December 20, 2004
LOCAL UNIONS AND
REGIONAL DIRECTORS
Re: Kone Vacation Pay Issue
Dear Brothers and Sisters:
The IUEC filed a grievance against KONE after the company
stopped withholding federal tax on vacation pay at weekly rates and began
withholding, instead, on a lump sum basis. At the same time, KONE requested a
Private Letter Ruling from the IRS, seeking a determination from the government
that withholding on a lump sum basis, rather than on a weekly basis, was
appropriate under IRS regulations. On November 9, 2004, shortly before the
scheduled arbitration hearing on the union's grievance, the IRS released its
Private Letter Ruling, stating that KONE should treat the vacation pay as
"supplemental wages" and that withholding on a 25% lump sum rate was therefore
appropriate. In view of this ruling, binding on KONE only (and not other
companies), the IUEC determined it was best not to proceed ahead with the
arbitration and withdrew the grievance against KONE.
Fraternally yours,
James H. Chapman, Jr.
Assistant to the General President
JHC/mrg
