Biden orders private companies and healthcare institutions to mandate employee vaccines


By Lauren Barghols Hanna

Yesterday afternoon, President Biden announced a series of executive actions and new federal rules to increase the number of vaccinated American workers. Noting that COVID-19 has killed more than 650,000 in the last 18 months, President Biden announced several expected executive orders and a forthcoming emergency OSHA rule. The expected rule will mandate that all companies with more than 100 workers require their employees to either be fully vaccinated or submit to weekly COVID-19 screening tests. By executive order, President Biden will mandate vaccines for health care workers, federal employees and federal contractors. If federal employees refuse vaccination without a valid medical reason or sincerely-held religious belief, they may be subject to disciplinary action, up to and including termination of employment.

President Biden vowed to “protect vaccinated workers from unvaccinated co-workers” and to “reduce the spread of COVID-19 by increasing the share of the workforce that is vaccinated in businesses all across America.” Until President Biden’s September 9th speech, he had appeared hesitant to enact federally-mandated vaccine requirements–instead relying on individual corporate vaccine incentive programs to encourage vaccine compliance. In his speech, President Biden conveyed the urgent importance of corporate and federal vaccine mandates to increase individual employee vaccination rates. His new orders are likely motivated by the rapid spread of the COVID-19 delta variant, the FDA’s recent full approval of the Pfizer-BioNTech COVID-19 vaccine, and the effort to achieve critical herd immunity to ensure continued economic recovery and minimize the likelihood of incubating potentially-severe variants among the unvaccinated population.

To ensure larger employers enact “vaccination or weekly testing” policies, President Biden ordered the Occupational Safety and Health Administration (OSHA) to draft a rule requiring even private employers with 100 employees or more to enact such policies to maintain critical OSHA compliance. OSHA has indicated that it intends to take enforcement action against private companies that do not comply with the vaccine mandate, with potential fines of up to $14,000 per violation.

Regardless of the number of employees, private hospitals and other healthcare institutions that accept Medicare and Medicaid reimbursements also will be required to enact similar mandatory vaccine policies, along with other federal contractors and federal agencies. In addition to these orders, President Biden also encouraged state governors to mandate vaccinations and/or weekly testing for entertainment venues, and private and public schools to “make sure we are keeping students safe.”

Across all industries, approximately two-thirds of America’s workforce will be impacted by one or more of President Biden’s orders and requested rules related to mandated COVID vaccinations and/or regular screening tests.

Phillips Murrah will continue to monitor the publications of these promised orders and provide additional implementation guidance as it becomes available.

Lauren Barghols Hanna portrait

Lauren Barghols Hanna is an attorney in Phillips Murrah’s Labor & Employment Practice Group.

For more information on this alert and its impact on your business, please call 405.606.4732 or email me.

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Breaking News: IRS issues guidance on Trump’s payroll tax deferral order

On Friday, August 28, 2020, the IRS and Treasury issued guidance implementing President Trump’s order to defer collection of some payroll taxes amid the coronavirus pandemic.

Phillips Murrah attorney Jessica Cory

Jessica N. Cory represents businesses and individuals in a wide range of transactional matters, with an emphasis on tax planning.

On August 8, 2020, President Trump issued a Presidential Memoranda, commonly known as an Executive Order (the “Order”), to defer the withholding, deposit, and payment of certain payroll taxes on wages paid from September 1, 2020 through the end of the calendar year.   The Order applies to any employee whose pretax compensation is less than $4,000 per biweekly pay period (or $104,000 per year, on an annualized basis).  The Order permits the employers of these eligible employees to temporarily suspend the 6.2% Social Security tax typically withheld from employees’ paychecks.

The Order has raised a number of questions for employers and payroll companies considering whether to implement the deferral.  For example, the National Payroll Reporting Consortium (“NPRC”) recently raised concerns about whether sufficient time is available to implement a deferral option by September 1, given the substantial programming changes that such an option would require. Because payroll systems are typically designed to use a single Social Security tax rate for the full year, for all employees, it may be challenging to change a reporting system to apply a different tax rate for part of the year, beginning mid-quarter, for only certain employees of certain employers.

In addition to practical challenges relating to implementation, the Order also raises liability concerns for both employees and employers, who are dually liable for unpaid payroll taxes under the Internal Revenue Code. Under Code Section 7508A, the Secretary of the Treasury can delay tax payments for up to a year during a presidentially-declared disaster, but no authority exists to authorize forgiveness of those deferred amounts. Accordingly, employees, employers, or both could be held liable for any deferred payroll taxes after the deferral period ends. This could represent a substantial burden. For example, for an employee earning $50,000 per year, the deferral would allow the employee to take home an additional $119 per paycheck during the deferral period. But, without Congressional action to authorize forgiveness of the deferred taxes, that employee—or his or her employer—would be facing a $1,073 tax liability in January.

Based on guidance released today from the Treasury Department in Notice 2020-65, employers who opt into the deferral program will be required to collect the deferred taxes ratably from their employees during a four month repayment period beginning on January 1, 2021, through increased withholding. Accordingly, during the repayment period, employers will be required to withhold 12.4% from their employees’ paychecks, rather than the normal 6.2%, to repay the payroll tax liability accumulated from September to December. The guidance does not indicate how an employer should collect the deferred taxes from an employee who terminates his or her employment prior to the end of the repayment period but indicates that employers may make other “arrangements … to collect the total [deferred tax amount] from the employee,” if necessary.

The guidance offered on Friday indicates that the Treasury intends to put the onus of repayment on the employer, with the employer potentially subject to interest, penalties, and additions to tax beginning on May 1, 2021, if the employer is unable to collect the accrued tax liability from its employees. Accordingly, given the voluntary nature of the deferral, the potential liability involved, and the costs and complexity associated with upgrading their payroll systems to accommodate the deferral, employers have a strong incentive to opt out and continue withholding for now.

To the extent an employer does want to participate in the tax deferral, the employer should consider establishing a procedure to allow eligible employees to opt in to the deferral. This procedure should require any employee opting in to provide the employer with a written and signed statement that:

  1. Acknowledges that any deferred taxes will come due in 2021.
  2. Authorizes the employer to withhold tax at a double rate, consistent with the guidance provided in Treasury Notice 2020-65, for those pay periods falling in the four-month repayment period.
  3. Agrees that in the event the employee’s employment is terminated prior to the end of the repayment period, for any reason, the employer can set off any remaining amount owed to the employee by the amount of outstanding deferred taxes, that the employee will be liable for any remaining amount, and the employee will reimburse the employer for any associated liability, including penalties and interest, as necessary.

Employers who decide to establish such an opt-in procedure should consult with counsel to ensure compliance with state labor laws.

For more information on this alert and its impact on your business, please call 405.552.2472 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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