Matt Grosh recently talked about Cam and Mitchell from Modern Family as a backdrop to the IRS’s recent revenue ruling. That ruling recognized same-sex marriages for federal tax purposes even when a couple resides in a state that does not permit same-sex marriages.  The couple must only have been validly married in a state that recognizes same-sex marriage.

After last summer’s Supreme Court decision analyzing the Defense of Marriage Act, numerous questions arose regarding legal treatment of same sex couples.  Employers were confused about their obligations regarding benefits such as health insurance and retirement plans.  After consultation with the Department of Justice and the Department of Treasury (Internal Revenue Service), the United States Department of Labor (DOL) issued Guidance to Employee Benefits Plans on the definition of spouse and marriage.

The DOL advised that employers are to recognize "spouses" and "marriages" based on the validity of the marriage in the state where the couple was married rather than the state where they reside.  The DOL concluded that such an interpretation would make it easier for employers to uniformly administer benefits to all employees, in addition to offering more protection to same-sex couples.  In effect, the Department of Labor Regulations, Rulings, Opinions and Exemptions will assume that the term "spouse" refers to any individual who is legally married under any state law. Consistent with the IRS ruling, the terms "spouse" and "marriage" will not include individuals in domestic partnerships or civil unions.  


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Although I don’t spend much time watching TV, I came across the new Netflix series House of Cards in which all 13 episodes were released at once for back to back watching. I enjoyed the series for its political perspective, but found it interesting as an employment lawyer as well.

Claire Underwood played by Robin Wright is the cold and beautiful wife of Francis Underwood, House Majority Whip (Kevin Spacey). Claire is the director of the non-profit Clean Water Initiative (CWI). In the beginning of the season, she fires half her staff, assigning the actual serial ax job to the office manager, who is terminated by Claire immediately after the firings are completed. She then actively recruits Gillian Cole (Sandrine Holt). When Claire first interviews Gillian, she is ill and, even before she is hired, Claire sends her to her personal physician, all expenses paid, a novel recruiting tool. Once she is on the job for a few months, Gillian tells Claire that she is pregnant as an explanation of why she cannot fly on CWI business. Gillian begins missing work periodically, and childless Claire makes a remark questioning her priorities and commitment to CWI. Ultimately, Gillian defies Claire on a matter of principal and Claire fires her on the spot for her insubordination. When Claire is later visited by counsel, we find out that not only has Gillian sued CWI but that she will not accept any monetary amount to settle her claim. Gillian tells Claire that the publicity resulting from her suit will cost CWI, Claire and her high profile politician husband more than any settlement payment and insure a better world for her unborn child. She also has many witnesses happy to testify for her including the former office manager, and adds that any embellishment of her testimony is justified by the need to expose CWI as a sell-out to corporate interests.  


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In honor of Labor Day, Russell, Krafft & Gruber, LLP will be closed on Monday, September 3, 2012 , as we celebrate the dedication and achievements of the American worker. The first Labor Day was celebrated on Tuesday, September 5, 1882 in New York City as planned by the Central Labor Union. In the 1800s

You may have recently read that Rite Aid is paying almost $21 million to settle multiple claims that it improperly failed to pay time-and-a-half for hours worked over forty in a week by its managers. State statutes and the federal Fair Labor Standards Act (FLSA) regulate the payment of overtime wages. Careful attention needs to be paid to the so-called white collar administrative and executive exemptions, particularly in view of the increasing numbers of class action suits.

I work with employers who have questions regarding the proper classification of employees. The number one misconception that I still see is the belief that paying an employee an annual salary makes him exempt from overtime payment. Another major misconception is undue reliance on a job title or written description. It does not matter what the title of the job is or what the job description says – what matters is what the employee is actually doing. If the work that the employee performs changes, even if the job title doesn’t, the exemption status can change as well.

The Wage and Hour Division of the United States Department of Labor publishes fact sheets that are a good start in examining your particular situation. To qualify for the administrative exemption, the employee’s primary duty must be the performance of work directly related to management or general business operations of the employer and include the exercise of discretion and independent judgment. The executive exemption applies to those whose primary duty is managing a department, and who customarily and regularly direct the work of at least two full time employees or their equivalent.


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Wage garnishment – if you haven’t heard of it before, you may picture crisp dollar bills surrounded by lettuce and tomatoes on a platter, or perhaps a paycheck "garnished" with a few extra zeroes. Unfortunately, wage garnishment is not typically a pleasant matter. It can occur in a variety of situations, including nonpayment of taxes. When the IRS garnishes a person’s wages, it can also impact his or her employment and, in certain cases, may raise concern in an employer’s mind.

What is Wage Garnishment?

When a person has fallen into certain types of debt, the law allows those who are owed the debt, i.e. the creditors, to obtain a court order requiring the employer of the debtor to withhold payments from his/her wages. The garnished wages are then paid directly to the creditor and are applied to the debt. IRS garnishment arises when it is determined, through the proper channels, that a taxpayer owes past due taxes. As a side note, another common area for garnishment to arise is with child support payments.

Can Garnishment Lead to Job Termination?

In my practice, I have encountered situations where employees had workers whose wages were being garnished by the Internal Revenue Service (IRS). In one instance, an employer asked whether the employee could be terminated because of the garnishment. Often, employees also wonder if the garnishment could jeopardize their employment. Many are surprised to learn that as long as the IRS garnishment is the only garnishment against an employee’s wages, it would be illegal to terminate the employee for this reason.

The Law: Title III

With regard to the question at hand, IRS garnishments are surprisingly governed neither by the Internal Revenue Code nor the IRS. Instead, it is covered by Title III of the Consumer Credit Protection Act (Title III) and the United States Department of Labor’s Wage and Hour Division. More specifically, Title III states that “[no] employer may discharge any employee by reason of the fact that his earnings have been subjected to garnishment for any one indebtedness." Other related laws make it clear that Title III applies to the IRS’s tax collection process. Title III imposes a fine of no more than $1,000 or no more than one year of imprisonment on employer’s who willfully violate the requirements of Title III.


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Severance Pay and UC Benefits in Pennsylvania

In PA Unemployment Compensation Law Update, Part 1, we covered changes in Pennsylvania’s Unemployment Compensation (UC) Law in regard to active job search requirements for claimants. In Part 2, we will discuss how the amended law impacts UC benefits when former employees also receive severance pay.

As an employer, it is sometimes difficult to terminate an employee’s job. It is also difficult for employees who are "let go." In some cases, employees are offered severance packages by their employer. Severance is money or benefits paid to employees when employment ends, also called separation or termination pay. It is not required by law but may be paid in accordance with an employment contract, collective bargaining agreement or an employer’s policy.

Severance pay can work as a financial buffer, helping former employees pay their bills as they make difficult transitions. Unemployment compensation benefits serve a similar purpose. Employees who receive both often wonder whether their severance pay can count against their UC benefits. Some have been surprised to find out that in Pennsylvania, an unemployed employee could receive full UC benefits even while the employer had paid or was making severance payments.

At least, that was the case until this year. The law has been amended by Act 6 of 2011 to provide that, in UC benefit years beginning January 1, 2012, employees will be paid their weekly benefit rate less the amount of severance pay that is attributed to that week. In other words, severance pay can offset UC benefits, but only when an employee’s total severance pay exceeds and amount equal to 40% of the state average annual wage. Currently, 40% of Pennsylvania’s average annual wage is $17,853. If terminated employees receive any amount up to $17,853 in severance, there will be no deduction or effect on their UC rate.


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