H. Mark Adams, Editor; Jennifer L. Anderson and Jennifer Faroldi Kogos, Associate Editors
Jones Walker

Vol. 15, No. 10
January 2007

Agency Action

Know when to track per diem payments. The IRS has issued guidance emphasizing the need for employers to track the amount of expense reimbursement allowances paid to employees on a per diem basis. IRS Revenue Ruling 2006-56 tells employers that if they routinely pay per diem allowances in excess of the federal per diem rates but don't track the allowances and don't require the employees to substantiate all the expenses or pay back the excess amounts and don't include the excess amounts in their income and wages, then the entire amount of the expense allowances is subject to income tax and employment tax.

Amounts employers pay employees to reimburse them for substantiated business expenses generally aren't subject to income or employment tax. For reimbursements for meals and other business travel costs, employees get this exclusion for reimbursements for each day of travel up to the federal per diem rates without having to substantiate the amounts of the expenses. But if an employer pays expense allowances that exceed the federal per diem rates, the excess amounts are subject to income and employment tax if they aren't repaid to the employer — unless the employee actually substantiates all of the expenses covered by the per diem allowance. For more information, go to www.irs.gov/pub/irs-drop/rr-06-56.pdf.

EEOC, Tyson settle racial harassment, retaliation suit. The U.S. Equal Employment Opportunity Commission (EEOC) has announced an $871,000 settlement with Tyson Foods on behalf of African-American employees who claimed they were racially harassed and retaliated against at a chicken-processing plant in Ashland, Alabama.

The litigation charged Tyson with maintaining a racially hostile work environment at the Ashland facility, including a racially segregated restroom, racial slurs, and intimidation. The suit also claimed retaliation against employees who complained about the unlawful conduct.

In addition to the monetary settlement, Tyson will appoint a senior-level employee to review policies and procedures for addressing discriminatory conduct, train employees on what constitutes race discrimination, harassment, and retaliation, monitor employee discipline for potential or actual disparate treatment, and hold supervisors at the Ashland plant accountable for participating in, permitting, or failing to report race discrimination or harassment. As part of the settlement, which was reached in November 2006, Tyson denied violating any laws.

Pension insurer reports lower deficit for single- employer plans. The Pension Benefit Guaranty Corporation's (PBGC) insurance program for single- employer pension plans posted a deficit of $18.1 billion in fiscal year 2006. That's a $4.7 billion net improvement over the $22.8 billion shortfall recorded for fiscal year 2005, according to a statement from the PBGC. The improvement is attributable mainly to airline relief provisions in the Pension Protection Act, which led to a reduction in the amount of "probable" liabilities reflected on the agency's balance sheet.

The PBGC's insurance program for multiemployer pension plans posted a net loss of $404 million in fiscal year 2006, compared to a $99 million net loss in 2005. The program's net deficit rose to $739 million for 2006 from $335 million recorded for 2005. The increase in net loss is attributed to a projected $257 million increase in loss from providing financial assistance to multiemployer plans.

The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits for 44 million American workers and retirees participating in more than 30,000 private-sector defined- benefit pension plans.

Copyright 2007 M. Lee Smith Publishers LLC

LOUISIANA EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Louisiana employment law. Questions about individual problems should be addressed to the employment law attorney of your choice. The State Bar of Louisiana does not designate attorneys as board certified in labor law.