Tips, Taxes & Finance Updates
Click here for a Lodging Business Tax Guide from the Washington State Department of Revenue. Specific guidance for hotels, motels, bed & breakfasts, resorts, and RV parks is available.
Can A Paid Break Become Unpaid?
By John E. Thompson
Acme Corporation’s longstanding policy is to give non-exempt employees two 10-minute rest breaks each workday. It treats these breaks as paid worktime. Management recently realized that, over the years, most of the employees have gradually come to be spending 15 to 20 minutes or even a little longer on each break. Acme sent out a memo reminding everyone that the breaks are limited to 10 minutes, but it had no effect. Could Acme start considering the over-10-minute extensions to be unpaid time? Read full labor article from Fisher & Phillips »
As The Economy Struggles, EEOC Charges Increase
By Robert K. McCalla
The cataclysmic effects of the longest and deepest recession since the 1929 depression will significantly change many aspects of our society for generations. The devastating impact of the recession on large segments of the workforce can be counted as one of the more significant effects. While it remains to be seen how the recession will change the psyche of this generation over the long term, one objective measure showing one aspect of the change is the large increase in EEOC charges as the economy nose dived. Read full labor article from Fisher & Phillips »
The Future of Tip Credit – And The Businesses That Depend Upon It
By Karen L. Luchka, J. Hagood Tighe
The U.S. Supreme Court is being asked to decide what amounts to the future of tip credit for many businesses – particularly in the hospitality industry. In short, the issue is whether an employer can continue to pay tip credit employees on a tip credit basis if they spend more than 20% of their work time on duties that did not produce tips. Read full hospitality update from Fisher & Phillips»
Tip Pooling by Restaurants Gets a Judicial Thumbs Up
by Timothy J. Calderbank and Kyle D. Sciuchetti of Bullivant Houser Bailey PC
The Ninth Circuit Court of Appeals in Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir 2010) recently affirmed a lower court decision that allows restaurants to require waiters and waitresses to participate in a tip pooling arrangement. Tip pooling is designed to distribute tips to those restaurant workers, such as kitchen staff, who do not ordinarily receive tips. The Ninth Circuit held that such a requirement is not in violation of the Fair Labor Standards Act (FLSA) of 1938.
In Cumbie, a waitress objected to a tip pooling arrangement instituted by her employer and brought a lawsuit alleging that the arrangement violated the minimum-wage provisions of the FLSA. Defendant Woody Woo argued that Cumbie might be correct in her reading of the FLSA if, and only if, the employer in question took a “tip credit” toward its minimum-wage obligation. Woody Woo, however, did not claim a “tip credit” and, therefore, asserted its tip pooling arrangement was permissible so long as it paid her the minimum wage, which it did.
The District Court agreed with Woody Woo and ruled in its favor. The case went up to the Ninth Circuit where the District Court’s decision was upheld. The Ninth Circuit decision provides guidance and certainty to the question as to whether tip pooling arrangements are permissible and under what conditions. This is important to our clients in the Northwest, and particularly to our Oregon clients, given that in 2011 the minimum wage will increase 10 cents to $8.50 per hour. Learn more at www.bullivant.com.
Unemployment Tax Insurance Rates Lowered February 11, 2011
On Friday, February 11, the Governor signed SB 5135 and ESHB 1091, lowering unemployment insurance tax rates for 80% of all small businesses. Part of the Governor’s jobs package, the legislation represents a significant positive step forward for the business community. The legislation contains five distinct components: 1) caps the social tax component of unemployment taxes; 2) adjusts the proportion of taxes paid in each rate class; 3) expands the UI training benefits program; 4) aligns state law to ensure unemployed individuals can take advantage of federally extended benefits fully funded by the federal government; and 5) includes a short-term temporary increase in weekly benefits.
Within the next 45 days, most businesses will receive a revised tax statement from the Employment Security Department identifying that they will pay lower taxes in 2011 than originally notified in December. No business will pay more than identified on the December 2010 tax statement but some will see no change in their payments. This reflects a business’ direct experience with layoffs over the past three years. The tax reductions represent $300 million that will remain in the hands of businesses in 2011 instead of being paid in UI taxes.
Although this legislation was passed within the first five weeks of session, it represents a hard-fought battle by the business community. Early in the discussion over this legislation the labor community brought forward a permanent benefit increase that would have given unemployed individuals an additional $15 per week per dependent. This type of benefit increase would have significantly increased employer tax rates. The business community fought hard against the dependent allowance and was ultimately successful in keeping it out of the final language.
Legislators however, brought forward an option to temporarily increase recipient weekly benefits that would not impact individual employer UI tax rates. The expansion of the existing training benefit program enables the state to receive $98 million in additional federal UI funds. Rather than permanently expanding benefits and increasing employer tax rates, a portion of the federal funds, $68 million, will be used to fund the temporary benefit increase. This strategy will increase UI benefits by $25 per week per UI recipient through November 2011. None of the dollars attributed to the temporary benefit increase will be charged against an individual employer.