On January 1, 2016, New York City’s Mass Transit Benefits Law, Local Law 53, went into effect, requiring employers with 20 or more full-time employees working in New York City to offer commuter benefits to those full-time employees. Specifically, the law requires employers to offer full-time employees the opportunity to elect a pretax salary reduction to purchase qualified transportation fringe benefits (other than qualified parking). Although the law went into effect on January 1, 2016, employers will not be subject to penalties for violations that take place before July 1, 2016. In addition, employers will be permitted a 90-day cure period to correct a violation before the New York City Department of Consumer Affairs (DCA) imposes penalties.
1. Which Employers Are Covered?
The law generally applies to every for-profit and nonprofit nongovernment employer with 20 or more full-time employees in New York City, which includes the Bronx, Brooklyn, Manhattan, Queens, and Staten Island. The ordinance applies to “chain” businesses, that is, a business with multiple locations that have 20 or more full-time employees at all of the owner’s chain locations in New York City. The law also applies to temporary staffing companies that employ or place 20 or more full-time employees in New York City. An employer’s number of full-time employees is determined by calculating the average number of full-time employees for the most recent consecutive three-month period.
2. Which Employers Are Exempt?
The law includes these exemptions:
- The law does not apply to the federal government, the State of New York (including its state agencies and departments), the City of New York, or any local government.
- Employers that have collective bargaining agreements (CBAs) are not required to provide covered employees these commuter benefits. However, an employer with a CBA and 20 or more full-time employees who are not covered by the agreement must provide commuter benefits to the non-CBA-covered employees.
- The ordinance exempts employers that are not required to pay federal, state, and city payroll taxes.
The DCA may also waive the ordinance’s requirements for employers that demonstrate that offering commuter benefits would be a financial hardship.
3. Which Employees Are Eligible?
The law defines “full-time employees” as employees who worked an average of 30 hours or more per week in the most recent four weeks, any portion of which was in New York City (including the Bronx, Brooklyn, Manhattan, Queens, and Staten Island). Accordingly, even if a full-time employee works only occasionally in New York City, the employee is eligible.
4. What Happens When a Covered Employer’s Workforce Is Reduced?
Employers with workforces that drop to under 20 full-time employees are required to continue to offer commuter benefits to any employee who had previously been eligible to purchase commuter benefits before the workforce reduction for the duration of the employee’s employment.
5. What Is the Ordinance’s Effective Date?
The New York City Transit Ordinance went into effect on January 1, 2016. The law gives employers six months to comply. Specifically, employers will not be subject to fines for any violation of the law that occurs before July 1, 2016.
6. What Kinds of Transportation Costs Can Employees Purchase With Their Pretax Incomes?
The ordinance permits employees to use their pretax incomes to pay for transit passes that could be used on public or privately owned mass transit in addition to commuter vans with a seating capacity of six or more passengers, including the Metropolitan Transportation Authority subway and bus, the Long Island Rail Road, Amtrak, New Jersey Transit, Metro-North, paratransit, and eligible vanpool and commuter bus services. The law also covers ferry services and water taxis taken into and within New York City. Employees may use their benefits to pay for more than one mode of transit in their commutes. Under federal tax law, employees may use up to $255 per month of their pretax income to pay for qualified transportation. Employers may not comply with the New York City Transit Ordinance by providing parking or bicycle commuting reimbursements, even where parking and bicycle commuting reimbursements constitute a qualified transportation fringe benefit under federal law.
7. How Do Employers Establish Compliance?
Employers must offer each eligible full-time employee the opportunity to use his or her pretax income to purchase transit benefits, and must keep records that document that it offered the benefit and whether the employee accepted or declined the offer. The DCA has provided a sample participation form that employers may use to document compliance. Employers are required to keep these records for two years.
8. What Are the Penalties for Failing to Comply With the Law?
Employers that fail to comply with the ordinance may be fined $100 to $250 for the first violation. Employers will have 90 days to cure a first violation before a fine is imposed. After the cure period expires, every 30-day period in which an employer fails to offer pretax commuter benefits to eligible employees will be considered a subsequent violation subject to a $250 fine. Fines shall not be imposed on any employer more than once in any 30-day period.