NPRC and APA File Amicus Brief with the California Supreme Court
A recent court decision could establish a precedent making payroll service providers directly liable for labor law violations. The lawsuit in question implies that payroll service providers should be responsible and liable for compliance with Labor laws and the actions of their clients. The ruling in question provided in part that a payroll provider may be liable to an employee of an employer client on a third-party beneficiary contract theory; e.g., for errors in an employee’s earnings statements.
These rulings ignore well-established California law that the duty to comply with California wage practices falls solely on the employer and cannot be delegated. The ruling would also place payroll service providers in an infeasible position as responsible for the conduct of client employers and their compliance with Wage & Hour laws. The appellate court had also certified the opinion for publication, which, if published, would allow the ruling to hold precedential effect.
NPRC’s role was to educate the Court about the payroll processing industry in California, and to emphasize the broad impact of the Court of Appeal’s ruling. If payroll service providers are routinely drawn into California Wage and Hour lawsuits as additional defendants, it would clearly increase the costs of payroll processing in the state and reduce the availability of payroll services in the state. The American Payroll Association helpfully collaborated on the NPRC amicus brief and signed on in support.
NPRC Asks IRS to Modify Form W-4
The NPRC asked the IRS to add “First Date of Work” to Form W-4. Form W-4 was not designed to be submitted to any government agency. However, the 1996 Welfare Reform Act (PRWORA) required all employers to report the hiring of new employees, and provided that employers may submit a copy of IRS Form W-4. In 2010, “hire” date (first date of employment) was added as a mandatory reporting element under federal law, so all states require “hire date” on New Hire reports, and yet Form W-4 does not have a space for it. This results in missing data, which drives up costs for employers, states and government integrity programs.
NPRC worked with the Federal Office of Child Support Enforcement, which estimated that roughly 180,000 new hire reports annually are missing the hire date. New hire reports are also used by Unemployment Insurance agencies to identify active UI claimants who have become reemployed. But without the hire date, they can’t use the information, and as a result, state UI taxes for all employers are higher than necessary. Additionally, child support agencies may not be able to locate persons who owe child support if the hire date is missing.