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30 October 2015 • www.CPAPracticeAdvisor.com A YEAR IN THE LIFE: PAYROLL ACCOUNTANT Minimum Wage Increase Minimum wage increases continue to be a hot topic right now with many cities and states voting to increase the m i n i mu m w a ge . I nc re a s e s h av e already gone into efect in some areas and are poised to be on the ballot in others. Certain industries are seeing more and more protests and activity surrounding this topic, but it's an issue that is likely to spread to other industries as well. Tis is a good time to review changes to state employ- ment laws and update your clients on any changes that may impact their business. Unpaid Internships I f you r cl ient s c u r rent ly of fer a n internship program, they may be able to bring on more unpaid interns. Ear- lier this summer, the Second Circuit federal appellate court ruled in favor of several unpaid interns who worked for Fox Searchlight Pictures, Inc. and Fox Entertainment Group, Inc. Te Court rejected a six-part test that had previously been used to determine if i nter ns were employees a nd t hus entitled to pay. Previously, two of the major c r iter ia t hat deter m i ned i f interns were entitled to be paid were the displacement of regular employees in their work and an immediate beneft and advantage to the employer from such activities. Te Court decided to adopt a new standard under federal and New York law that looked at the following set of factors: • Te extent to which the parties under- stood there was no expectation of compensation (any promise of com- pensation suggests an employee rela- tionship) • The extent to which the internship provides training similar to clinical, hands-on or other training in an edu- cational environment • Te tie between the internship and the intern's formal education program, such as through integrated coursework or the receipt of academic credit • The internship's alignment with the academic calendar and accommodation of the intern's academic commitments • Te extent to which the internship is limited to the period in which it pro- vides the intern with benefcial learning • Te extent to which the intern's work provides signifcant educational benefts and complements, rather than displaces, the work of paid employees • Te extent to which the parties under- stand that there is no entitlement to a paid job at the conclusion of the internship W hile this new ruling allows for more unpaid interns, it does so under the expectation that the internship is primarily benefcial to the intern and that there is a signifcant educational tie between the intern's educational program and the internship. Work with your clients to examine current intern positions and assess how they line up with the Court's new test. Worker Classifcation Earlier this year, the U.S. Department of Labor's Wage and Hour Division issued guidance in eforts to clarify the employee vs. contractor debate. Under the new Guidance, most workers are classifed as employees under the Fair Labor Standards Act. Classifcation as an independent contractor is largely dependent upon the individual oper- ating a truly separate business opera- tion and any one employer not being solely responsible for direct income or referral work for the individual. W hen determining if workers are t r u l y employe e s or i ndependent workers, you and your clients should still look at the "economic realities test," which considers: • Te extent to which the work performed is an integral part of the employer's business • Te worker's opportunity for proft or loss depending on his or her managerial skill • Te extent of the relative investments of the employer and the worker • Whether the work performed requires special skills and initiative • Te permanency of the relationship • The degree of control exercised or retained by the employer Proposed Overtime Exemptions As previously reported, the DOL has proposed changes that would change the minimum salary threshold to be exempt from overtime pay. Te new minimum salary threshold would be $50,440, almost double what it is now. Te deadline for public comments on the proposed overtime wages rule was last month, but experts expect the fnal r u le to be relea sed i n ea rly 2 016, although there is no hard deadline. If passed, an anticipated 4.6 mil lion white collar employees and 36,000 highly compensated employees will become eligible for overtime pay. Since the change could cause sig- nifcant changes to your clients' pay- roll, it's a good idea to start discussing the potential impact of these changes now. Adv ise your clients to rev iew work hours for their employees and assess if it would be benefcial to give raises to any employees that are near the threshold and likely to work more than 40 hours per week. Keep in mind the reclassification from exempt to non-exempt could afect the benefts employees are now eligible for, so you should review ACA compliance with your clients as well. Te new rule is also likely to bring changes to how remote employees work, such as how checking email or taking phone calls, is classifed, which could drive new or updated HR poli- cies. While this is primarily something that your clients and their HR team w ill need to work out together, it's important for you to discuss the likely implications on how payroll is pro- cessed moving forward. If there will be a signifcant increase in non-exempt employees, you may wa nt to work w it h your cl ients to upgrade their current time tracking and pay roll systems, as well as the current pay roll ser v ices your f irm provides. With changes to internship status, minimum wage and overtime pay, it's a good idea to set aside time with each of your clients to review how these changes impact them. For additional information on payroll laws by state, check out this guide on SurePayroll's website: htp://www.surepayroll.com/ online-payroll/payroll-by-state.asp . Changes Ahead for Minimum Wage and Unpaid Internships By Taija Sparkman T here's a lot being debated right about payroll legislation. Te proposed and recently passed changes not only afect what employees earn, but also redefne how employees are classifed. Each change will impact business differently and could send your clients headed to your practice in a frenzy. From student internships to increases to the minimum wage, your clients will want to know, "What does this mean for me?"