Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

Last week, Obama released some specifics about the Small Business Jobs and Wages Tax Cut, a proposal that would reward employers that increase hiring and/or wages with tax cuts. According to a fact sheet (pdf), businesses, including non-profits, would receive a $5,000 tax credit – up to $500,000 per firm – for every net new employee hired in 2010. Start-ups would be eligible for half of this tax credit. An additional tax credit would be provided for those employers that increase wages or work hours for new or existing employees. Specifically, businesses would receive a bonus 6.2 percent tax credit on aggregate wages in excess of inflation, thereby reimbursing the employer for the Social Security payroll taxes they pay on those payroll increases. Firms would not get credit for increasing wages for employees making more than the current taxable maximum of $106,800. This credit could be claimed on a quarterly basis. The proposal also includes anti-abuse provisions to prevent “gaming” the system, such as firing then re-hiring employees to qualify for the tax credit, or replacing full-time with part-time employees. This proposal echoes the provisions included in a number of recently-introduced job creation bills.

Photo credit:  Elizabeth Cromwell
 

• The job creation wage subsidy would provide the capital that many businesses and organizations need to grow their workforce and expand their operations.
• Small and medium-sized non-profit and private sector employers would be eligible for a job creation wage subsidy administered through local Workforce Investment Act (WIA) One-Stop Career Centers.
• The One-Stop Career Centers would grant the subsidies to eligible employers on a first-come, first serve basis to incentivize rapid job creation.
• The job creation subsidy would be available for 50 percent of wages, up to a $12 per hour subsidy.
• Employers that hire veterans who have returned from Iraq and Afghanistan would be eligible for an enhanced job creation wage subsidy of 60 percent.
• Employers would be eligible for the job creation subsidy for 12 months.
• The job creation subsidy would be paid directly to participating employers twice per month through their Workforce Service Area for the first nine months, and the subsidy for the 10th, 11th and 12th months would be paid in a lump sum at the end of the 15th month upon certification that the worker was retained.

The remaining $5 billion would be granted directly to states, local governments, and tribes to create green jobs. This legislation has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.

The same day the SEED Act was introduced, Sen. Russ Feingold (D-Wis.) introduced a bill (S. 2955) that would create a 2-year temporary jobs tax credit for businesses that hire new employees, expand work hours for their current workforce, or raise worker pay. According to a press release, this tax credit would:

• Amount to 15 percent of the increase in eligible payroll for 2010 and 10 percent of the increase in 2011.
• Make pay hikes for high-salary workers ineligible.
• Be based on a firm’s total eligible payroll so it would reward firms that expand work hours or raise pay as well as hiring more workers.
• Be calculated on a quarter over year-ago-quarter basis to avoid seasonal employment spikes. For example, wages for the first quarter of 2010 are compared with wages for the first quarter of 2009.
• Not be eligible for the wages of firm owners and their family members.
• Be offset so as to not increase the deficit.

This bill has been referred to the Senate Committee on Finance.

In the House of Representatives, Rep. Vern Buchanan (R-Fla.) introduced the Job Creation Act of 2010 (H.R. 4513), a bill containing a five-point plan calling for tax relief for small business investments and capital gains, a one year elimination of taxes on unemployment benefits, and using repaid TARP funds to help pay down the national debt. The measure also contains provisions outlining legal reforms to curb frivolous lawsuits against small businesses. For example, the bill would impose mandatory sanctions against attorneys or parties who file frivolous lawsuits; remove a “safe harbor” provision that allows plaintiffs and their attorneys to avoid sanctions for frivolous suits by withdrawing them within 21 days; and reduce forum shopping by requiring that plaintiffs in civil tort actions sue only where they live or were injured, or where the defendant's principal place of business is located. This bill has been referred to the House Committees on Ways and Means, Financial Services, and the Judiciary.

Earlier this month, Rep. Bob Etheridge’s (D-NC) introduced the Hiring Incentives to Reinvest and Incentivize New Growth (HIRING) Act of 2010 (H.R. 4437), legislation that would provide a refundable tax credit to any business that expands its payroll by a certain percentage.

In December, the House of Representatives passed the Jobs for Main Street Act of 2010, a bill that would, among other things, divert $75 billion from TARP to fund infrastructure programs, job stabilization efforts, and emergency relief measures. The Senate is expected to take up one or more job creation bills shortly. 

Photo credit: amphotora

On the same day this legislation was introduced, Rep. Dennis Kucinich (D-Ohio) introduced the Responsible Banking Act of 2010 (H.R. 4414), a bill that would impose a 75 percent tax on bonuses paid for services performed by “any specified business,” defined in the bill as: the Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation; any business as a financial institution, insurance company, hedge fund, financial advisor, or a broker or dealer in securities; and any lending or finance business. This bill does not limit the tax to beneficiaries of the financial bailout. If enacted, the provisions of this bill would sunset after five years.

Meanwhile, on Wednesday, House Financial Services Chairman Barney Frank (D-Mass.) announced that his committee will hold a hearing on January 22 to discuss the issue of compensation practices in both financial and non-financial firms. In addition, today President Obama unveiled a plan to impose a fee on financial institutions that received TARP funds directly or indirectly. According to a White House summary, (pdf) Obama’s budget will include a fee on approximately 50 of the nation’s largest financial firms. Companies to be affected by this plan include broker-dealers, bank holding companies, thrift holding companies, insured depositories, in addition to insurance companies that own one of the other entities. The “financial crisis responsibility fee” would only apply to businesses that have more than $50 billion in assets. While most would be U.S. companies, some U.S. subsidiaries of foreign-owned companies would face this tax as well. Additional details of this plan are expected to be released over the course of the month as the President finalizes his budget.

Photo credit: DNY59

The Economic Recovery Adjustment Act of 2009 (S. 431) introduced by Sen. Sheldon Whitehouse (D-RI), would – among other things – create within the Department of Justice an Office of the Taxpayer Advocate. The Advocate would have the authority to conduct ongoing audits and oversight of executive compensation received by TARP recipients. “Executive compensation” is defined under this bill as all wages, salary, deferred compensation, benefits, retirement arrangements, options, bonuses, office fixtures, goods, or other property, travel, or entertainment, vacation expenses, and any other form of compensation, obligation, or expense that is not routinely provided to all other employees of the company. This new office would also have the ability to conduct investigations, issue subpoenas and take testimony.

In addition, the Advocate would be imbued with the authority to negotiate a reduction in executive compensation if, after an audit, it is determined that the company would have become insolvent in the absence of TARP assistance. A Temporary Economic Recovery Oversight Panel comprised of five President-appointed federal bankruptcy court judges would be in charge of reviewing any negotiated reductions in executive compensation.

This bill has been referred to Senate Committee on Banking, Housing and Urban Affairs.

For more information on the executive compensation provisions contained in the stimulus package, see Littler’s ASAP: Besides COBRA: What Does the Stimulus Package Have for Employers by Ellen N. Sueda, GJ Stillson MacDonnell, Patricia A. Haim, and Chadwick M. Graham.
 

Immigration

The Senate approved a modified amendment to the stimulus bill that would substantially limit employers that receive Troubled Asset Relief Program (TARP) funds from hiring employees who hold H-1B work visas. The Save Our Small and Seasonal Businesses Act of 2009 (S. 388), on the other hand, would extend by three years the hiring cap exemption for returning H-2B guest workers. In other immigration news, the Loophole Elimination and Verification Enforcement Act (H.R. 994) was introduced. This bill would, among other things, mandate that all employers use the E-Verify program.

Labor/Management Relations

President Obama signed another labor-friendly executive order encouraging the use of project labor agreements.

Workplace Flexibility

The Airline Flight Crew Family and Medical Leave Act (H.R. 912), passed by the House this week, would close a Family and Medical Leave Act (FMLA) loophole for airline pilots and flight attendants by changing the hours of service requirements.  In other FMLA news, the Family and Medical Leave Enhancement Act of 2009 (H.R. 824) would amend the FMLA to allow employees to take parental involvement or family wellness leave.

The Family-Friendly Workplace Act (H.R. 933) was reintroduced this week. This bill would amend the Fair Labor Standards Act to permit private-sector employees to chose compensatory time off (“comp time”) in lieu of case wages for overtime hours worked.

Workplace Safety

The Worker Protection Against Combustible Dust Explosions and Fires Act (CDEFA) (H.R. 849) was introduced. This bill would regulate combustible dust exposure at industrial sites.