New Laws Give Employers Hiring Incentive (6/10)

The Hiring Incentives to Restore Employment Act (HIRE Act) was signed into law on March 18, 2010, and provides employers who hire certain unemployed workers two temporary tax credits.  Specifically, any employer (except federal, state, and local government employers and household employers) that hires a worker who was previously unemployed for at least 60 days may receive a tax credit of 6.2% on the wages paid to the new employee, the equivalent of the employer’s share of the employee’s Social Security tax.  In addition, employers may take a tax credit of up to $1,000 per each previously unemployed worker they hire who stays on the job for at least 52 consecutive weeks, although they may not take both the 6.2% credit and the $1,000 for the same employee in the same year.       For a new employee to be a “qualified employee” under the Act, the worker must meet the following four criteria: 1.     The employee begins employment with you between February 4, 2010, and before December 31, 2010.   2.     The employee certifies by signed affidavit, or similar statement under penalties of perjury, that he has not been employed for more than 40 hours during the continuous 60-day period ending on the date the employee begins employment with you.  The affidavit does not have to be filed with the IRS but should be kept with other payroll and employment records.  3.     The employee is not employed by you to replace another employee unless the other employee separated from employment voluntarily or for cause (including downsizing).  Note, though, that the credit can apply to a former employee who was laid off as long as the employee meets the other criteria for a “qualified employee.”   4.     The employee is not related to you, as defined by the Internal Revenue Service (IRS).      The IRS defines “related to you” very specifically to include your child or a descendent of your child, your sibling or stepsibling, your parent or an ancestor of your parent, your stepparent, your niece or nephew, your aunt or uncle, or your in-law.  An employee also is considered to be related to you if he is related to anyone who owns more than 50% of your outstanding stock or capital and profits interest or is your dependent or a dependent of anyone who owns more than 50% of your outstanding stock or capital and profits interest.       In addition, according to the IRS guidance on the HIRE Act, the credit does not affect the employee’s future Social Security benefits, and the employer must still withhold the employee’s 6.2% portion of the Social Security tax.  But, both the employer and the employee must pay the Medicare taxes on the wages.  The 6.2% credit only applies to wages earned from March 19, 2010, through December 31, 2010.      The IRS has provided information on the HIRE Act for employers, including a new employee affidavit form, form W-11, online at www.irs.gov/businesses/small/article/0,,id=220745,00.html.

Ftc Requires Employees to Disclose Relationship on Blogs, Social Media (6/10)

The Federal Trade Commission (FTC), recently issued regulations addressing endorsements and testimonials in advertising that may affect your employees who “blog” or use social media as part of their jobs.  The regulations at first glance appear to apply to paid celebrity endorsements or bloggers who receive “freebies” for writing about a company’s products and require disclosure of these relationships.  However, because of the broad definitions used, even employees who simply “talk up” their organizations’ products online likely are covered.        Specifically, the new regulations, which took effect December 9, 2009, state that anytime a “connection” exists between an endorser and a seller of a product that might “materially affect the weight or creditability of the endorsement,” the connection must be fully disclosed.  So, for example, if an employee endorses his employer’s products or services in a public forum such as on a blog or Twitter, that employee must disclose fully the work relationship.   The regulations, in 16 C.F.R. §255.5, provide the following example that helps illustrate the requirement:      “An online message board designated for discussions of new music download technology is frequented by MP3 player enthusiasts.  They exchange information about new products, utilities, and the functionality of numerous playback devices.  Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product.  Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, the poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.”      If an employee does not disclose his relationship, the regulations indicate that an employer could be liable for false or unsubstantiated statements made through the endorsements or for failing to disclose the material connections with the endorsers.  In addition, the employee-endorser also may be liable for statements made in an endorsement.  Given the rapid distribution of information on the Internet, it is easy to see how these undisclosed or inaccurate endorsements could quickly turn into class action legal claims against your organization as well.      Comments to the regulations also suggest that an employer may be able to limit liability if it has appropriate policies and procedures in place concerning employee participation in social media.  For example, you may not be liable for the comments and nondisclosure of a “rogue” employee who violates a policy specifically requiring disclosure of the employment relationship when participating in social media.  In light of this new FTC requirement, you should implement a policy either that requires full disclosure of the employment relationship whenever an employee posts about your products or services online or that bans endorsements of your goods and services by employees entirely.