‘Card check’ legislation: Boon for union, bust for business

April 6th, 2009

From McDonald’s Corporation Government Relations Team

The U.S. Senate is taking up the Employee Free Choice Act (H.R. 800/S. 1041), also known as “card check” legislation. The House of Representatives passed the bill already, but debate on the measure has been stalled in Senate. Card check legislation could significantly impact the ability of unions to organize companies. Recent reports state that key Democrats, who strongly favor the bill, are working to reopen the debate.

The Employee Free Choice Act, also known as “card check” legislation, will have a significant impact on the McDonald’s System. The bill will end the long practice of allowing employees to vote by secret ballot on whether they want to be become a member of a union.

Under current law, this secret ballot election is overseen by the National Labor Relations Board, which provides detailed procedures to ensure a fair election, free of fraud. The card check bill would eliminate this oversight and the secret ballot. Instead, a simple majority of employees in a workplace would simply have to check a card indicating that they want to unionize. This would leave them open to intimidation and coercion because their decision would no longer be private but open to scrutiny. The bill would also require mandatory arbitration in contract disputes. If workers determine they want to be unionized, an employer just negotiate with the union representatives and agree on a contract. Under the bill, a third-party arbitration panel would be brought in to decide the terms of the contract, including such things as pay levels and benefits, if the employer and the union fail to reach an agreement after 90 days. The bill does not give union members the right to vote to approve or disapprove the contract, as is a common practice now.

The bill passed in the House of Representatives, but debate on the issue has stalled in the Senate. The Senate is currently comprised of 58 Democrats and 41 Republicans. However, the election between Democrat Al Franken and Norm Coleman in Minnesota is still up in the air.

It is critical that you contact your senators and urge them to vote “No” to The Employee Free Choice Act. We also strongly suggest to contact your representative. If the Senate passes the bill with any changes from the version passed in the House, those differences will be hammered out in conference committee.

To learn how to contact your senators and representatives, visit www.senate.gov and www.house.gov or call the Senate switchboard at 202-224-3121 or the House of Representatives at 202-225-3121.

Click here for two sample letters that can be sent to urge your congressman and senator to oppose the measure.

IRS offers details on COBRA subsidy & payroll tax

April 6th, 2009

The IRS has added to its Web site 18 new questions and answers to help explain how employers are to administer the COBRA continuation premium subsidy provided to former employees and their families under the American Recovery and Reinvestment Act of 2009. The IRS also offers some guidance how the premium subsidy impacts an employer’s payroll responsibilities.

COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. For private-sector employers, COBRA generally covers health plans maintained by employers with 20 or more full and part-time employees.

The Recovery Act provides a 65-percent premium subsidy for nine months to assist eligible individuals (AEIs), namely employees or members of their families who:

• are eligible for COBRA continuation coverage at any time between Sept 1, 2008, and Dec. 31, 2009;
• elect COBRA coverage;
• and are eligible for COBRA as a result of the employee’s involuntary termination between Sept. 1, 2008, and Dec. 31, 2009.

It is important to note that employers must send notices by April 18 to employees who were terminated during this period, whether voluntarily or involuntarily and whether or not they are enrolled in COBRA, to inform them of this benefit. Substantial per-employee and per-day penalties apply for failing to do so. The Department of Labor has provided model notices for employers. If an eligible employee pays 35 percent of the premium, the group health plan must treat that individual as having paid the full premium required for COBRA continuation coverage. While employers must treat the 35% payment by eligible former employees as full payment, they are entitled to a credit for the other 65 percent of the COBRA cost on their quarterly employment tax return. Employers should use the updated Form 941, Employer’s Quarterly Federal Tax Return, to report their COBRA premium assistance payments.

The IRS says that credit for payment of the COBRA subsidy is treated as a payment of payroll taxes and is applied as a deposit made on the first day of the quarter. It does not reduce an employer’s tax liabilities for purposes of determining the employer’s deposit schedule generally. However, since the credit is applied as a deposit, a required deposit can be reduced by the amount of the credit. The IRS also clarifies that if an employer with unpaid employment or income taxes claims a credit on Line 12a of Form 941 for the amount of COBRA premium assistance provided during the quarter, and the amount of the credit exceeds the amount of payroll tax liabilities shown on Form 941, the IRS will offset the other unpaid taxes against the balance due before refunding any balance. The IRS will notify the employer of the offset.

Finally, the IRS says the new subsidy provision has no effect on federal unemployment taxes. For more, please visit www.irs.gov and www.dol.gov. You should also contact your medical insurance carrier to confirm that they are handling the required notifications.

Source: Checkpoint RIA and AICPA