Presented below is a hypothetical fact pattern based on a compilation of questions received by Associated Industries’ In-house Counsel.

The information below is not a substitution for competent legal advice, nor does it create an attorney-client relationship between Associated Industries’ In-house Counsel and any readers or recipients of this information.

Additionally, this material reflects the current state of the law at the time of development. Where specific legal issues arise, recipients or readers should seek private legal counsel.

THE DILEMMA

You are the operations manager of a local manufacturing facility specializing in brass work. You have recently received a custom order for brass ornamental railing caps to be installed on a new bridge being built by the state. The order is from another fabricator responsible for the entire railing and includes the cap design specified in their contract. If you are not involved in the actual construction of the bridge and will not even be involved in the installation of the railing, do you have any special obligations with regard to your employees’ time on that project?

ISSUES AND CONCLUSIONS

The short answer is yes. While the Federal prevailing wage laws pursuant to the Davis-Bacon Act require payment of prevailing wages to mechanics and laborers employed directly upon the site of the work, Washington State’s prevailing wages apply to laborers, workers or mechanics, upon all public works. RCW § 39.12.020.

Washington’s courts view this difference in terminology as evidence of state legislative intent to vary from the Federal standard and apply the prevailing rate to labor performed off-the-job-site by employees of the prime contractor, subcontractor, or other persons doing or contracting work contemplated by the contract. In order for the work to be within the coverage of state prevailing wage requirements, however, the item must be produced for the particular public works project and not merely as a standard item for sale on the general market. In this case, the employer must determine whether the caps are special products created only for this project or whether they can be characterized as standard items.

In this case, because the caps are to be produced in keeping with the design provided in the contract, they are not standardized and the work involved in producing them must be compensated at the appropriate prevailing wage. In order to identify the appropriate rate to be applied, employers may access the prevailing wage rates at http://www.lni.wa.gov/TradesLicensing/PrevWage/WageRates/default.asp.

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"Morning Briefing"
An important component of drug-free workplace programs is reasonable suspicion testing. Associated Industries' next "Morning Briefing" will discuss both the practical and legal aspects of reasonable suspicion testing to assist employers in developing sound and reliable practices. This session will also satisfy the Federal Department of Transportation supervisory training requirements for commercial driver testing.

This class will be instructed by Associated Industries In-house Counsel and David Michaelsen, MS, General Manager of Toxicology, PAML.

Congress approves final changes to health plan

by Ted Blotsky, Senior Vice President,
Employee Benefit Services

After a final surge to overcome Republican opposition, Congressional Democrats approved the last piece of their healthcare overhaul on Thursday evening, March 25th. The Senate passed the reconciliation package on a nearly party-line vote, 56 to 43 and House Democrats approved the same package, 220 to 207.

The 153-page package represents a small fraction of the healthcare legislation that the House approved recently, and – as A.I. CEO Jim DeWalt mentions – the ramifications of all these changes remain to be seen. But the package makes several major changes, including the expansion of subsidies the Federal government will provide to low- and moderate-income Americans to help them buy health insurance starting in 2014.

The package also scales back a new 40 percent excise tax on high-end “Cadillac” insurance plans and delays the implementation of the tax until 2018.

It imposes a new levy on couples making more than $250,000, who will pay a 3.8 percent Medicare tax on capital gains and other investment income for the first time.

The bill boosts Federal aid to states, to help them expand their Medicaid programs, replacing a provision in the main healthcare bill that singled out Nebraska for special assistance.

In addition, it would gradually close the gap in Medicare prescription coverage know as the “doughnut hole,” which forces millions of seniors to pay thousands of dollars for medications out of their own pockets. Within a year, beneficiaries whose initial drug benefits ran out would receive a $250 rebate, and by 2020, the doughnut hole would be gone.

The legislation also establishes a broad new framework of government regulation to prevent insurance companies from denying coverage to people who are sick and requires insurers to provide a minimum level of benefits.

As is often the case, an additional entry, not related to healthcare, was tacked on to the bill, a major change in the way the Federal government helps students pay for college. The add-on gives the government authority to lend money to students directly instead of using private financial institutions as intermediaries.

Much more to come.

― Ted Blotsky, Senior Vice President, Employee Benefit Services

by Steven M. Roark, CPA, LeMaster Daniels

Audits become more likely as state agencies look for money: Best to be prepared, take advantage of tax savings opportunities

Across the state and in local jurisdictions, cash-strapped governments are scrounging for tax revenues to sustain their operations and services, and now more than ever they’re mining taxpayer funds by way of business audits. Though it’s always best to be prepared for such a review, this is an especially good time to make sure your state and local taxes are in order. There are several ways to do this..

First, if you are already taking advantage of the numerous but obscure credits, deductions and exemptions buried in state and local tax code, be sure you’re reporting them correctly. Common mistakes, such as improperly apportioning in- and out-of-state service revenues, stand out egregiously in an audit. (If your company is not yet availing itself of these opportunities, such as high tech credits and manufacturing exemptions, you should consult with a tax professional to determine if you qualify for them.)

Second, consider outsourcing your company’s compliance with state and local business taxes to a qualified CPA. Washington State tax code is quite complex and it takes an expert to accurately interpret it. You can find relief from your reporting and compliance obligations and get help with long-term planning while you’re at it.

Finally, avoid the pain of an audit altogether simply by preparing for it properly. By getting an expert to review your current Department of Revenue and city tax returns and ensuring that they are correctly reported, you can deter incorrect auditor assessments and identify potential offsetting tax credits. Even if you’re never audited (and those odds are dwindling,) you’ll rest easy knowing you are fully compliant – as well as taking advantage of all possible tax savings.

LeMaster Daniels’ team of tax professionals includes Kevin Cox, Steve Roark and Rick Tedrow – a state and local tax consultant and a former Washington State auditor. Give us a call at (866) 622-5553 to discuss all the ways your business can benefit from this rare and specific insight.

― Steve Roark, LeMaster Daniels

BE OUR GUEST

Stopgap COBRA subsidy extension approved  

On March 2, 2010, President Obama signed H.R. 4691, the Temporary Extension Act of 2010. H.R. 4691 includes another limited extension of the COBRA subsidy that was originally part of the American Recovery and Reinvestment Act of 2009 (ARRA), as amended by the 2010 Department of Defense Appropriations Act (the Appropriations Act) on December 19, 2009.

ARRA originally provided for a nine month premium assistance subsidy for health benefits under COBRA for Assistance Eligible Individuals (AEIs) who were involuntarily terminated between September 1, 2009, and December 31, 2009. The Appropriations Act extended the original ARRA premium assistance subsidy from nine to 15 months and expanded the eligibility window to February 28, 2010.

H.R. 4691 strikes the February 28, 2010, end date from the Appropriations Act amendments to ARRA and inserts a new end date of March 31, 2010. Under H.R. 4691, you can be involuntarily terminated up through March 31, 2010, and still be an AEI for the COBRA premium subsidy.

The law does not address what plan administrators should do to provide adequate COBRA election notices for individuals terminated after February 28, 2010, and up until the Department of Labor (DOL) is able to provide another updated version of its General Election Notice. H.R. 4691 also clarifies that where a reduction in hours is followed by an involuntary termination of employment, such individuals can be considered AEIs. If such individuals did not elect COBRA or elected and discontinued COBRA after the initial reduction in hours, an involuntary termination of employment that takes place on or after March 2, 2010, (the date of enactment of H.R. 4691) will be considered the qualifying event. However, the period of continuation coverage will be counted from the reduction in hours.

H.R. 4691 expressly states that such individuals do not have to elect or pay for coverage retroactively to the date of the loss of coverage due to reduction in hours. This clarification appears to include individuals whose hours were reduced after September 2008, and who are then terminated on or after March 2, 2010. Guidance from the DOL on this critical timing issue will be extremely important because, as written, this provision is not equitable for those whose hours were reduced and who were ultimately terminated before the date of enactment of H.R. 4691.

The “clarification” regarding a reduction in hours followed by a termination necessitates new notices. H.R. 4691 provides that during the 60 days after the involuntary termination, the plan administrator must provide an additional notice explaining these new rules.

The law is silent as to whether or not the DOL will provide notices for this purpose. Based on the DOL’s conduct after the Appropriations Act amendments to ARRA, it is likely (but not certain) that they will provide model notices. H.R. 4691 also amended the retroactive payment provision for those entitled to transition period relief under the Appropriations Act to allow retroactive payments to be made by the end of the grace period for the period of coverage. Finally, H.R. 4691 provides that individuals are authorized to bring civil actions to enforce determinations made by federal agencies under the expedited review process set forth under ARRA, and for equitable relief. In addition, plan sponsors or health insurers are subject to penalties of up to $110 per day for failing to implement the reviewing agency’s determination within 10 days of receiving notice of the determination. The analysis above reflects the language of HR 4691.

DOL and Internal Revenue Service guidance would be welcome as there are many unanswered questions that affect how plan administrators will implement this extension and the clarification regarding reduction in hours. Congress also continues to consider legislation that will extend the COBRA subsidy program for a third time through December 31, 2010. We will provide prompt updates on any additional guidance or further extensions of the COBRA premium subsidy.

― Wells Fargo Insurance Services

Higher Education News and Updates

Kyle Somerville joins Associated Industries team

Associated Industries welcomes Kyle Somerville as a summer intern. Kyle is currently a student at the Community Colleges of Spokane and is a recipient of an Associated Industries Bright Promise Program Scholarship.

Associated Industries is taking advantage of Washington State’s Work Study Program that will help pay part of his wages. Any employer may be eligible to take advantage of this Work Study Program. For more information click here.

Kyle will be supporting Associated Industries' VP of Education, Training and Development Bill Sweigert through several major projects over the next few months, including the data collection, sales and deployment of Associated Industries compensation surveys.

Job shadowing offers students a glimpse of what awaits them after graduation

A.I. VP of Marketing and Communications, Cher Merrill, President of the Greater Spokane Chapter of PRSA, will host Stephanie Baker, a student at Whitworth University as a participant in the 2010 PRSA “Day on the Job” March 30th. A total of 25 job shadows have been arranged by the local chapter of PRSA, as students from universities throughout the region experience a day in the life of a communications professional this spring.  

Eastern Washington University College of Science, Health and Engineering Career
and Internship Fair

Eastern Washington University will host its annual College of Science, Health and Engineering Career and Internship Fair on Wednesday, April 7th. The College of Science, Health, & Engineering Career and Internship Fair 2010 is an opportunity for employers to connect with Eastern Washington University undergraduate students, graduate students and alumni seeking full-time, part-time, and internships in following disciplines; biology, chemistry/biochemistry, computer science, engineering and design, technology,  environmental science, mathematics, health sciences, geology, and physics.
The career fair will be held in the Computing and Engineering Building located on Eastern Washington University’s Cheney campus. The registration price is $125; registration for non-profits and government agencies is $75. To register follow this link www.ewu.edu/cshefair .

If you would like more information contact Jill Summers via email at jsummers@ewu.edu or by phone at 509.359.6417.

brightpromiseprogram.org

Voice your opinions to your legislators

Associated Industries does not endorse any political candidate or point of view. However, we do want to let you know when there are opportunities to speak with your elected officials and how to find out more about what’s going on in Olympia and beyond. As we receive information from our elected officials, we will make every effort to pass that information on to you.

REP. KEVIN PARKER (R) (6th Leg. District) In Representative Parker’s March 25, 2010 email update, he outlines some of the differences between the House and Senate tax increase proposals. Read the full email here.

REP. JOHN DISCOLL (D) (6th Leg. District) Representative Driscoll news and updates can be found here.

REP. JOE SCHMICK (R) (9th Leg. District) Representative Schmick discusses what he believes has been a misuse of tax payer’s money in the Legislature’s “special” session. Read his full comments here.

SEN. CHRIS MARR (D) (6th Leg. District) Sen. Marr’s latest e-newsletter discusses the passage of Senate Bill 6627 which will provide residents who live in Spokane and work in Idaho a new way to access prescription drugs. Read the e-newsletter here.

REP. TIMM ORMSBY (D) (3rd Leg. District) For news and updates visit Representative Ormsby’s website here.

It's our hope you will take the time to listen to and then communicate with the people that represent you, and give your attention to the issues that affect our region and our country. It's our privilege and our duty as citizens to share our ideas and voice our opinions on issues that are important to us.