By Carrie B. Cherveny, Esq.
Developments on the regulatory compliance front promise to keep human resource managers busy during 2019’s second half, responding to new pay reporting rules, a proposed increase in the minimum salary threshold for overtime pay calculations and stepped-up enforcement of the Affordable Care Act (ACA).
You still have time to prepare. Here’s what you need to know – and how to get ready.
Employers with 100 or more employees are required to annually file the EEO-1 report with the Equal Employment Opportunity Commission (EEOC). Originally, the EEO-1 report included racial, ethnicity, gender, and occupational categories. On March 4, a federal judge ruled to reinstate the EEOC’s 2016 pay reporting rule requiring employers to include pay data in the EEO-1 filing.
Under the new EEO-1 reporting rule, employers with more than 100 employees will be required to collect and report aggregated W-2 data and hours worked, based on gender, race, and ethnicity, in 10 job categories, across 12 pay ranges, for each of a company’s physical locations. On April 25, the court held that the EEO-1 is required to collect the traditional EEO-1 data along with pay-data by September 30, 2019. According to the EEOC, it will open its collection portal by July 15. Additionally, the EEOC has committed to providing updated end-user information and training before July 15.
Employers should begin working (immediately) with their reporting vendors to determine the services they may provide in compiling and reporting the data for the EEO-1. Employers that complete the EEO1 report themselves should begin assessing their ability to compile and report data to ensure they are prepared when the EEOC releases the new EEO1 form and opens the portal.
Fair Labor Standards Act (FLSA)
The Department of Labor (DOL) is taking another pass at issuing proposed changes to the overtime calculations under the FLSA. Significantly, the DOL has proposed an increase to the weekly minimum salary threshold for exempt employees from $455 ($23,660 annually) to $679 ($35,309 annually).
Unlike the DOL’s last attempt to revisit the minimum salary threshold, it appears likely this effort will be successful. Additionally, the revised regulations would limit various forms of discretionary bonuses that should be included in the calculation of overtime. Notably, the DOL has not proposed any changes to the duties test. The DOL is accepting comments through May 21 and the final rule is expected by the end of 2019.
In the event that the new threshold becomes law, organizations will need a strategy to become compliant with respect to those employees being paid less than the proposed minimum salary. Employers should review their current exempt employee salaries to identify any employees that fall below the proposed threshold of $679 ($35,309 annually). Employers will have essentially two options for those employees falling below the new threshold: (1) change the employee from exempt to non-exempt; or (2) increase the employee’s salary to the increased minimum salary threshold. Additionally, employers must be sure that compensation changes do not adversely impact any protected class (for example, such as women running afoul of the Equal Pay Act).
Affordable Care Act Enforcement
While the IRS has been engaged in ACA enforcement activity since the fall of 2017, its enforcement activity in 2019 has taken on a new fervor. Employers are receiving ACA enforcement/penalty letters at an increasing volume. In part, the increased volume of letters is attributable to the IRS enforcement year. More specifically, the IRS is currently enforcing calendar-year 2016 which represents the first year in which 2015 transition relief ended (expanding the number of employers subject to the ACA). Compounding matters, the IRS is also imposing penalties for the failure to file and distribute the ACA tax filings (i.e. 1094-C and 1095-C forms).
HR and employee benefits professionals should confer with their ACA service providers in advance of receiving an enforcement letter to ensure they are organized and prepared to respond to IRS ACA enforcement. Work directly with your compliance advisor or broker to review enforcement letters. Additionally, payroll, benefits, and other technology vendors that handle the underlying filings frequently provide enforcement appeal assistance.
HUB International’s team is available to work with you on a diverse range of HR needs, from risk management and regulatory compliance to benefits strategy, program design and workplace culture.