In the recent case of Mebane v. GKN Driveline N. Am., Inc., No. 1:18-CV-00892 (M.D.N.C. Nov. 05, 2020), the federal district court held that a claim brought under the North Carolina Wage and Hour Act (?Ç£NCWHA?Ç¥) is preempted by ERISA. The employee-plaintiffs in this case alleged their employer violated the NCWHA by deducting from their paychecks, without express authorization, a monetary penalty for those employees who participate in the employer?ÇÖs group health plan and use tobacco products (i.e., a so-called ?Ç£tobacco surcharge?Ç¥). The defendant-employer filed a motion to dismiss this claim for unauthorized payroll deductions as being preempted by ERISA. The court agreed and dismissed the employees?ÇÖ claim, ruling that it was preempted by ERISA. The court?ÇÖs opinion is available here.
Smaller companies often use professional employer organizations (?Ç£PEOs?Ç¥) as a way to reduce benefit costs and to assist with many, if not all, human resources and payroll functions. While PEOs may work well for a company?ÇÖs day-to-day operations, they can create headaches and complications in corporate transactions. When acquiring a company that uses a PEO, it is important to consider the following: Seller?ÇÖs representations and warranties relating to employee benefit plan compliance generally include representations and warranties relating to the compliance of the plans it sponsors. Since individual companies do not sponsor PEOs, the typical benefit plan representations and warranties should be modified to include representations and warranties regarding any plans or benefits provided by the seller or its controlled group members plus more limited representations and warranties regarding the plans sponsored by the PEO. Depending on the PEO involved, it may be more difficult to get copies of actual… Continue Reading
On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act (the ?Ç£Act?Ç¥), which made certain changes to the requirements of forgivable loans made under the Paycheck Protection Program (?Ç£PPP?Ç¥). For a PPP loan to be forgiven, the loan proceeds must be used to cover payroll and other approved operating costs incurred by the employer during a designated time period following the date on which the loan was made (the ?Ç£Coverage Period?Ç¥). The Act extended the coverage period from eight to 24 weeks and reduced the percentage of loan proceeds that must be used to cover payroll costs during the Coverage Period to 60% (down from 75%). Accordingly, up to 40% of the loan proceeds could be used by an employer to cover other non-payroll operating costs, such as rent, utilities, and interest on its other debt obligations that are due during the Coverage Period. The Act is… Continue Reading
The Small Business Administration (?Ç£SBA?Ç¥) recently released a form Loan Forgiveness Application and instructions related to the potentially forgivable loans made under the Paycheck Protection Program (?Ç£PPP?Ç¥). PPP loans are generally forgivable if, among other things, the loan proceeds are used to cover certain payroll costs incurred over the eight-week period after the loan is made (for additional information on PPP loans, see our prior blog posts here, here, here, and here). To apply for the forgiveness of a PPP loan, borrowers should complete a Loan Forgiveness Application, which can be completed in either paper or electronic form, and then send the completed application to its lender. The Loan Forgiveness Application and instructions are available here. For additional information on the Loan Forgiveness Application and other recent SBA Guidance, see the following Haynes and Boone article: SBA Issues New Guidance via Interim Final Rule on Foreign Affiliates; Releases Loan Forgiveness… Continue Reading
The Small Business Administration (?Ç£SBA?Ç¥) continues to update its FAQs on PPP loans to provide additional guidance regarding what costs constitute payroll costs. Borrowers should use care in determining what amounts constitute payroll costs since borrowers are responsible for providing an accurate calculation of payroll costs and must attest to the accuracy of those calculations on their Borrower Application Form. Under the new guidance the SBA clarified: The $100,000 annualized per employee cap only applies to cash compensation and does not include any non-cash benefits, such as employer contributions to defined benefit or defined contribution retirement plans, payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and payment of state and local taxes assessed on employees?ÇÖ compensation. PPP loans can be used to cover costs for employee paid vacation, parental, family, medical and sick leave (other than qualified sick and family wages for… Continue Reading
Businesses that received a loan under the Paycheck Protection Program (?Ç£PPP?Ç¥) are eligible for forgiveness of that loan if, among other things, the loan proceeds are used to cover ?Ç£payroll costs?Ç¥ incurred over the eight-week period after the loan is made. Payroll costs, capped at $100,000 on an annualized basis for each employee (i.e., $15,384 over the eight-week period), are broadly defined to include, among other things: Salary, wages, commissions, or tips; Employee benefits costs, such as for vacation or paid family or medical leave (other than wages for which a credit is received under the Families First Coronavirus Response Act), group health care costs, retirement plan contributions, and severance benefits; and State and local taxes assessed on employee compensation. As of the date of this posting, no guidance has been issued by the IRS or the Department of Treasury to further clarify what specific items qualify as payroll costs.… Continue Reading