Law Does Not Provide for a Social Security Cost-of-Living

News Release

Law Does Not Provide for a Social Security Cost-of-Living

Adjustment for 2016
With consumer prices down over the past year, monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will not automatically increase in 2016.
The Social Security Act provides for an automatic increase in Social Security and SSI benefits if there is an increase in inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The period of consideration includes the third quarter of the last year a cost-of-living adjustment (COLA) was made to the third quarter of the current year. As determined by the Bureau of Labor Statistics, there was no increase in the CPI-W from the third quarter of 2014 to the third quarter of 2015. Therefore, under existing law, there can be no COLA in 2016.
Other adjustments that would normally take effect based on changes in the national average wage index also will not take effect in January 2016. Since there is no COLA, the statute also prohibits a change in the maximum amount of earnings subject to the Social Security tax, as well as the retirement earnings test exempt amounts. These amounts will remain unchanged in 2016. The attached fact sheet provides more information on 2016 Social Security and SSI changes.
The Department of Health and Human Services has not yet announced Medicare premium changes for 2016. Should there be an increase in the Medicare Part B premium, the law contains a “hold harmless” provision that protects approximately 70 percent of Social Security beneficiaries from paying a higher Part B premium, in order to avoid reducing their net Social Security benefit. Those not protected include higher income beneficiaries subject to an income-adjusted Part B premium and beneficiaries newly entitled to Part B in 2016. In addition, beneficiaries who have their Medicare Part B premiums paid by state medical assistance programs will see no change in their Social Security benefit. The state will be required to pay any Medicare Part B premium increase.
Information about Medicare changes for 2016, when available, will be found at
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Commission-Paid Employees Entitled to Minimum Wage or Overtime Protection?

Companies often seek to limit their risks in business, as well as limit their overall payroll expenditures. What simpler way to limit payroll risks than by implementing an “eat what you kill” compensation system that provides an employee the opportunity to work on a pure commission basis? However, employers should beware of violating the Fair Labor Standards Act (FLSA) and state wage hour laws as there are very real and potentially expensive consequences.
Generally, the FLSA requires employers to pay an overtime premium to employees of one and a half times the employee’s regular rate of pay for all hours worked in excess of 40 within a workweek and to also pay at least the minimum wage for all hours worked. However, there are certain exceptions to these requirements under the FLSA. One particular area of confusion is when an employee is a commission paid employee as the FLSA has carved out several exceptions.

• White Collar Exemption:
The “White Collar” exemption generally includes executives, administrators, and professionals. In order to qualify for this exemption, certain thresholds need to be met. First, the employee must be paid a salary of at least $455 per week (this is expected to substantially increase with new federal regulations that are anticipated to become effective in 2016). Once the salary level test is met, the employee must satisfy the duties test for their respective position. For example, a salesperson advising a client on the proper product to purchase might be an administrative employee. A sales manager, paid by commission, who supervises two or more employees, might qualify under the executive exception. Lastly, a lawyer who is paid a percentage of the fees that he collects likely falls under the professional employee exemption.
Regardless of the position, an employee must receive a salary, or guaranteed draw, of at least the required weekly amount. Therefore, a pure commission paid employee cannot be exempt under the “White Collar” exemption within the FLSA.

• Outside Sales Exemption
In order to qualify for this exemption, the employee’s primary duty must be the sale of goods or services or the rental of facilities and the employee must be customarily and regularly engaged away from the employer’s place of business. The second prong of this inquiry is where most commission paid employees are disqualified. For example, a general salesperson that maintains an office at the company’s facility, but is required or expected to meet with customers, generally does not fit under the outside sales exemption and would be protected by the minimum wage and overtime provisions of the FLSA. Conversely, if an employee is an outside salesperson, the company does not have to pay him/her a salary or minimum wage.

• Employees Paid Commissions by Retail Establishments
This exemption requires that the employee must be employed by a retail or service establishment, defined as establishments 75 percent of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry. An employee at a retail establishment requires the employer to demonstrate the employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked. Further, the employer must show that more than half the employee’s total earnings in a representative period (at least one month and no more than one year) must consist of commissions. Once these requirements are met, the employer may compensate the employee on pure commission without overtime premiums.
While the FLSA has many exceptions and requirements, states generally have wage hour laws that are more restrictive than the FLSA. The various requirements pose challenges to employers as they can face immense liability for violating the FLSA or state laws. Therefore, it is imperative for employers, and employees, to verify the company is satisfying the FLSA’s and state’s minimum wage and overtime requirements for commission paid employees.

Source: Bennett L. Epstein, Do You Need to Pay Minimum Wage or Overtime to Your Commission-Paid Employees? (September 21, 2015),

The Fight For 15 Just Landed at America’s Busiest Airport

A McDonald’s worker speaks on a bullhorn outside O’Hare Airport yesterday. (Airport Workers United / Facebook)

Encouraged by an energetic rally of more than 100 janitors and other members of Service Employees (SEIU) Local 1, a group of low-wage security, cleaning and passenger service workers at Chicago’s O’Hare Airport on Tuesday launched a campaign to organize 5,000 airport workers to win higher wages and the right to form a union without intimidation.

The O’Hare organizing drive hopes, first, to bring the non-union workers at the airport into the Fight for $15 movement, initiated three years ago among fast food workers and, according to SEIU, already responsible for raising wages of 11 million workers. Then SEIU organizers hope to use the energy of that campaign for higher pay—and whatever success they have—to help create a union that can continue to defend and bargain for better working conditions.

The anticipated strategy is different from most union organizing. Organizers typically sign up a majority of workers, go through an election (or a “card check”) to win recognition, then negotiate a contract (and each step is hard to accomplish). But even SEIU’s initial airport worker organizing about 15 years ago was somewhat unorthodox: in both Los Angeles and San Francisco labor-community coalitions eventually won for the airports both living wage ordinances and labor peace agreements (legal provisions that favored giving contracts for work at the airports to companies that were not blatantly anti-union).

Over the years, SEIU has won contracts for such airport workers as janitors, aircraft cabin cleaners, skycaps, security officers, passenger transporters (pushing wheelchairs for passengers who need help getting around), and security screeners at some airports. Recently, the Fight for $15 has won referenda, local government votes, or—in New York City—a decision by a governor-appointed wage board setting the city minimum wage at their targeted $15. These victories have raised wages of both non-union and even some union workers (in cases with contracts setting wages at less than $15). In many cases, UNITE HERE (or other unions) have joined in such airport campaigns and also won contracts, for example, for workers in airport concessions.

Such campaigns depend on winning support not only from the workers involved but also from the general public.

In the campaign launch, Local 1 president Tom Balanoff emphasized the hardship of the airport workers and their families, and their need for $15 as a minimum income for a decent life. “There are thousands of workers here,” he said, “most of them working below the poverty line.”

Some workers, such as the passenger transporters, said that they often earn less than the state or federal minimum wage as a result of being classified as tipped workers and suffering management deductions of some of their tip income. Transporter Jackie Chako, a recent college graduate with $40,000 in debt and family pressures to help her younger siblings financially, said that she makes $5 to $8 an hour. Airplane cabin cleaner Jason Davis said he gets no health insurance through his job: he couldn’t visit a doctor for his injured knee, and he had to pay out of pocket for health and dental care for his children.

Beyond the needs of the workers themselves, however, Balanoff also stressed the public interest in raising their wages. At around $15 an hour, he said, workers would no longer need to rely on the public safety net programs, which in such situations amount to a public subsidy to big corporations that can pay more and save taxpayers the expense.

Also, he argued that higher pay offered an alternative, community-oriented strategy for economic development. Raising wages complements whatever development generated by the big projects that politicians often like, even when they are not very productive—such as airport expansion, downtown construction, stadiums and new tourist and entertainment destinations on the lakefront.

“O’Hare airport is an economic engine for the city,” he said. “It should be an economic engine for the workers, too. The best thing for this airport and the city is for these workers to be paid a living wage and to have a right to organize. Then our communities will have the resources to come back.”

Before deregulation started in the late 1970s, most of these airport support service jobs paid decently, said Silvia Ruiz, national director of the SEIU’s airports campaign, but as airlines entered a more competitive environment, they subcontracted many activities, typically driving down wages as firms fought to win the contracts.

But SEIU organizing at 16 airports, including seven of the biggest origins and destinations of international flights, has raised wages and won some union recognition across the country, but have also pushed contractors to compete on quality more than on wages. O’Hare, now the third busiest airport, is an important link in the organizing. Despite years of turmoil in the now-consolidating industry, United and American pay executives hefty salaries, benefit from major public subsidies, and can pay more for airport service workers, as they have elsewhere.

But organizing at O’Hare, where SEIU many years ago tried to organize transporters, may be a challenge because it is they major hub of two big airlines, United and American. Those airlines have as much or more power to determine worker standards in most cases than the subcontractors they retain, and could make a big difference in how difficult organizing at O’Hare might be.

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