LEGAL UPDATE JANUARY 2021

FUTURE COMPLIANCE DATES
FEBRUARY 1, 2021: Forms W-2 and 1099 (when applicable) Due
Employers must provide all employees with copies of Form W-2 reporting earnings and taxes for 2020 by February 1, 2021. When applicable, employers must provide Forms 1099 to contractors who earned more than $600 in business-related payments in 2020.

NOTE: If the Form W-2 does not include required information about the Earned Income Tax Credit (usually found on the back of W-2 Copy B), you must provide a notice to anyone employed during 2020 from whose wages income tax was not withheld. This does not apply to anyone who claimed exemption on Form W-4. For more information, see EIC Notice Info.

FEBRUARY 1, 2021: Form 941 Due
Form 941, the employer’s quarterly tax return, is due February 1, 2021 for fourth quarter 2020. Click here to access Form 941. Credit for FFCRA-qualified paid sick leave wages and qualified paid family leave wages can be requested on this form. Employers may also opt to use Form 7200 to request an advance payment of the tax credits for qualified sick and qualified family leave wages and the employee retention credit that will be claimed on Form 941.

FEBRUARY 1, 2021: Post OSHA Form 300A
Employers with more than 10 employees who are not in exempted low-risk industries must post Form 300A, the annual summary of job-related injuries and illnesses, in a workplace common area from February 1 through April 30, 2021. If there were no recordable injuries or illnesses, applicable companies must still post the form with zeroes on the appropriate lines. See list of exempted industries here: Partially Exempt Industries.

FEBRUARY 16, 2021: Exempt Status Form W-4
An employee claiming exempt status must return a new Form W-4 by February 16, 2021 to continue to be exempt from withholding for this year.

MARCH 1, 2021: Medicare Part D to CMS
Employers offering prescription drug coverage must disclose to the Centers for Medicare and Medicaid Services (CMS) on or before March 1 (or within 60 days of the start of the plan year if on a non-calendar year plan). See CMS disclosure form.

MARCH 1, 2021: MEWA Form M-1 Due to IRS
All participating employers must file a Multiple Employer Welfare Arrangement (MEWA) Form M-1 electronically with the IRS. In general, MEWAs are arrangements that offer health and other benefits to the employees of two or more different employers. See Form M-1.

MARCH 1, 2021: Paper Forms 1094-B & 1095-B or 1094-C & 1095-C Due to IRS
Applicable Large Employers and employers who offer self-funded/level-funded plans must submit Forms 1095 and 1094 to the IRS by March 1, 2021 if filing by paper.

MARCH 2, 2020: OSHA Form 300A Accident Summary Filing Deadline
Employers with at least 250 employees (including part-time, seasonal, or temporary workers) in industries covered by the recordkeeping regulation must submit information from their 2020 Form 300A by March 2, 2021 to OSHA. Employers with at least 20 employees but fewer than 250 in certain identified high-hazard industries must also submit information from their 2020 Form 300 and 301 by March 2, 2021. Click here for reporting requirements & electronic submission: OSHA.

MARCH 2, 2021: ACA 1095 B/C Forms Due to Employees
Applicable Large Employers and employers who offer self-funded/level-funded plans must distribute Forms 1095 to employees by March 2, 2021. If mailed, forms must be postmarked by that date. (Some exceptions apply to B forms.)

MARCH 31, 2021: Electronic ACA Filing Deadline
Applicable Large Employers and employers who offer self-funded/level-funded plans must submit Forms 1095 and 1094 to the IRS by March 31, 2021 if filing electronically. Any Applicable Large Employer (“ALE”) filing 250 forms or more must file electronically.

FEDERAL COMPLIANCE UPDATES

HIGHLIGHTS OF CONSOLIDATED APPROPRIATIONS ACT, 2021
The newest coronavirus relief package entitled Consolidated Appropriations Act, 2021 was signed into law on December 27, 2020. The law contains over 5,500 pages detailing the relief package and other provisions. Here is a summary of key elements for employers to note as well as links to guidance and resources.

$600 Stimulus Checks
Taxpayers who reported 2019 earnings of less than $75,000 per individual or $150,000 for joint filers are entitled to receive a check for $600 each and an additional $600 per qualifying child age 16 or younger.

FFCRA Expired but Paid Sick Leave and Expanded FMLA Tax Credits Extended
While the mandated requirement to provide paid leave for eligible reasons under the Families First Coronavirus Response Act (“FFCRA”) leave expired on December 31, 2020, the Consolidated Appropriations Act, 2021 provides tax credit incentives for employers to voluntarily continue to offer the paid leave through at least March 31, 2021.

Employers are entitled to 100% tax credits for FFCRA leave paid between April 1, 2020 and March 31, 2021. The tax credit is limited to two weeks of paid sick leave and ten weeks of Expanded Family and Medical Leave for a qualified employee.

The DOL has added guidance to their FAQ document related to the voluntary extension of the FFCRA leave. See questions 104 and 105 here: DOL FFCRA FAQs.

Round 2 of PPP Loans
More than $284 billion in additional funds is available for first or second forgivable loans through the Paycheck Protection Program (“PPP”). The current deadline to apply is March 31, 2021. To be considered for a second-round PPP loan, a business must have fewer than 300 employees; have used or will use the full amount of first PPP loan (if received); and had gross receipts during the first, second, third, or fourth quarter in 2020 that are at least 25% less than the gross receipts of the business during the same quarter in 2019. According to guidance from the U.S. Small Business Administration (“SBA”), non-calendar quarter calculations can be used if a business’s fiscal year begins in February, March or April and thus contains all of the second, third, and fourth quarters of the calendar year. Publicly-traded companies and businesses controlled by the President, Vice President, head of governmental executive departments, or members of Congress as well as spouses of any of these categories are ineligible.

PPP Loans are now capped at $2 million, as opposed to the $10 million cap of the first round of PPP loans. Eligible businesses can apply for loans to cover up to 2.5 times the average monthly payroll costs — which include all employer-provided group insurance benefits, retirement contributions, and taxes — plus additional qualified business expenses. Restaurants, hotels, motels, and certain other food and lodging businesses with a NAICS code beginning in “72” can apply for loans at 3.5 times the average monthly payroll costs. Additional eligible expenses are extended to include most (but not all) operational expenses, property damage, supplier costs, and purchases of Personal Protective Equipment (“PPE”). Borrowers can amend their original application to request increased loan amount due to changes in PPP loan rules if the original loan amount was less than amount that would have otherwise applied.

Borrowers may select any covered period length between eight weeks after loan origination and 24 weeks after loan origination.

Borrowers can request loan forgiveness based on how they spent the loan proceeds. To be eligible for 100% loan forgiveness, at least 60% of the loan must be used for payroll costs. This is a reduction from the 75% requirement for the first round of PPP loans. Partial forgiveness may be granted even if the threshold is not met. Borrowers of less than $150,000 may take advantage of a new Simplified Loan Forgiveness process.

Businesses considering a second-round PPP loan should make sure they understand the impact of Employee Tax Retention Credit and EIDL advances, explained below, on PPP loans.

The SBA and Treasury Department have issued guidance that includes two interim final rules (“IFR”) regarding the PPP. The 82-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” consolidates the rules for PPP forgivable loans for first-time borrowers and outlines changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. The 42-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” lays out the guidelines for new PPP loans to businesses that previously received a PPP loan.

Employee Retention Credit Criteria Now More Favorable
The Employee Retention Credit (“ERC”) provides a payroll tax credit for qualified wages paid to employees. Employers now can receive both a PPP and an ERC, and PPP recipients can retroactively receive an ERC.

The ERC has been amended to 70% of qualified wages paid to employees after December 31, 2020 and before July 1, 2021. During the first two quarters of 2021, a maximum of $10,000 in qualified wages for each employee per calendar quarter may be counted in determining the 70% credit.

If a business’s operations were fully or partially suspended due to orders from a governmental authority due to COVID-19 or if the gross receipts of such a business for a calendar quarter are less than 80% of the gross receipts for the same calendar quarter of 2019, the employer is eligible for the credit that quarter.

The ERC has been renewed through June 30, 2021, but certain provisions apply only after December 31, 2020.

For eligible employers that averaged 500 or fewer full-time employees, the ERC available in 2021 is based on the qualified wages paid to all employees after December 31, 2020, and before July 1, 2021, regardless of whether the wages were paid for services performed. For eligible employers that averaged more than 500 full-time employees, the credit is based on qualified wages paid to those employees not providing services due to the suspension of operations or decline in gross receipts.

Qualified wages used in determining the ERC may not be counted as payroll costs under the PPP. However, employers may elect not to have wages count as qualified wages for purposes of the ERC. If a PPP loan is ultimately not forgiven, such election would not prevent the wages from counting as qualified wages for purposes of the ERC.

EIDL Loans
Businesses suffering a substantial economic injury may apply for an advance under the Emergency Income Disaster Loan (“EIDL”) program of up to $1,000 per employee limited to $10,000 total, which does not need to be repaid. The EIDL program has been granted an additional $20 billion in funding under the Consolidated Appropriations Act, 2021 with a directive to distribute money to low-income areas first. Of the $20 billion allocated, $15 billion has been set aside for “Shuttered Venue Grants” such as movie and live-stage theaters, concert venues, and sports arenas that have a 25% reduction in revenue in the first, second, or third quarter of 2020 as compared to the same quarter in 2019.

Advances received through the EIDL program are deemed non-taxable income, and do not reduce PPP loan forgiveness eligibility. Borrowers who have already received PPP loan forgiveness with a reduction for the EIDL Advance may now amend their application to request repayment of the advance.

FSA Plan Changes
Health and Dependent Care Flexible Spending Account (“FSA”) plans may now permit unused benefits from the 2020 and 2021 plan years to be carried over to the next year. The grace period for a health FSA or dependent care FSA for a plan year ending in 2020 or 2021 may be extended from two-and-a-half months to 12 months. Employees may also be permitted to change their health FSA or dependent care FSA contribution rate during 2021 without requiring a qualifying event. A similar rule is already in place for 2020 plan years.

Employers can also allow unused dependent care FSA amounts for children up to age 14 instead of the previous limit of 13, through the end of the 2021 plan year.

An employee who stops participating in a health FSA during 2021 may continue to receive reimbursements from unused amounts through the end of the plan year, including any grace period. Unlike reimbursements available to participants who have elected COBRA coverage following their termination, this rule does not require that the participants make further contributions to access their unspent funds.

These changes are optional for employers to implement. Those electing changes would be required to amend their plan and notify plan participants.

Repayment of Social Security Tax Withholding Deferrals Extended
Repayment of deferred withholding of the employee share of Social Security taxes on certain wages has been extended to December 31, 2021, with no penalties or interest accruing until January 1, 2022.

Unemployment Supplemental Payments Extended
Federal unemployment payments of an additional $300 per week under the Pandemic Unemployment Assistance are authorized through March 14, 2021. Coverage extends to self-employed, gig workers, and others in non-traditional employment. The maximum number of weeks an individual may claim unemployment benefits is extended to a total of 50 weeks.

Business Meal Deductions
Effective January 1, 2021 through December 31, 2022, 100% of business meals may be written off as a tax deduction, as long as the meal is from a restaurant or bar and was paid before January 1, 2023.

Charitable Donation Deductions Reinstated
Taxpayers will be able to claim $300 if filing as single and $600 if married filing jointly in above-the-line charitable deductions for cash payments to established charities contributed in 2021.

Employer-Sponsored Retirement Plan Vesting Reprieve
While the IRS code generally requires retirement plans to provide for 100 percent vesting upon termination or partial termination of a plan, a reprieve will be granted to plans that had a partial termination in a plan year between March 13, 2020 and March 31, 2021 if the number of active participants in the plan covered on March 31, 2021 is at least 80 percent of the number on March 13, 2020.

Student Loan Repayment and Tuition Assistance Extended through 2025
Employers may provide up to $5,250 in tax-exempt student loan repayment contributions or tuition assistance through December 31, 2025, extended from the previous deadline of December 31, 2020.

Elimination of Surprise Medical Billing
Effective January 1, 2022, the No Surprises Act prohibits covered individuals from being “balance billed” without their consent when they seek emergency care, when transported by an air ambulance, or when receiving non-emergency care at an in-network hospital but unknowingly are treated by out-of-network physicians or other specialty care services. While the law allows certain providers to request that a patient sign a consent waiver to be billed at out-of-network rates, this exception is only allowed in non-emergency situations.

Plans must disclose on a public website and in explanations of benefits the requirements and prohibitions against surprise billing, including any state law requirements and contact information for the appropriate state and federal agencies to report when a provider or facility has violated those prohibitions.

Transparency Guidelines and Benefits Parity Required
Group health plans are now required to adopt cost transparency guidelines, including on the costs of pharmacy drugs. In addition, plans must ensure greater parity between medical and surgical benefits and mental health and substance-use disorder benefits.

DOL REVISES FLSA INDEPENDENT CONTRACTOR TEST
Expected to take effect March 8, 2021, a new final rule published by the U.S. Department of Labor (“DOL”) revised its interpretation of who is an independent contractor as opposed to an employee under the Fair Labor Standards Act (“FLSA”).

The revised final rule bases the determination on the nature and degree of workers’ control over their work and the opportunity for profit or loss based on initiative, investment, or both. The DOL’s classification tests, to a lesser degree, also consider the amount of skill required for the work, the degree of permanence of the working relationship between the potential employer and worker, and whether work is part of an “integrated unit of production.”

For additional details, see the full text of the Final Rule. Note: Some state and local laws are more stringent than the DOL’s revised classification tests.

STANDARD MILEAGE REIMBURSEMENT RATE REDUCED FOR 2021
Effective January 1, 2021, the standard mileage reimbursement rate for business use of a personal vehicle is 56 cents per mile, a reduction from 57.5 cents in 2020. In addition, the mileage reimbursement rate for medical or moving purposes is 16 cents per mile, a reduction from 17 cents in 2020. The mileage reimbursement rate for driving in the service of charitable organizations remains at 14 cents.

Businesses have the option to instead calculate the actual costs to employees based on a Fixed and Variable Rate (FAVR) allowance plan, where employees who drive their own vehicles can receive tax-free reimbursements from their employers for fixed vehicle costs (such as insurance, taxes and registration fees) and variable vehicle expenses (such as fuel, tires, and routine maintenance and repairs). The 2021 maximum FAVR allowance is $51,100 per year, but the calculated allowance must be paid on a quarterly basis. The FAVR method may result in higher reimbursement rates than the standard mileage rate if eligible reimbursable costs are higher than average.

Yet another alternative for employers is to reimburse employees for their business-driving expenses as a flat car allowance, which is a set amount provided to employees over a given period to cover the costs of using their own car for business purposes. While this method is relatively easy to administer, payments are taxable to employees unless handled within an “accountable plan” that requires substantiation through adequate records and the return of excess amounts within a reasonable time.

TIP CREDIT RULES AMENDED
Effective March 1, 2021, amendments to the Fair Labor Standards Act (“FLSA”) tip credit regulations address who may share tips and the circumstances under which employers may use a tip credit.

The newly-issued Final Rule includes the following changes:
• Incorporates the 2018 FLSA amendment that prohibits an employer from keeping tips received by its employees for any purpose and establishes a new recordkeeping requirement;
• Removes the portions of existing regulations prohibiting employers that pay their tipped employees a direct cash wage of at least the full federal minimum wage and do not take a tip credit against their minimum wage obligations from including employees who do not customarily and regularly receive tips, such as cooks and dishwashers, in mandatory tip-pooling arrangements;
• Reflects guidance explaining that an employer may take a tip credit for any amount of time that an employee in a tipped occupation performs related, non-tipped duties contemporaneously with their tipped duties, or for a reasonable time immediately before or after performing the tipped duties, and addresses which non-tipped duties are related to a tip-producing occupation;
• Incorporates the statutory civil money penalties provision into the regulations;
• Reaffirms that employers may reduce the tips paid to employees by the amount of the transactional fees associated with credit card payments; and
• Clarifies that managers or supervisors may keep tips that they directly receive from a customer and for which they were the only ones who provided the service.

For additional details, see the full text of the Final Rule here: Tip Credit Final Rule.

H-1B VISA LOTTERY TO BE REPLACED BY WAGE-BASED SELECTION PROCESS
Effective early March 2021, a new Final Rule published by the U.S. Department of Homeland Security details a new wage level ranking system that would prioritize H1-B visas for foreign workers who have received the highest wage offers from employers. This system will replace the existing lottery system to select H-1B visa petitions.

USCIS WITHDRAWS PROPOSED VISA FILING FEES INCREASES
The United States Customs and Immigration Services (“USCIS”) has withdrawn its proposal to increase visa filing fees. The increases were slated for October 2, 2020. Just before the increases took effect, a federal judge in California enjoined the rule and refused to enter a stay of the injunction pending an appeal. On December 28, 2020, the Department of Justice (“DOJ”) voluntarily moved to dismiss the appeal. Therefore, the filing fee increases will not go into effect.

RELIGIOUS EXEMPTION EXPANDED FOR FEDERAL CONTRACTORS
Effective January 8, 2021, a new Final Rule issued by the Office of Federal Contract Compliance Program (“OFCCP”) clarifies that certain employers who work with the federal government can assert a religious defense to employment discrimination claims based on religion.

For additional details, see the full text of the Final Rule and FAQs.

EEOC RELEASES FINAL RULE ON NEW CONCILIATION PROCEDURES
The Equal Employment Opportunity Commission (“EEOC”) has released a final rule to update its conciliation program and encourage employers to voluntarily resolve employment discrimination charges. Under the new rule, the EEOC will provide employers with a written summary of the known facts and other relevant information when an employee files a discrimination charge, to inform employers on the findings in the case and encourage them to resolve disputes voluntarily rather than in court.

During the conciliation process, an EEOC investigator will work with the employee (or job applicant) and the employer to determine an appropriate remedy. The EEOC will allow employers at least 14 calendar days to respond to the agency’s initial conciliation proposal.

NEW FORM I-9 DOCUMENT COMBO
U.S. Citizenship and Immigration Services (“USCIS”) has issued a revised Form I-797, Notice of Action to indicate receipt notice of an Application to Replace Permanent Resident Card (Form I-90). This new Form I-797 replaces the sticker that extends the validity of a Form I-551, Permanent Resident Card (also known as the Green Card). The revised notice extends the validity of a PRC for 12 months from the “Card Expires” date on the front of the PRC.

Employees may present their expired Permanent Resident Card with this notice as an acceptable List A document. Employers should enter the information from this document combination in Section 2 under List A, entering “PRC Ext” and the I-90 receipt number from the Form I-797 in the “Additional Information box” of the Form I-9. Employers should also retain copies of both the PRC and Form I-797 with the employee’s Form I-9.

PORTAL FOR EEO-1 REPORTS OPENING SOON
Organizations with 100+ employees and organizations with federal government contracts of $50,000 or more and 50+ employees will be required to submit 2019 and 2020 EEO-1 reports when the applicable data collection portal is opened by the EEOC.

The EEOC will open four data collections in 2021, including the 2019 and 2020 EEO-1 Component 1 Data Collection as well as the 2020 EEO-3, 2021 EEO-4, and 2020 EEO-5 Data Collections. The collections are scheduled to open in the following months:

April 2021: 2019 and 2020 EEO-1 Component 1 Data Collection (Private Sector Employers)
July 2021: 2020 EEO-5 Data Collection (Public Elementary/Secondary School Districts)
August 2021: 2020 EEO-3 Data Collection (Local Referral Unions)
October 2021: 2021 EEO-4 Data Collection (State/Local Governments)

The precise opening dates of the collections, as well as the new submission deadline dates, will be announced by posting a notice on the EEOC’s home page as well as on the new dedicated website for the agency’s EEO data collections. As in previ¬ous years, a notification letter will also be sent to eligible filers.

STATE COMPLIANCE UPDATES

CALIFORNIA
Guidance Issued on Pay Data Reporting Due March 31
No later than March 31, 2021, employers in California with more than 100 employees that are required to file an annual EEO-1 report must also submit pay data to the Department of Fair Employment and Housing (“DFEH”).

All employees, whether based in or outside of California, count toward the 100-employee threshold, including temporary employees. An employer meets the 100-employee threshold by employing 100 or more employees during the “snapshot period” or by regularly employing 100 or more employees during the reporting year. The snapshot period is a single pay period that the employer chooses between October 1 and December 31 of each reporting year. Employers with multiple establishments must submit a pay data report for each establishment and a consolidated report.

The submission will include the number of employees by race, ethnicity and sex in each of the ten EEO-1 job categories and within each of the pay bands used by the U.S. Bureau of Labor Statistics Occupational Employment Statistics classifications.

The DFEH has launched guidance on the pay-data report’s contents, available here: DFEH Reporting Guidance.

Increased Rates for CA EDD Benefits
The California Employment Development Department (“EDD”) has announced an increase to the state disability contributions that California employers are required to withhold and send to the EDD.

Below are the 2021 Voluntary Plan Employee Contribution and Benefit Rates.

Employee Contribution Rate	1.2%
Taxable Wage Ceiling (per employee per year)	$128,298.00
Maximum Contribution (per employee per year)	$1,539.58
Maximum Weekly Benefit Amount (WBA)	$1,357.00
Maximum Benefit Amount (WBA X 52 weeks)	$70,564.00
Assessment Rate	0.14%

The employee contribution rate is the percentage withheld from the wages of employees who are covered by Disability Insurance (DI) and Paid Family Leave (PFL). The taxable wage ceiling is the maximum yearly wage that is subject to DI and PFL withholding. The maximum contribution is the maximum amount withheld from the yearly wages of an employee who is covered by state disability and who annually earns an amount equal to or exceeding the taxable wage ceiling.

The EDD also released an updated 28-page Overview of California’s Paid Family Leave Program and the Disability Insurance Provisions brochure.

Family and Medical Leave Tool Kit and Required Poster Released
The Department of Fair Employment and Housing (“DFEH”) has released new resources regarding Family and Medical Leave that includes the expansion of the California Family Rights Act (“CFRA”), which went into effect on January 1, 2021.

Employers are required to post updated notices about the CRFA and Pregnancy Disability Leave. The posters can be downloaded here: Family and Medical Leave and Pregnancy Disability Leave.

DISTRICT OF COLUMBIA
Protections for Displaced Workers Expanded
Effective February 1, 2021, the Displaced Workers Right to Reinstatement and Retention Amendment Act requires certain hospitality industry employers to provide reinstatement and retention rights for eligible employees displaced by COVID-19 once they start rehiring after the pandemic. The new law also allows for reinstatement and retention if there is a change in the employer’s ownership, controlling interest or identity.

The law applies to employers with 50 or more employees in the following industries: hotels, restaurants, taverns, brewpubs, nightclubs, live entertainment venues, and retail establishments. The law also applies to contractors with 25 or more employees who work in the following capacities:

Food service workers in a hotel, restaurant, cafeteria, hospital, nursing care facility or similar establishment;
Janitorial or building maintenance workers in an office building;
Non-professional employees performing health care or related services in a hospital, nursing care facility or similar establishment; or
Security guards working in an office building, institution or similar establishment.

MINNESOTA
Minneapolis Expands Wage-Theft Protections to Independent Contractors
Effective January 1, 2021, the Freelance Worker Protection Ordinance expands wage-theft protections to independent contractors who perform services within the city of Minneapolis.

Services that are expected to exceed $600 within a calendar year or $200 within seven consecutive days must be agreed upon by commercial hiring parties and freelance workers through a written agreement that outlines the terms of service to be performed. The written agreement must contain the following terms:

The name and address of both the commercial hiring party and the freelance worker;
An itemization of all material services to be provided by the freelance worker;
The compensation for the services, including the rate or rates and method of compensation;
The date on which the commercial hiring party must pay the agreed upon compensation or the mechanism by which the date will be determined; and
Signature of the freelance worker.

If the parties are not able to specify the total compensation prior to performance, the written contract also must include the method by which the total compensation will be determined and specify which party will be responsible for tracking the information necessary to determine the total compensation. When the freelance workers are responsible, they must provide the commercial hiring party an invoice with the total compensation amount and a detailed calculation by which the amount was determined. When the commercial hiring party is responsible, it must provide the freelance worker an earnings statement with the total amount and enough detail to allow the freelance worker to verify the calculations.

If the contract does not specify the date or deadline when payment becomes due, payment must be made no later than 30 days after the completion of services.

The ordinance does not apply to certain sales representatives, commission salespersons, attorneys, and licensed medical professionals.