hour Practice Group

State Flag of MarylandThe Maryland General Assembly recently amended the Maryland Wage Payment and Collection Law (MWP&CL) in two significant ways. The MWP&CL governs the timing of payment and payment of wages (such as salary, bonus or commissions) upon the termination of employment.

First, the General Assembly added “overtime wages” to the definition of “wage.” Accordingly, if a court now finds that an employer withheld overtime wages, other than as a result of a bona fide dispute, the employee may be entitled to treble damages. This represents a change from existing court precedent, which provided that an employee could sue for overtime wages only under the Fair Labor Standards Act and the Maryland Wage and Hour Law, but not under the MWP&CL. Notably, the new law fails to provide any guidance to courts about how the conflicting penalty sections of these statutes should be reconciled.

Second, the General Assembly provided the Maryland Department of Labor, Licensing, and Regulation (“DLLR”) with the authority to investigate and adjudicate wage claims of up to $3,000. Upon receipt of a complaint from an employee, DLLR will send a copy to the employer and require a written response within 15 days. Following an investigation, DLLR may issue an order to pay the wages plus interest or dismiss the claim. Significantly, DLLR is not authorized to order attorney’s fees or treble damages, which would otherwise be available to an employee in court.

Within 30 days after receipt of an order to pay wages, an employer may request a de novo administrative hearing. If an employer is unsuccessful at an administrative hearing, it may appeal the decision to a circuit court. However, the court may overturn the administrative decision only if it “is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or is arbitrary or capricious.”

These changes become effective on October 1, 2010.

This entry was written by Steven Kaplan.
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