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Pennsylvania News
Pennsylvania – early implementation of EIT collection system changes permitted. Changes to the earned income tax (EIT) collection system are scheduled to go into effect in 2012. However, counties are permitted to implement the changes a year early. In March, the Department of Community and Economic Development held a meeting to discuss concerns about early implementation. The changes in the EIT collection system are scheduled to be implemented early in four counties: Chester, Lancaster, Lebanon, and Wyoming. However, Chester County is the only county enforcing early adoption. It is voluntary for employers in the other three counties, which will not enforce it or penalize employers in 2011.
Pennsylvania: Regulations amended. Pennsylvania has amended the regulations under its Unemployment Compensation Law as follows:
Wages. Effective as to wages paid on or after January 1, 2012, the tax treatment of delayed wage payments is distinguished from the existing approach that will continue to be used for benefit purposes. For purposes of taxation, the regulation will treat wages as paid on the date the employer actually pays them. This treatment reflects the decision of the U.S. Supreme Court in United States v. Cleveland Indians Baseball Company, 532 U.S. 200 (2001). In that case, the Court held that, for federal employment tax purposes, back wages should be attributed to the date on which they actually are paid. The Department is required to follow this decision when allocating wages for tax purposes because the UC law requires that payments subject to taxation under the FUTA also must be taxed as wages under the UC law. For benefit purposes, however, the existing treatment of wages remains in effect. That is, when a payment of wages is delayed, the wages are considered paid on the day on which the employer generally pays amounts definitely assignable to a payroll period.
The regulation also is amended regarding remuneration made in mediums other than cash. In addition to the general rule holding that the value of noncash compensation is its fair market value, the regulation specifies minimum values to be placed on meals and lodging by reference to recognized federal standards, subject to rebuttal by the employer.
Third-party sick pay. When sick pay is paid to a worker by a third party, this newly adopted regulation provides that the third party is responsible to report and pay unemployment compensation taxes on the sick pay. Note that the third party may shift that responsibility to the employer if it meets certain conditions.
Witness fees. An agent of an employer, like the employer he or she represents, is not entitled to witness fees for participating in an administrative proceeding if the employer is an interested party in the proceeding.
Reimbursable items. Specific amounts pertaining to the mileage allowance and the per diem fee for witnesses have been deleted. The regulation now provides that witnesses may be paid compensation and expenses in accordance with the Judicial Code.
Confidentiality of information. This newly adopted regulation implements new federal confidentiality requirements that were recently promulgated by the U.S. Department of Labor.
Work registration. The regulations now provide that a work registration created by an application for benefits remains effective throughout the benefit year.
Methods of filing. The Department no longer requires claimants to appear in person to conduct UC-related business. Instead a claimant may file an application for benefits by telephone, Internet, U.S. mail or fax transmission and may file a claim for compensation by telephone or the Internet.
Application for benefits. The regulations now specify that an application for benefits is effective on the first day of the week in which the application is filed (or deemed filed under the regulation relating to extended filing, see below).
Claims filing. Claims are filed biweekly and each biweekly pair of claims covers the preceding two weeks.
Extended filing. The provisions regarding late filing of claims and applications have been consolidated into one new regulation, which reflects circumstances that may prevent a claimant from filing a timely application or claim under current procedures in which applications and claims are taken by telephone, Internet and fax transmission.
Withdrawing an application for benefits. This new regulation specifies circumstances under which the Department may approve a claimant's request to withdraw an application for benefits and cancel the corresponding benefit year. Under the UC law, a claimant may be 'unemployed' for purposes of UC eligibility if he or she is working less than his or her full-time work.
Definitions. This newly adopted regulation provides the following definitions, unless the context clearly indicates otherwise:
Agent state—A state in which an individual files a claim for benefits from another state.
Benefits—Compensation payable to an individual with respect to the individual’s unemployment under the unemployment insurance law of a state.
Interstate Benefit Payment Plan—The plan approved by the National Association of State Workforce Agencies under which benefits are payable to unemployed individuals absent from the state in which benefit credits have been accumulated.
Interstate claimant—(1) An individual who claims benefits under the unemployment insurance law of one or more liable states through the facilities of an agent state; and (2) The term does not include an individual who customarily commutes from a residence in an agent state to work in a liable state unless the Department finds that this exclusion would create undue hardship on the claimants in specified areas.
Liable state—A state against which an individual files, through another state, a claim for benefits.
State—The term includes Puerto Rico, the Virgin Islands and the District of Columbia.
Week of unemployment—Any week of unemployment as defined in the law of the liable state from which benefits with respect to the week are claimed.
Reserve accounts of employers. The amended regulation provides an additional reimbursement scenario if a reserve account for an employer is not authorized or not required to be maintained under criteria established in the law. In addition to the existing three scenarios for allowances for dependents being subject to a reimbursement, the amended regulation provides that the Unemployment Compensation Fund will be reimbursed for dependents’ allowances paid as a result of service in the employ of a reimbursable instrumentality or political subdivision of the Commonwealth.
Pennsylvania: Illness or death of others. A claimant was entitled to benefits where he left work in another state to move home to be with his family after the death of his adult son. The court held that the Board erred in concluding that his decision to return to Pennsylvania to reunite with his family in order to cope with a tragic loss did not constitute necessitous and compelling cause to leave his employment (Fiedler, Pa. Cmwlth. Ct.).
Pennsylvania: Method or time of payment. Where it was undisputed that an employer routinely failed to pay a claimant in a timely manner and on an established payday, it was error for the Referee to conclude that the claimant voluntarily quit her employment without good cause. The claimant worked as a paralegal and when she complained about the erratic wage payments the employer put off her concerns. The court considered Pennsylvania’s Wage Payment and Collection Law and concluded that erratic and intermittently late wage payments are unacceptable as a matter of law. Given that the Wage Payment and Collection Law already requires adherence to a rigid payment schedule, the court held that it is sufficient for employees to complain of late payments so long as the employer is afforded a reasonable opportunity to address the employees’ complaints. Here, the claimant acted with ordinary common sense when she emailed her employer advising him of his lateness several times before she actually quit. Moreover, in furtherance of preserving her employment, the claimant graciously gave the employer several opportunities to become current before actually leaving her job. While the court was mindful that the employer apparently had cash flow problems and did allow the claimant a flexible work schedule, these factors do not cause repeatedly late wage payments to constitute any less of a compelling and necessitous reason to terminate employment (Shupp, Pa. Cmwlth. Ct.).
Pennsylvania: Safety regulation. A claimant was not entitled to benefits where she was terminated from her employment as a registered nurse because she used her personal cell phone to post comments on her Facebook page while distributing patient medications. The court determined that there was substantial evidence supporting the Board’s findings that the employer’s policy prohibited the use of cell phones while on duty, the policy itself was reasonable in nature, and the claimant was aware of the policy abut violated it anyway (Chapman, Pa. Cmwlth. Ct.).
Pennsylvania: Campaign manager. The court reversed an award of benefits where the Board erred in determining that the claimant was not an independent contractor. The claimant worked as a campaign manager. Testimony supported the finding that the claimant was not supervised in the performance of his duties or told how to do his job. He was not required to work any specific hours or attend regular meetings. Moreover, there was testimony that it is a typical arrangement for a campaign to retain an independent contractor as campaign manager. Under these facts, there was insufficient evidence to support a conclusion that the candidate controlled and directed the claimant in the performance of his work. The court also noted that the fact that the claimant could not work on any other campaigns was not indicative of anything other than that the election was only one month away and the claimant’s full-time services were needed for that brief, final stretch of the campaign. Finally, the claimant was not paid on an hourly basis but in two lump-sum payments from which there was no withholding for taxes. For all of these reasons, the court concluded that the Board committed an error of law in determining that the claimant was an employee of the candidate (Tracy, Pa. Cmwlth. Ct.).
Pennsylvania: Self-employed. An order denying benefits was reversed because the Board erred in finding that the claimant did not satisfy all of the exceptions to the general disqualification of the practice of law as a sideline activity. The claimant worked for a law firm and also did work representing indigents in federal court. He did this work before starting with the law firm, turned over his earnings from this work while he was working for the law firm, and continued this work when he left the firm. An employee who engages in self-employment is ineligible for benefits unless (1) the self-employment began prior to the termination of the employee’s full-time employment; (2) the self-employment continued without substantial change after the termination; (3) the employee remained available for full-time employment; and (4) the self-employment was not the primary source of the employee’s livelihood. Here, the claimant met his burden of proving all four prongs. Also, the claimant made it clear that he was not opening his own practice and he testified that he was available for full-time employment and was looking for a job at a law firm. Because he proved that his activities were nondisqualifying, he was entitled to unemployment compensation benefits (Kress, Pa. Cmwlth. Ct.).
Philadelphia wage tax remains the same. The Philadelphia, Pennsylvania wage tax rates will remain 3.928% (.03928) on residents and 3.4985% (.034985) on nonresidents, after June 30, 2011. (http://www.phila.gov/revenue/What%27s_New.html, June 2011.)
Interest rates unchanged for the third quarter of 2011. The IRS has announced that the interest rates on overpayments and underpayments of tax for the calendar quarter beginning July 1, 2011 will remain unchanged. The rates will be 4% for overpayments (3% in the case of a corporation); 4% for underpayments; 6% for large corporate underpayments; and 1.5% for the portion of a corporate overpayment exceeding $10,000. The interest rates are computed from the federal short-term rate during April 2011 to take effect May 1, 2011, based on daily compounding. Annual interest rate tables for prior periods were also issued. (Rev. Rul. 2011-12, IRB 2011-26, June 27, 2011.) Pennsylvania follows the federal rate in effect as of January 1 of the calendar year, without regard to quarterly changes.