DOL Proposes New, Simplified Joint Employer Rule

New Four-Part Test to Determine an Employer's Status

The Department of Labor (DOL) has proposed a new rule to determine whether an employer is a joint employer or not. The proposal simplifies the current standard, introducing a four-part test to determine an employer’s status. According to the newly proposed rule, an employer qualifies as a joint employer if it:

  • Can hire or fire employees;
  • Controls employee schedules;
  • Determines employees’ pay and how they are paid; and
  • Maintains the employees’ employment records.

All factors must be completed to decide an employer’s status. Under the Fair Labor Standards Act (FLSA), if two employers exercise joint responsibility for a group of workers, minimum wage compensations and overtime obligations are shared by both parties. In 2016, the Obama Administration DOL issued guidance that dramatically increased a club’s liability for joint employment; however, in 2017, the Trump Administration’s DOL rescinded that guidance.

The current DOL noted the proposed rule may consider additional factors to determine an employer’s status such as if a potential joint employer is “exercising significant control” over employees’ work or “otherwise acting directly or indirectly in the interest of the employer in relation to the employee.”

In a statement by Labor Secretary Alexander Acosta, the new proposed rule would reduce litigation under FLSA and provide clarity to businesses and courts.

The proposal is currently on a 60-day public comment period.

Laws and Regs

DHS Pushes for More H-2B Visas

The Department of Homeland Security (DHS) has announced that it plans to raise the number of H-2B visas available by 30,000. This boost applies for summer-season organizations only and applies to fiscal year 2019 returning workers only—those individuals who received H-2B visas from FY2016 to 2018.

The announcement comes after Congress passed a bill in February that allowed the DHS to increase the current 66,000-visa cap to 135,325. Because the numerical cap of 33,000 visas for the second half of the federal government’s fiscal year (Apr.1-Sept. 30) was met by February 19, the need for more H-2B workers has been critical.

The increase also doubles the number of additional H-2B visas approved by the DHS last year, and is likely to be provided at an earlier date than in 2018. The visas are expected to be released in the next few weeks. NCA will continue to push for the release of more H-2B visas in order to help clubs carry out critical services for their members.

IRS Removes Club's Private Status Over Cell Tower Lease

 

According to "Tax Analysts," the IRS has removed a private club’s 501(c)(7) tax-exempt status for exceeding nonmember income and operating as a trade or business by receiving revenue for a cell tower easement agreement. The club received a lump sum payment at the beginning of the agreement and subsequent monthly payments followed by an increase in the payment after several years.

 

If a club loses its tax-exempt status due to excessive unrelated business income, the club will incur tax liability for other member revenue such as dues, initiation fees and assessments, as well as jeopardizes its private status and subjects itself to additional administration and financial burdens.

 

DOL Proposes New Overtime Rule

The Department of Labor (DOL) has proposed a new overtime rule that would require employers to pay overtime to workers earning salaries less than $35,308 per year ($679 per week). This proposal represents a roughly 30 percent increase from the current salary threshold of $23,660 per year ($455 per week). 

The rule also increases the total yearly compensation threshold for highly compensated employees from the current level of $100,000 to $147,414.  

Importantly, this rule does not alter the current duties test, used to determine which workers are considered exempt or nonexempt from overtime.  

During the Obama Administration, the DOL proposed an overtime rule that increased the overtime threshold to $47,476 annually ($913 per week)—more than doubling the current rate. NCA opposed such a dramatic increase because it would significantly increase costs for clubs and hurt club employees. Prior to its scheduled implementation in December 2016, a Texas federal district court struck down the rule.

 The rule proposed by the current DOL offers a more balanced approach to raising overtime pay, allowing clubs to more effectively implement its changes. The proposal is now open for comment for 60 days.

Rhode Island Proposes 7 Percent Tax on Club Memberships

The Rhode Island legislature has proposed a budget bill that would tax club memberships at a 7 percent rate, including initiation fees. The bill also includes language that would tax all outside work done at the club, such as golf course maintenance, renovations to the club and cleaning services.

If passed, this bill would significantly impact Rhode Island clubs’ bottom lines, levying a tax on the industry’s most vital source of revenue. NCA is tracking this bill and will inform you of any further updates.

New York Takes Second Shot at Club Tax Assessments

New York state legislators Sandy Galef (D) and David Carlucci (D) have proposed a bill in the state house and senate that would allow clubs and golf courses in the Empire State to be assessed based on the property’s highest and best use rather than its current you. Assemblywoman Galef chairs the state’s Real Property Taxation Committee, which has progressed the bill.

The proposed bill marks the second attempt in as many years to raise tax rates on New York private clubs. Last year, the bill was defeated through a concerted effort from the club industry.

NCA will keep you updated on any further developments.

The Push to Stop the HIT

NCA and our allies on the Stop the HIT Coalition sent a letter to Senate Majority Leader Mitch McConnell R-Ky), Senate Minority Leader Chuck Schumer (D-N.Y.), Speaker of the House Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif), urging them suspend the Health Insurance Tax (HIT) for 2020.

The HIT is levied on health insurance providers but is passed down to clubs in the form of a 2 to 4 percent premium hike on each health care plan. If enacted, the HIT would significantly increase health care costs for the private club industry.  

The tax was suspended in 2017 and 2019, however, its 2020 status is yet to be decided. Since 2013, both Presidents Obama and Trump have signed laws providing relief for the HIT. Further, members of both parties support HIT relief. NCA will continue to work to ensure the HIT is suspended for 2020.