Basic Terms Flashcards
2021 definition of a highly compensated employee
Test 1: The employee was a 5% owner at any time during the year or the preceding year.
Test 2: The employee received more than $130,000 in pay for the preceding year. The IRS gives you the option to ignore tes 2 if the employee was not also in the top 20% of employees when ranked by pay for the preceding year.
Acronym for Davis-Bacon Act
DBRA
Another name for the independent contractor Reasonable Basis Test
Section 530 Relief
Another name for the white-collar exemption salary threshold
Salary level test
Are workers’ compensation payments taxable?
No
Criteria for enterprise coverage under the FLSA.
2 or more employees engaged in producing goods for interstate or foreign commerce
Annual gross volume of no less than $500k
Criteria for individual coverage under the FLSA
Any individual who regularly and recurrently engages in interstate commerce no matter how minimal the activity is.
Criteria to qualify for Section 530 relief.
Any of the following:
- Court ruling or other judicial precedent
- Published IRS rulings
- Past IRS Audit did not result in penalties being assessed for workers in substantially the same position
- Longstanding industry practice
The current federal minimum wage
$7.25 as of 7/24/2009
Define a common law employee
When the employer has the right to control what will be done and how it will be done the worker is a common law employee.
Define an employee exempt under the Administrative classification.
- Min salary $684 per week
- Primary duty must be the performance of office or non-manual work directly related to management or general business operations of the employer or the employer’s customers.
- Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
Define an employee exempt under the Commissioned Retail Employees classification
- Applies to retail and service establishments with 75% of annual sales volume from goods or services not for resale
- OT exemption for if all of the following are true: Employee’s regular rate of pay exceeds 1.5 times the fed min wage and more than half of the employee’s earnings for the period are commissions.
Define an employee exempt under the Creative Professionals classification
- Paid on a salary basis at a rate not less than $684 per week.
- Primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor
Define an employee exempt under the Executive classification
- Min salary $684/week
- Primary duty managing the enterprise, or a dept or subdivision
- Customarily and regularly direct the work of at least 2 or more other full-time employees or their equivalent
- Authority to hire or fire, or the suggestions as to the hiring, firing, or promotion of other employees must be given particular weight.
Define an employee exempt under the Learned Professionals classification
- Min Salary $684/week
- Primary duty must be work requiring advanced knowledge, defined as work which is intellectual in character and includes work requiring the consistent exercise of discretion and judgment
- Advanced knowledge must be in a field of science or learning and customarily acquired by prolonged specialized intellectual instruction.
Define an employee exempt under the Outside Salespeople classification
- Primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.
- must customarily and regularly engaged away from the employer’s place of business
- There is no salary requirement
Define “Constructive Receipt”
When pay is available to the employee free of “substantial limitations or restriction”
Define interstate commerce
Trade, commerce, transportation, transmission or communications among the several states or between any state and any place outside thereof
Definition of a holder in due course
Possesses a financial instrument (aka a check), received the check for value, took the check in good faith and without notice that it is overdue, has been dishonored or that there is any defense to payment on the part of any person
Do employers have to provide a lactation space even if they don’t have any nursing mother employees?
No, only when there is an employee who has a need to express milk.
Does managing 4 employees who each work 20 hours per week satisfy the Executive exemption requirement of directing the work of at least two or more full-time employees?
Yes
Does managing independent contractors satisfy the Executive exemption requirement of directing the work of at least two or more full-time employees?
No
Examples of covert check stock security features
Chemical sensitive paper, invisible fluorescent fibers, toner adhesion and fugitive ink backer
Examples of overt check stock security features
Warning bands, holograms, heat-sensitive ink, visible fibers, the padlock icon and true watermarks
Federal taxes a common law employee’s wages are subject to
FIT, Social Security and Medicare tax, FUTA
Form to report wages of a common law employee.
Form W-2
Form you use to report payments to an independent contractor
Form 1099-MISC
General Requirements of Statutory Employees.
- Agree with employer to perform all work personally
- Not make a substantial investments in business equipment or facilities
- Work must be part of an ongoing relationship with the employer
Hours may be rounded in what increments
- Tenths of an hour
- Nearest five minutes
- Nearest quarter hour
How many breaks is a nursing mother entitled to under the Nursing mothers amendment?
A reasonable amount of break time to express milk as frequently as needed by the nursing mother.
How much must an employee earn monthly in tips in order for the employer to take the tip credit?
$30
How should you treat a worker while waiting for the IRS response to your SS-8 submission?
As an employee
Is travel time to and from an employee’s principal place of performance compensable?
No, based on the Portal - to - Portal Act
Key points of independent contractor Reasonable Basis Test
If any of the following are true:
- Court ruling or other judicial precedent for similar workers as contractors
- Published IRS rulings with regards to the particular type of worker
- Past IRS Audit did not result in penalties assessed for workers in substantially the same position
- Longstanding industry practice for treating these types of workers as contractors
Key points of the Davis-Bacon Act
- Applies to construction contracts or federally assisted contracts in excess of $2,000 with the US or DC
- Contract must contain minimum wages to be paid to various classes of workers
- Construction contracts are for the construction, alteration, or repair of public buildings or public works
- The Sec of Labor sets prevailing wages and fringe benefits
Key points of the McNamara-O’Hara Service Contract Act
- Applies to service contracts in excess of $2,500 with the US or DC
- Requires contractors and subs performing services on prime contracts to pay service employees in various classes no less than the prevailing wage and fringe benefits in the locality of the rates contained in a predecessor contractor’s collective bargaining agreement
Key points of the Walsh-Healey Public Contracts Act
- Applies to contractors engaged in the manufacturing or furnishing of materials, supplies, articles, or equipment to the US or DC
- Contractors must pay employees who “produce, assemble, handle, or ship goods under contracts exceeding $10k the fed minimum wage for all hours worked and 1.5 times their regular rate of pay for all hours worked over 40 in a workweek
Law that requires employers to provide break time for mothers to express milk
The Nursing Mothers Amendment
Limitation on the IRS with regards to defining a longstanding industry practice
- Longest period the IRS may require you to show the industry practice has existed in 10 years.
- May not require you to demonstrate that any more than 25% of the industry follows the practice
List the 4 types of statutory employees
- Agent or commissioned drivers who deliver food, beverages (except milk), laundry or dry cleaning
- Full-time insurance agents who work primarily for one company
- Full-time traveling salesperson
- An individual who works for you is you provide the materials and specifications of the work to be done.
List the types of statutory non-employees.
Qualified Real Estate Agents
Direct Sellers
Certain companion Sitters
Name the 3 tests that must be met for an employee to be exempt from the FLSA overtime and minimum wage requirements
- Salary basis test
- Salary level test (aka salary threshold)
- Duties test
Name the 2 basic tests to determine if a worker is an independent contractor
- Common law test
- Reasonable basis test
Name the 2 types of coverage under the FLSA
Enterprise coverage
Individual Coverage
Penalty rates for misclassifying an employee as a nonemployee
Penalty rate if employer filed required information returns - 20% of the employee rate for Soc Sec and Medicare - 1.5% of wages for income tax withholding penalty rate if employer did not file required information returns - 40% of the employee rate for Soc Sec and Medicare 3% of wages for income tax withholding
PPACA
Patient Protection and Affordable Care Act of 2010
Purpose of the EEOC
- End employment discrimination
- Promote voluntary action programs
- Enforce provisions under the Equal Pay Act of 1963
Requirements of the Nursing Mothers Amendment
Provide reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child’s birth each time such employee has need to express milk. Provide a place, other than a bathroom, shielded from view and free from intrusion from coworkers and the public.
Salary deductions disallowed from an exempt employee’s salary
- For variances in the employee’s quality or quantity of work
- For absences necessitated by the employer
- For time when the employee is ready, willing and able to work but the employer has no work available
Statute of limitations to file claims for unpaid wages?
2 years (3 years for willful violations)
Statute of limitations to file claims for unpaid wages was implemented as part of what act?
The Portal-to-Portal Act
Taxes you must withhold from payments to an independent contractor
None, unless the worker is subject to backup withholding
Taxpayers eligible for VCSP
- Federal, state and local government entities
- Exempt organizations
- Private corporations and businesses
- a previously IRS or DOL audited taxpayer who has complied with the results of the previous audit and is not currently contesting the classification in court
Taxpayers ineligible for VCSP
- State and local gov entities whose workers are covered under a Section 218 Agreement
- A taxpayer who is currently under employment tax audit by the IRS or currently under audit by the DOL or a state agency with regard to the classification of workers
- A member of an affiliated group is ineligible if any member of the affiliated group is under employment tax audit
True or False: Constructive receipt occurs when the employer mails the paychecks
False. Constructive receipt occurs when the post office delivers the check.
True or False: If a business does not fall under the FLSA based on enterprise coverage then all the employees within the business are exempt from the FLSA
False. Enterprise coverage test is separate form the individual coverage test therefore individual employees within the business may be covered by the FLSA
Type of contracts the McNamara-O’Hara Service Contract Act applies to
Service contracts in excess of $2,500 with the U.S. and the District of Columbia
Type of employees the nursing mothers amendment applies to
Non-exempt employees
Types of businesses covered by the FLSA under enterprise coverage regardless of their annual gross volume.
- Hospitals
- Government agencies
- Public and private schools
- Nursing care facilities
Types of paid time off the FLSA requires an employer to pay
None
VCSP
Voluntary Classification Settlement Program
VCSP tax settlement amount
Generally 10% of the employment tax liability due on worker compensation paid in the most recent tax year 25% for employers using the temporary eligibility expansion
Wage an employer may pay a tipped employee if taking the maximum tip credit
$2.13/hour, if the employee receives in tips at least the remainder of the required minimum wage.
What does the FLSA govern?
- Minimum wage
- Overtime law
- Record keeping
- Child labor
- Equal Pay
What does the McNamara-O’Hara Service Contract Act govern?
Requires contractors and subs performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the prevailing wage and fringe benefits in the locality.
What factors are considered under the independent contractor common law test?
- Relationship
- Financial Control
- Behavioral Control
What federal taxes do you withhold from statutory employees and what special reporting is required on the W-2?
- Social Security and Medicare tax
- FUTA under certain circumstances
- Mark the statutory employee box on Form W-2
What is form SS-8?
Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding
What is the Davis Bacon Act?
requires each contract over $2k with the U.S. for the construction, alterations, or repair of public buildings or public works shall contain a clause setting for the minimum wages to be paid to various classes of laborers.
What is the federal “fair pay” rule?
Effective Aug 2004 workers earning less than $455/week were guaranteed overtime protection
What is the Portal-to-Portal Act?
An amendment to FLSA law providing clarification regarding travel and other activities before and after the workday.
What is the “salary basis test”?
To be exempt white-collar worker must be paid a guaranteed weekly salary regardless of the number of hours actually worked during the workweek or the quality of quantity of the work.
What is the “salary threshold”?
Minimum salary amount for white-collar exemption $684/week
When is an activity that employees must perform before beginning or ending their shift compensable?
When it is “integral and indispensable” to performing their duties.
When is an activity that employees must perform before beginning or ending their shift NOT compensable?
When the activity is preliminary to or postliminary to said principal activities, unless there is a custom or contract to the contrary.
When is it allowable to make full day deductions from an exempt employee’s salary?
- Full day absences under a bonafide sick or disability plan, or for personal reasons
- Penalties for significant safety rules infractions
- Disciplinary suspensions of 1 or more full days for conduct infractions
- FMLA Unpaid leave
- May pro-rate an salary for first and final weeks of employment
- Do not need to pay for any workweek that they do not perform any work.
When is it allowable to make partial day deductions from an exempt employee’s salary?
- Partial day deductions may be made to the exempt employee’s paid time off accrual balance as long as the employee receives their guaranteed salary for the week
- to offset monies the employee receives for jury duty or witness fees or military pay
When may you pay the youth minimum wage?
During the first 90 days consecutive calendar days of employment of an employee under years old.
When should you use form SS-8?
If after applying the reasonable basis and common law tests you still can’t determine if a worker is an employee or an independent contractor.
When was the nursing mothers amendment passed?
March 23, 2010 as part of the Patient Protection and Affordable Care Act It is an amendment to the FLSA
Who enforces the FLSA compliance?
The U.S. Department of Labor
The work restrictions on 14-15 year olds.
- Work outside school hours in non-manufacturing, non-mining, non-hazardous jobs
- Work no more than 3 hrs on a school day or 18 hrs in a school week.
- Work no more than 8 hrs on a non-school day or 40 hrs in a non-school week
- Work between 7am - 7pm, except from June 1 to Labor Day, evening hours are extended to 9 pm.
The work restrictions on minors 14 years and younger
May be employed by a parent or in a specific allowed occupations only (i.e. acting, newspaper carrier, babysitting) Parents may not employ in a hazardous industry such as manufacturing or mining
The work restrictions on minors 16-17 years old
May not work in hazardous jobs
No limit on work hours or time of day
Year the Portal-to-Portal Act implemented
1947
The youth minimum wage
No less than $4.25 per hour
