INDEPENDENT BUSINESS ASSOCIATION Redmond Way NE #336C Redmond, WA 98052

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1 INDEPENDENT BUSINESS ASSOCIATION Redmond Way NE #336C Redmond, WA SMALL BUSINESS REPORT SMALL BUSINESS REPORT SMALL IBA SMALL BUSINESS REPORT - December 15, 2017 Paid Sick Leave Compliance Help Page 1 Department Finalizes Paid Sick Leave Notice and Policies Page 1 Paid Sick Leave Compliance Timeline Page 2 The 2018 Economy Page Economic Forecast Page 4 OSHA Injury and Illness Reporting Page Industrial Insurance Rate Reduction Page State Unemployment Tax Reductions Page 5 Avoid Being Fined For Hiring Illegal Workers Page 5 Get Your I-9 s Up To Date Page 5 Federal Tax Cuts Needed Now? Page 6 You Have A Friend In The U.S. Senate Page 7 Holiday Greeting From IBA Page 7 NOTICE: The information contained in the publication is intended to alert the reader to issues, laws, regulations and events which may affect the operations o f a small business. The information is presented is in a summary form and is not intended to assure compliance with laws or regulations which may apply to any specific business. The information is not intended as legal advice. The reader is advised to seek the advice of a qualified attorney, accountant or other advisor to obtain specific compliance advice with respect to the laws, regulations or other issues which may apply to a specific business. Copyright 2017 by Redmond Way #336C, Redmond, WA (425) iba@isomedia.com

2 Paid Sick Leave Compliance Help IBA has prepared a Special Report to help you prepare to comply with the new state Paid Sick Leave Law that takes effect on 1/1/2018. IBA has identified 11 things you should do before 1/1/2018, 10 things you should do after 1/1/2018, 2 things you should do before 2/1/2018, and 2 things you should do before 2/28/2018. This IBA Special Report explains the basics of the state new Paid Sick Leave law in a handy Frequently Asked Questions format. You can get this IBA Special Report via the Internet at: This IBA Special Report also provides you links to a number of the important details you need to prepare to comply with the new state Paid Sick Leave Law that include: The Law The Paid Sick Leave Rules Likely Common Employer Errors Department of Labor and Industries sample notification and policy documents Exempt Workers who are they? Authorized Reasons to Take Paid Sick Leave Normal Hourly Compensation Employer Retaliation Department Finalizing Paid Sick Leave Notice and Policies Department of Labor and Industries will release its Paid Sick Leave sample worker notice and sample Paid Sick Leave sample policies on or about 12/18. L&I advised IBA that the worker responsible for putting these documents on-line is on leave until 12/18. By using these Department prepared policies, you don t have to use an employment law attorney to develop your company paid sick leave polices. IBA recommends you use the Department prepared policies as they are. If you want to develop your own policies or modify the Department's prepared policies, IBA recommends you do so with the advice of an employment law attorney as this Paid Sick Leave law has many downside risks for employers. You can access those Department sample polices via the Internet at: Disclaimer: The following information is business advice and is not legal advice and should not be relied on as legal advice and is not intended to assure compliance with the Washington State paid sick leave law. The reader is advised to consult with a qualified employment law attorney for legal advice to comply with the Washington State Paid Sick Leave law. You need to provide a notice to your workers by 1/1/2018 about the new state paid sick leave law that explains the law, how workers accrued paid sick leave, worker rights under the state's paid sick leave law, etc. You can use this Department prepared notification documents to help you comply with the law and not create you own notification document. If you prepare your own notification or revise the Department sample notification document the reader is advised to consult with a qualified employment law attorney for legal advice to comply with the Washington State Paid Sick Leave law. By 1/1/2018 the Department of Labor and Industries new paid sick leave rules direct employers to have a written Company Paid Sick Leave Policy. You can use this Department prepared sample policy documents to help you comply with the law and not have to create your own policy documents. If you prepare your own policy documents or revise the Department sample policy documents, IBA advises you to consult with a qualified employment law attorney for legal advice to comply with the Washington State Paid Sick Leave law. The company Paid Sick Leave policy document is to explain how the employer will implement the state new Paid Sick leave law, including but not limited to: How workers accrue paid sick leave hours; How the company will calculate the workers' normal hourly compensation ; What increment the company will use to charge paid sick leave to its workers; If the company will require workers to provide an advance paid sick leave notice to their employer prior to taking foreseen paid sick leave (IBA recommends). If the company will have a paid sick leave verification policy (IBA recommends) that requires worker to verify the reason they took paid sick leave; If the company will have a paid sick leave frontloading policy (not required) and if so, how it will work;

3 IBA s SMALL BUSINESS REPORT Page 2 If the company will have a shared paid sick leave policy (not required) and if so, how it will work; If the company will have a Paid- Time-Off (PTO) policy (not required) that incudes the new state paid sick leave law, and if so, how it will work. Paid Sick Leave Compliance Timeline Following is a timeline guide to help you prepare to comply with the new state s Paid Sick Leave law. Before January 1, IBA recommends you notify your workers about the new paid sick leave law on or before 1/1/2018. The employer has until February 28, 2018 to provide such notice to their workers. L&I has prepared a sample notification document that will help you comply with the worker notification requirement of the new law. You can get this document via the Internet at: You should have your workers verify the receipt of this notification and keep that receipt. 2. Prepare a company paid sick leave policy. This should include: a. How sick leave is accrued, who is eligible to take paid sick leave, the reasons a worker can take paid sick leave, how the workers paid sick leave pay will be calculated, etc. L&I will have a sample Company policy document that will help you comply with this requirement of the new law. You can get this document after 12/18 at: b. Include in your company paid sick leave policy the way your company will calculate the normal hourly wage for your workers. The calculation must be reasonable and consistent for all workers eligible for paid sick leave. c. Include in your company paid sick leave policy if your company will pay a worker for unused paid sick leave. Employers are not required to pay workers for unused paid sick leave. d. Include in your company paid sick leave policy how your company will carryover unused paid sick leave. Into the next year. Employers are required to carry forward up to 40 hour of unused paid sick leave into the next year. e. An employer may require workers to provide the employer, advance notification before taking foreseen paid sick leave. An advance notification policy is optional, IBA recommends. If your company wants to require workers to provide you advance notice of taking paid sick leave you must include an advance notice policy in your company paid sick leave policy to be able to require workers to provide an advance notice before taking paid sick leave. L&I will have a sample notification document that will help you comply with the worker notification requirement of the new law. You can get this document via the Internet at: You can use the L&I sample policy or create your own. IBA advises that if you prepare your own policy, you need the advice and counsel of an employment law attorney to avoid violations of the state paid sick leave law. f. An employer may require that workers provide the company verification of the reason the worker took paid sick leave after taking 3 consecutive days of paid sick leave. A verification policy is optional, IBA recommends. If your company wants a worker s verification policy you must include a verification policy in your company paid sick leave policy. L&I will have a sample verification policy that will help you comply with the worker notification requirement of the new law. You can get this document via the Internet at: You can use the L&I sample policy or create your own. IBA advises you that if you prepare your own policy, you need the advice and counsel of an employment law attorney to avoid violations of the state paid sick leave law. g. An employer may establish a paid sick leave frontloading policy to frontloading paid sick leave. Frontloading is optional. If your company wants to frontload paid sick leave, you must include a frontloading policy in your company paid sick leave policy. L&I will have a sample frontloading policy that will help you comply with the new law. You can get this document via the Internet at: You can use the L&I sample frontloading policy or create your own. IBA advises that if you prepare your own policy, you need the advice and counsel of an employment law attorney to avoid violations of the state paid sick leave law. h. An employer may establish a shared paid sick leave policy where workers can share their unused paid sick leave with other workers in your company. A shared sick leave policy is optional. If your company wants to have a shared paid sick leave policy, you must include a shared leave policy in your company paid sick leave policy. L&I will have a sample shared leave policy that will help you comply with the new law. You can get this document via the Internet at: You can use the L&I sample shared leave policy or create your own, but

4 Page 3 IBA advises that if you prepare your own policy, you need the advice and counsel of an employment law attorney to avoid violations of the state paid sick leave law. i. An employer may establish a paid time off (PTO) policy that incorporates a paid sick leave policy. A paid-time-off (PTO) policy is optional. If your company wants to have a paid-time-off (PTO) policy, you must include your PTO policy in your company paid sick leave policy and ensure it complies with the state paid sick leave law. L&I will NOT provide a sample PTO policy. If you create your own paid -time-off (PTO) policy, IBA advises you that you need the advice and counsel of an employment law attorney to avoid violations of the state paid sick leave law. 3. Provide a copy of your written company paid sick leave policy to each of your current workers before 1/1/2018 or when you hire any new worker. 4. Get a written confirmation from your workers that they received a copy of your Company Paid Sick Leave Policy. After 1/1/2018 1, Effective 1/1/2018, begin to record the paid sick leave hours accrued by each of your workers. 2. Effective 1/1/2018 begin keeping ongoing records of the amount of paid sick leave accrued by each worker, amount of paid sick leave used by each worker and keep these records for 3 years. Required records include: a) Paid leave accruals each month. b) Paid sick leave reductions each month i.e. paid sick leave used, donated, or not carried over into the following year. c) All unused paid sick leave available for each worker. d) Date of commencement of worker s employment with the employer. 3. Allow workers who have worked 90 days prior to 1/1/2018 to use accrued paid sick leave any time after 1/1/ Whenever you hire a new worker, on or before their first day of work, your company must notify the new worker about the state s paid sick leave law. L&I has prepared a sample notification document that will help you comply with the worker notification requirement of the new law. You can get this document via the Internet at: 5. You should have your workers verify the receipt of this notification and keep that receipt. 6. Also provide the new worker a copy of your written company paid sick leave policy. 7. You should have your workers verify the receipt of your company paid sick leave policy and keep that receipt. 8. By 1/31/2018 and every month thereafter, or with each paycheck, provide each of your workers a statement of the amount of paid sick leave the workers has accrued in the past month, how much paid sick leave the worker has used in the past month and how much unused paid sick leave the worker has available to use. 9. Manage your company s paid sick leave program fairly and consistently with the law and in accordance with your company paid sick leave policy. IBA s SMALL BUSINESS REPORT 10. Do not take any negative employment action against any worker based on their use or desired use of paid sick leave. Document the reason for every negative employment action to protect yourself from a paid sick leave retaliation complaint from workers who have worked for you. By 2/1/ Before 2/1/2018 and every month thereafter, or with each paycheck, provide each of your workers a statement of the amount of paid sick leave the workers has accrued in the past month, how much paid sick leave the worker has used in the past month and how much unused paid sick leave the worker has available. 2. Implement your paid sick leave program in accordance with your company paid sick leave policy and consistent with state law. By 2/28/ Verify you have notified your current workers about the new paid sick leave law on or before 2/28/2018, and provide the notice to new workers on or before the day they start work. Require workers to sign a receipt they received this notice and keep that receipt. 2. Implement your paid sick leave program in accordance with your company paid sick leave policy and consistent with state law. The 2018 Economy As the year ends, you can hear experts saying the economy will continue to grow and other experts saying the economy is about to decline sharply. Who is right? Those saying the economy will continue to grow are saying there is no reason for the economy to stall. The new Trump Administration is helping the economy grow by reducing regulations and possi-

5 IBA s SMALL BUSINESS REPORT Page 4 bly reducing business taxes. Those that say the economy is about to decline, point to the fact that this economic recovery is much longer than a normal economic recovery that usually last about 4 years. This one is now 10 years old. They are saying the stock market is overvalued. They point to the record price to earnings ratio of the stock market. Yet, the experts have been wrong many times before. Failure of the experts to predict the Great Recession of Wharton College Professor Franklin Allen wrote about how the experts missed predicting the Great Recession of He said: There is a long list of professions that failed to see the financial crisis brewing. Wall Street bankers and dealmakers top it, but banking regulators are on it as well, along with the Federal Reserve. Politicians and journalists have shared the blame, as have mortgage lenders and even real estate agents. You can find Pressor Allen s article via the Internet at: article/why-economists-failed-to-predict -the-financial-crisis/ IBA is not in a position to predict the 2018 economy, but we are providing you an independent expert prediction of the 2018 economy and the signs to watch that will likely result in the economy doing better or worse than predicted. Understand that many of the experts claiming the economy will grow or will decline in 2018 are likely trying to sell you something. One important note, the expert IBA is using for this prediction is not trying to sell you anything and you have already paid for their advice Economic Forecast So, what will the economy do in 2018? Here are the latest thoughts from the Washington State Economic and Revenue Forecast Council. The Legislature relies on the Council to plan their spending for four years into the future. The Council is headed by a PhD economist and includes the state budget writers from both the House and the Senate who carefully oversee the Council s forecast. The Council actually puts out three economic scenarios; their baseline scenario is the one they feel is most likely to occur. They also prepare optimistic and pessimistic scenarios. Below are those three scenarios The forecast assigns a probability of 60% to the baseline forecast, 15% to a optimistic scenario based on the upside potential and 25% to a pessimistic scenario based on the downside risks. The Council states, The level of uncertainty in the baseline remains elevated. Baseline Scenario The Washington economy is expanding at a rapid pace. Historical estimates of personal income have been revised significantly higher. Employment has also been revised higher and growth has exceeded expectations. Seattle home prices continue to rise very rapidly and housing construction remains strong. Washington exports continue to decline due to transportation equipment and manufacturing challenges. Seattle area consumer price inflation is well above the national average due to higher shelter cost inflation. The economic outlook is largely unchanged from our September forecast. Our November forecast for real GDP growth is 2.2% for The forecast calls for real GDP growth of 2.5% in The forecast calls for growth of 2.1%, 2.1%, and 2.0% from 2019 through Washington employment is expected to grow 3.0% this year. We expect employment growth to average 1.6% per year in 2018 through Our forecast for nominal personal income growth this year is 5.5%. Our new forecast for nominal personal income growth in 2018 through 2021 averages 5.1% per year. The November housing construction forecast expects total housing units authorized by building permits to decline 2.2% this year. We expect permits to average 42,200 during the next four years. We expect the all-items Seattle CPI to rise 2.9% this year. We expect Seattle area inflation will average 2.4% per year in 2018 through Optimistic Economic Scenario Below are the events the Council believes will result in the economy doing better than the baseline forecast. A major tax cut passes Congress. An infrastructure package passes Congress. Increased business confidence leads to more hiring. Increased consumer confidence gives a boost to consumer spending. The housing sector improves faster than anticipated. Oil prices decline as OPEC fails to impact prices. Labor productivity growth returns to the higher rates seen in Employment growth expands faster than in the baseline. China successfully transitions to a more consumption based economy. European and emerging market economies grow faster than ex-

6 Page 5 pected. The U.S. dollar declines, making U.S. exports cheaper abroad. Wage growth picks up faster than expected. Pessimistic Economic Scenario Below are the events the Council believes will result in the economy doing worse than the baseline forecast. Increasing geopolitical tensions negatively impact consumer confidence. An unexpected shift in monetary policy. A breakdown in trade relations. Chinese economy experiences a hard landing (annual growth under 5%); growth is weaker in emerging market economies. Weaker than expected employment growth. Real wage growth stagnates, leading to slower consumer spending. Slower household formation. Slowdown in economic growth and negative effects to financial markets due to Brexit. U.S. dollar rises against other currencies, decreasing exports. Weak global economy persists, impacting exports. Failure to raise the debt ceiling and/ or a government shutdown. Injury and Illness Recordkeeping In some states employers are required to submit an electronic 300A report to OSHA on December 15, 2017 but that requirement does not apply in Washington State. In Washington State employers with more than 10 workers in the previous year are still required to keep paper workplace injury/injury records. Certain low-risk industries are exempted. You can get a list of those exempted low risk industries via the Internet at: Businesses required to report must: Keep an OSHA 300 Log of Work- Related Injuries and Illnesses There are several pages to the Log. An OSHA 300A Summary of Work -Related Injuries and Illnesses for posting at the end of the year. The employer must post a copy of the OSHA 300A form beginning on February 1st for the previous year s Injury/Illness history, and keep it posted until April 30th The employer must keep these OSHA Log forms for 5 years. An OSHA 301 Incident Report that provides details about the incident II Rate Reduction The Department of Labor and Industries approved the proposed 2018 state Industrial Insurance average 2.5% rate reduction on November 30th. Most small businesses will see their state Industrial Insurance rates go down slightly in Happy Holidays! 2018 State Unemployment Taxes The average unemployment tax rates in Washington will decrease about 10% to 1.10% in 2018 as compared to 1.21% in 2017, the lowest in more than 20 years. About 81 percent of employers will move into a lower rate class or stay in the same rate class in may go higher. IBA s SMALL BUSINESS REPORT Others Employers will pay unemployment taxes on the first $47,300 of each employee s earnings in 2018, this is up from $45,000 in The average total tax paid per employee will decline by $15 to $215. There are 40 unemployment tax rate classes. Employers are assigned a rate class depending on the amount of unemployment benefits paid out to their former workers as compared to their unemployment taxes paid in. Rates range from 0.10 percent to 5.7 percent, a 5.2 times tax rate difference. Avoiding unemployment can greatly reduce your unemployment tax rates in the future. Taxes for an average-state-wage fulltime employee will range from about $550 (employers in rate-class 1) to $2,850 (rate-class 40). Washington s unemployment trust fund that pays unemployment benefits has grown $.3 billion in 2017 to $4.4 billion as of 11/ UI tax collections will decline from $1.06 billion in 2017 to $952 million in Employers will soon receive their 2018 unemployment tax rate in the mail. Huge Fine For Hiring Illegal Workers A well-known national tree trimming company was just fined $95 Million for hiring illegal alien workers. Asplundh Tree Expert Co. of Willow Grove, Penn. pleaded guilty to federal criminal charges that it knowingly hired illegal aliens as workers. Asplundh operates across the nation and in Washington State as well as internationally. Asplundh has many city, county, state and federal government tree trimming contracts. The Department of Justice started to look into Asplundh s hiring in In September, 2017 the Department of Justice charged Asplundh with the violations.

7 IBA s SMALL BUSINESS REPORT Page 6 According to an Associated Press report, Asplundh knew what it was doing, knew it was wrong, and continued to hire illegal alien workers. You can view the Associated Press report via the Internet at: Asplundh used its hiring practices to dominate the tree trimming industry nationally. Get Your I-9 s Up To Date Small businesses hire more than 50% of all workers. Small businesses don t have the legion of staff to ensure they comply with all of the government regulations. These facts make small businesses a prime focus for a federal INS/ ICE investigation. As the story above clearly points out, the federal agencies are serious about enforcing the federal Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA). Regardless of whether your business has foreign born workers or not, you MUST have properly completed I-9 forms on all of your workers or you are subject to substantial fines. There is a USCIS guide available to you via the Internet to answer your questions and help you comply with the federal Employment Eligibility Verification laws. Given this guide is available to you via the Internet, the INS won t settle for, I didn t know. This guide includes the following and much more you need to know: Why Employers Must Verify Employment Authorization and Identity of New Employees Who Must Complete Form I-9 Completing Section 1 of Form I-9 Failure to Complete Section 1 Completing Section 2 of Form I-9 Failure of an Employee to Present Acceptable Documents Completing Section 3 of Form I-9 E-Verify: The Web-Based Verification Companion to Form I-9 Reverifying Employment Authorization for Current Employees Reverifying or Updating Employment Authorization for Rehired Employees The Guide is free and could save you a bundle of money and a great deal of grief. You can get the guide via the Internet at: Free Employee Handbook IBA has discovered a source of a FREE Employee Handbook that commonly costs hundreds or thousands of dollars if prepared by an attorney that is accessible by IBA members. You might consider this a holiday gift from IBA. Disclaimer: provides business advice and does not provide legal advice. The following information must be considered business advice and is not legal advice. The reader is responsible for seeking legal advice regarding the following Handbook information with respect to compliance with any local, state or federal laws or any employment related issue. If you use this service from RocketLawyer, it will ask you a number of questions about your company s dress code, personal leave, vacation leave and other company policies before it creates an employee handbook for your business. You should consider these issues before using this RocketLawyer system. The RocketLawyer Employee Handbook created by this RocketLawyer service attempts to preserve the employment at will relationship between your company and your employees, a critical element recommended by employment law attorneys. To determine if it successfully achieves that goal, you must seek the legal advice of a qualified employment law attorney to review the document prepared by Rocket Lawyer. The table of contents of the RocketLawyer Employment Handbook includes 21 provisions. You can view the contents at: You can access this free service from Rocket Lawyer at the following Internet address: Federal Tax Cuts Needed Now? While President Trump, the U.S. Senate, and the U.S. House of Representatives work on federal tax reform legislation, is this the right time for this? A number of people including economic professors and members of the Federal Reserve are publically questioning this tax reform legislation (i.e. tax cut) at this time. Why? First, unemployment is at a very low level and has reached what most experts believe is full-employment. Unemployment is now at 4.1%. 5% unemployment is considered the target unemployment rate. As most small business owners know, it is very difficult to find people to fill jobs you may have to fill in your business. The tax reforms (i.e.

8 Page 7 IBA s SMALL BUSINESS REPORT tax cuts) could make that worse by over stimulating the economy and the demand for workers. Second, tax reforms (i.e. tax cuts) will further stimulate the economy. This may be a problem for the following reasons: The economy has been growing for nearly 8 years since the Great Recession. Growth in the last part of 2017 is reaching the target USA economy growth rate, which is between 3 to 3.5% If the economy gets overheated, it causes inflation. The Federal Reserve has been managing USA interest rates for the past 10 years to stimulate the economy with low interest rates. The Federal Reserve is in the process of slowly increasing interest rates to avoid a shock to the economy and provide a soft landing from their low interest rate economy stimulus. But, Federal Reserve members are saying if the USA economy is over stimulated, they likely will have to increase interest rates more quickly to control inflation so as to not hurt the lower and middle income citizens by hyper inflation. Third, small businesses in the USA are the job creators, yet the Senate tax reforms (i.e. tax cuts) proposed help larger businesses but hurt most small business with pass-through income. Senator Johnson (R - Wisconsin) held out for provisions in the Senate tax reforms (i.e. tax cuts) to reduce the damage it would do to small businesses. Fourth, the Senate passed tax reforms (i.e. tax cuts) will add an estimated $1.5 Trillion to the USA deficit over 10 years. As one economist stated, with the economy doing so well now, this is the time to reduce federal spending and reduce the federal deficit, not increase it. Hmmmmm? You Have A Friend In The U.S. Senate Senator Johnson (R - Wisconsin) is a great friend of small businesses. Senator Johnson stood up and said NO to the Senate s proposed tax reforms (i.e. tax cuts) because of how it was going to impact small businesses. Senator Johnson used to be a small business owner. Johnson and his brother-in-law started a small business and for nearly a year, Johnson worked as the accountant and as a machine operator, trading 12-hour shifts with his brother-in-law. They had a small cot in the office to get some rest between shifts. Clearly, Senator Johnson understands small business. Senator Daines (R-Mont.) joined Senator Johnson. The tax reforms (i.e. tax cuts) might have failed without Senator Johnson s and Senator Daines yes votes, so the Senate Republican leaders asked Senators Johnson and Daines what they needed to change their votes to yes. Neither Senator wanted some pork barrel item to benefit their re-election or some other personally rewarding issue. Senators Johnson and Daines wanted the legislation changed to protect passthrough (i.e. Sub Chapter S and LLC) small businesses. Johnson s business was a pass-through small business. Both the House and Senate proposed to tax non-pass-through Schedule C corporations at 20 percent. The Senate would allow most small pass-through firms to exclude 17.4 percent of their qualified small business income from taxes and leave some small businesses owners paying effective taxes of 30+%. Eighty-six percent of taxpayers with pass-through income already pay a top marginal income tax rate of 25 percent or less. Senators Johnson and Daines pushed to increase the pass-through exemption from 17.4 to 23 percent, a near $60 billion in tax savings for small business owners over the next 10 years. Small businesses will be treated much more fairly as a result of Senator Johnson and Daines work on behalf of passthrough small businesses. Holiday Greetings From IBA! Whether you celebrate Christmas, Chanukah, Bodhi Day, the Winter Solstice, the New Year or some other event in the months of December and January, IBA wants to extend our best wishes to you during this special time of year has been a stabilizing year for most of us. Many legislative proposals harmful to small businesses never became law. The economy and your wallet benefitted from the continuing strong economy. In addition to those bright spots, we must also reflect on the positives all around us. Our family members who make our lives so much richer and better. Make sure they know you appreciate them and their support. Our dedicated employees who make our business operations possible. Your customers who have made your business possible over the years. Your suppliers and vendors who help you through thick and thin. Your advisors, your banker, your accountant, etc. you rely on for information and assistance. IBA will be here working to make 2018 the best it can be for you!