5 HR & Payroll Legal Issues for 2011

With all the legislative changes in 2010, it is often difficult to keep up. Here are updates on some of the legal issues that will affect day-to-day HR and payroll operations going into 2011.

• First on the list is classification of positions, particularly with regard to contract labor. Time is getting short for avoiding fines and penalties for misclassifying employees as contractors particularly if it appears your company is doing so for purely financial reasons. Failure to evaluate and make appropriate changes may result in paying the piper - and he's very expensive.

• Second is about storing I9 forms. If you are attempting to keep these records in an electronic repository, be aware of federal and any state regulations regarding storage and access. Seyfarth Shaw (attorneys) reported in their 'One Minute Memos' for October 2010 that although the Immigrations and Customs Enforcement (ICE) office failed to find any indication that Abercrombie & Fitch had hired unauthorized workers, the company and ICE reached an agreement on a million dollar fine settlement because the clothier's electronic verification system had numerous deficiencies. As enforcement measures continue to pound away at companies, their processes and their actions, it is imperative to ensure compliance with not only the requirements for collecting information but ensuring your processes for maintenance meet regulatory standards. For information regarding completion and storage of I9 forms check out http://www.uscis.gov/files/form/i-9.pdf

• Number three is especially important as we head into tax season. W4's have been getting increased scrutiny from the IRS; with added agency investigators, companies are likely to see an even greater IRS involvement in employer tax collection responsibilities in the next year. Employees who are claiming excessive deductions on their W4's can spell trouble for unobservant HR and Payroll departments. The IRS sends out "lock-in" letters requiring employers to adjust the wayward employee's deductions to only those allowed in the letter. Compliance failure on the company's part can (and most likely will) result in the tax liability being transferred from the employee to the employer. Making employees aware of potential issues is the first step in preventing employee relations issues later. Watch those forms.

• A big number four is reminding employees to use their Flexible Spending Account (FSA) dollars this year to put in a supply of over-the-counter (OTC) medications. Beginning January 2011, OTC medications will no longer qualify as an eligible expense under FSAs. As employees make elections for FSA dollars for 2011, educate them in plan changes that may affect the amount of money they wish to make available through FSAs.

• Finally, five: the mandatory requirement for showing the value of healthcare benefits on W-2s has been delayed for one year. If employers choose, they may voluntarily report this non-taxable information on W-2s in 2011 but implementation has been delayed until 2012.

With so many regulatory changes coming and going, it is wise to have help keeping you current with the changes. Professional newsletters, memberships in professional organizations, and peer group meetings all can be helpful in keeping your business running smoothly while you navigate the legislative twists and turns. With increased governmental emphasis on compliance, companies can no longer afford to try to squeak by; non-compliance is much too costly.