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© 2019 American Payroll Institute, Inc. January 7, 2019 • Volume 21 • Issue 1 PayState Update | 3 DOL Signs MOU With Arizona RHour ecently, the U.S. Department of Labor’s (DOL) Wage and Division (WHD) signed a three-year agreement with Arizona to protect the rights of employees by preventing their misclassification as independent contractors. Also in 2018, the WHD signed separate agreements with New Jersey and Puerto Rico (see PAYSTATE UPDATE, Issue 18, Vol. 20). So far, the WHD signed agreements with 43 states, the District of Columbia, and Puerto Rico. Arizona, WHD sign misclassification effort The Industrial Commission of Arizona, Labor Department, and the WHD signed a Memorandum of Understanding (MOU) on October 9, 2018, to protect workers from being misclassified as independent contractors and not as employees [https://www.dol.gov/whd/workers/ Misclassification/az.htm]. The MOUs allow states and the DOL to share information and collaborate on their enforcement efforts. Employers can access guidance and resources and follow developments in state coordination and investigations on the WHD’s DOL Misclassification Initiative website at https://www.dol.gov/whd/workers/misclassification/. Eight Counties in Indiana Have Tax Rate Changes for 2019 ERevenueJanuary ffective 1, 2019, the Indiana Department of (DOR) has issued a new Departmental Notice No. 1. Eight counties – Carroll, Cass, Dearborn, Grant, Hancock, Huntington, Jennings, and White – increased their county income tax rates [DOR, Departmental Notice No. 1, How to Compute Withholding for State and County Income Tax, rev. 12-18 https://secure.in.gov/dor/reference/files/ dn01.pdf News Release, 12-27-18]. Counties with rate changes All 92 of Indiana’s counties impose a county income tax on residents of the county and on nonresidents – who do not reside in another Indiana county – with a principal place of business or employment in the county. Each county has one county income tax rate (i.e., tax rates are the same for residents and nonresidents). Employers withhold state and county income taxes from employees’ wages. Effective January 1, 2019, the following eight counties have tax rate changes: • Carroll County – new rate of 2.2733% (previously 2.0733%) • Cass County – new rate of 2.6% (previously 2.5%) • Dearborn County – new rate of 1.2% (previously 0.6%) • Grant County – new rate of 2.55% (previously 2.25%) • Hancock County – new rate of 1.74% (previously 1.70%) • Huntington County – new rate of 1.95% (previously 1.75%) • Jennings County – new rate of 3.15% (previously 2.50%) and • White County – new rate of 2.32% (previously 1.32%). Next notice in October Departmental Notice No. 1 lists county names, county codes, and county tax rates and is updated twice a year (effective January 1 and October 1). A revised Departmental Notice No. 1 will likely be issued in September 2019, with an effective date of October 1, 2019. State White Collar Salary Requirements Increase With Minimum Wage Rate Increases in 2019 Tincreases he new year brings many state minimum wage rate (see PAYSTATE UPDATE, Issue 24, Vol. 20). In addition to employee wage increases that result from those increases, remember that state minimum wage rate increases also cause increases in some state “white collar” exemption salary thresholds. Employers must track recent or upcoming scheduled state “white collar” exemption salary threshold changes in Alaska, California, Colorado, Maine, New York, and Oregon. If those changes make a state salary threshold more favorable to employees than the “white collar” exemption salary threshold in the federal Fair Labor Standards Act (FLSA 29 USC §201 et seq.), then the state threshold applies to all relevant employees covered by the state law, even if those employees also are covered by the FLSA. ‘White collar’ exemptions Similar to the “white collar” exemption provisions in the federal FLSA, some state minimum wage and overtime laws exempt “white collar” employees from certain protections and their employers from related recordkeeping requirements. Generally, “white collar” exemptions apply to executive, administrative, and professional employees (including computer software professionals), and outside sales employees and eligibility is based – at least in part – on whether the employee’s salary is high enough to meet a certain threshold (i.e., a salary test or salary threshold). Some states calculate salary thresholds using unique formulas based on state minimum wage rates, so state minimum wage rate increases result in state salary threshold increases. FLSA update Because employers must apply the salary threshold more favorable to the employee, the federal overtime exemption regulations have virtually no effect in states with salary thresholds more favorable to employees. When the U.S. Department of Labor’s (DOL) 2016 “white collar” rule was