New York City's Commuter Benefits Law Takes Effect January 1, 2016
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Presented by New York City’s Commuter Benefits Law Takes Effect January 1, 2016 By Carolyn D. Richmond, Glenn S. Grindlinger and Phillip H. Wang On January 1, 2016, New York City’s Commuter Benefits is determined by calculating the average number of full-time Law takes effect. Under the law, private employers with 20 employees for the most recent four-week period. or more full-time, non-union employees in New York City Employers with more than one location are covered by the must offer covered employees the opportunity to enroll in law, so long as they have 20 or more full-time employees in commuter benefits programs to pay for their mass transit New York City. Chain businesses (i.e., businesses that share costs with pre-tax earnings. a common owner or principal who owns a majority of each What Is the Purpose of the Law? location and are engaged in the same business or operate The law’s goal is to reduce transportation costs to under a franchise agreement) are also covered by the law. employees, promote the use of mass transit, and lower Full-time employees at all of the chain business’ locations payroll taxes for employers. Because federal income and in New York City are counted to determine the total number social security (FICA) taxes are not imposed on such of employees. expenses, employees will be able to save on commuting Temp agencies are covered by the law and are considered expenses and employers will be able to reduce payroll costs. the employer of each full-time employee they place in What Are Commuter Benefits Programs? another organization. Thus, temp agencies that place 20 or A commuter benefits program is a plan whereby employers more full-time employees in New York City must offer those can offer their full-time employees the opportunity to use employees transportation benefits. To determine whether pre-tax income to cover certain IRS qualified transportation an employee qualifies as full-time, temp agency employers costs. Employees may use such pre-tax income to pay for should add the total number of hours worked by each various forms of transit, including the MTA subway and bus, employee in the most recent four weeks at all placements. Long Island Rail Road, Metro-North, Amtrak, New Jersey The law’s requirements may be waived for certain Transit and eligible ferry, water taxi, commuter bus and employers. To qualify for a waiver, an employer must vanpool services. However, parking and bicycling expenses present compelling evidence that providing transportation do not qualify. A list of mass transit providers, and qualified benefits would be impracticable and create severe financial third-party providers that administer commuter benefits hardship. programs, are set forth in the Q&A below. Which Employees Are Covered? Alternatively, employers can provide (at their own expense) Only full-time, New York City employees are covered by the a transit pass or similar form of payment for mass transit law. A full-time employee is any employee who works an transportation. However, if the employer-provided benefit is average of 30 hours or more per week, any portion of which less than the maximum pre-tax transportation benefit that was in New York City, for a single employer. To determine is allowed under IRS regulations (currently $130 for transit whether an employee is full-time, employers should passes and commuter highway vehicles), then the employer calculate the average number of hours worked in the most must offer employees the opportunity to purchase pre-tax recent four weeks. transportation fringe benefits in an amount equal to the difference. The law covers full-time employees who work in New York City, regardless of their place of residence. New York City What Employers Are Covered? includes the Bronx, Brooklyn, Manhattan, Queens and Only employers with 20 or more full-time employees are Staten Island. covered. An employer’s total number of full-time employees Fox Rothschild www.foxrothschild.com | NYC Hospitality Alliance www.thenycalliance.org Copyright © December 2015 Fox Rothschild LLP | Attorney Advertising Full-time employees whose job duties require them to work will receive a six-month grace period — until July 1, 2016 only occasionally in New York City are still covered by the — before the DCA can seek penalties. After July 1, 2016, law, so long as they work an average of 30 hours or more employers will have 90 days to correct any violation of the per week, any portion of which was in New York City and if law before penalties will be imposed. their employer has 20 or more full-time employees. What Are the Penalties for Noncompliance? The law does not cover New York City residents who work First violation penalties will range between $100 to $250, outside of the city. Thus, employers are not required to offer provided the employer fails to correct violations within commuter benefits to their employees who live in New York 90 days. If a violation is not cured after the first fine, an City, but who work in New Jersey, Connecticut, Long Island, additional fine of $250 will be issued for each additional Westchester or some other location, 30-day period of noncompliance. What Are the Law’s Recordkeeping and Administration What Are the Employer Takeaways? Requirements? While many large New York City employers already offer Employers must give their full-time employees a written offer such pretax transit benefits, the new law will require of the transportation benefits. Employers should maintain many smaller employers to put a qualified transportation such records, and employee responses, for at least two benefit program in place. Thus, employers with employees years. A sample Employer Compliance Form – Offer of in New York City must now determine whether they will Commuter Benefits can be downloaded here. be subject to the new law, and if so, the impact on their Who Enforces the Law? operations. Employers should therefore consider changes Initially, the Department of Consumer Affairs (DCA) will to the administration of their benefits programs, proper enforce the law although the proposed New York City communications to employees regarding such plans and any Office of Labor Standards would be given enforcement payroll changes necessary to comply with the new law in responsibilities if such office is created by the City Council. 2016. While the law takes effect on January 1, 2016, employers New York City’s Commuter Benefits Law Questions & Answers Employer Coverage Question: Does an employer have to offer commuter benefits if Question: Which employers must offer commuter benefits? its workforce is reduced to fewer than 20 full-time employees? Answer: Private employers with 20 or more full-time, non- Answer: Yes. Employers must allow employees who were union employees working in New York City. eligible for commuter benefits before a workforce reduction the same continued benefits throughout the remainder of Question: How is the number of full-time employees their employment. determined? Question: Does the law apply to temp agencies? Answer: The total number of full-time employees is determined by calculating the average number of full-time Answer: Yes. A temp agency that supplies full-time employees for the most recent four-week period. employees to other companies is the employer of those employees. Thus, agencies that employ 20 or more full- Question: What if an employer has been in business for less time employees, who are placed in New York City, must also than three months? provide qualified transportation fringe benefits. Answer: Then the number of full-time employees is Question: Does the law apply to chain businesses? determined by calculating the average number of full-time employees per week for the period of time in which the Answer: Yes. Chain businesses are group establishments employer has been in business. that share a common owner or principal who owns a majority of each location and are engaged in the same Question: Which employers are exempt under the law? business or operate under a franchise agreement with the Answer: Employers that have employees covered by a same franchisor (as defined in New York State General collective bargaining agreement (CBA). Note, however, that Business Law Section 681). Business owners must count if the employer has 20 or more full-time employees who are full-time employees at all of the chain business’ locations not covered by a CBA, the employer must still offer those in New York City to determine the total number of full-time employees commuter benefits. Government employees are employees. also excluded. Fox Rothschild www.foxrothschild.com | NYC Hospitality Alliance www.thenycalliance.org Copyright © December 2015 Fox Rothschild LLP | Attorney Advertising Covered Employees Full-Time Employee Considerations Question: Does the law apply to part-time employees? Question: If an employer has multiple locations, do all full-time Answer: No. employees count toward the total number of employees? Question: Who is considered a full-time employee? Answer: Yes. If an employer has more than one location in New York City, the employer must count all full-time Answer: A full-time employee is any employee who works an employees at all New York City locations to determine the average of 30 hours or more per week, any portion of which total number of full-time employees. was in New York City, for a single employer. Employers should calculate the average hours worked in the most Question: If an employer is part of a chain business, do all full- recent four weeks. time employees count toward the number of employees? Question: Does the law apply to employees who do not live in Answer: Yes. If an employer owns a majority of more than New York City but work in New York City? one establishment in the chain business in New York City, the employer must count all full-time employees at all Answer: Yes.