Maintaining compliance gets complicated, but understanding these seven regulatory issues will make a big difference for HR.
By Mike Trabold
2021 is poised to be another year of fast-paced regulatory change, with another round of COVID-19 relief and the priorities of a new presidential administration coming into focus. Several items on the docket will impact HR processes, policies, and operations in businesses both big and small across the country.
With so much to keep track of already, 36% of HR professionals say that staying on top of changing regulations was their biggest challenge in 2020. And 2021 has its own set of obstacles ahead.
According to the 2020 Paychex Pulse of HR Survey, here are seven regulatory issues that should be top of mind for HR leaders this year.
1. Family leave, sick leave, and COVID-19 leave. 2020 brought a host of legislation related to employee leave that is likely to continue throughout the COVID-19 pandemic and beyond. Last year, employers with 500 or fewer employees became subject to the “Families First Coronavirus Response Act (FFRCA)”, which provided mandatory paid leave time for workers diagnosed with COVID-19, those caring for a family member with COVID-19, or those caring for children whose place of care was closed due to the pandemic. There was a refundable federal tax credit to offset the cost of this required leave.
This leave is no longer mandatory for employers beginning in 2021. The new relief package, signed by former President Trump on December 27, 2020, extends tax credits to employers that were previously required to offer this leave and chose to continue it through March 31, 2021. Additionally, certain state and local leave laws may be extended as the pandemic continues. There is also bipartisan interest in a permanent federal paid family leave law, with several proposals expected in the coming year.
2. Workplace safety/OSHA. President Biden has repeatedly advocated for the creation and enforcement of an “Emergency Temporary Standard” regarding COVID-19. Current OSHA language on COVID-19 violations is not specific and enforcement has varied considerably across the country. Four states—California, Michigan, Oregon, and Virginia—have already implemented emergency standards, and a new national standard will likely adopt similar requirements for employers. These include the development of an exposure control plan, stricter implementation controls, maintaining of records, and the effective training of employees. Additionally, as the COVID-19 vaccine becomes more widely available, considerations on state requirements, including whether employers can mandate that employees get vaccinated, will also come into play. To prepare, businesses should ensure their safety policies and procedures are compliant with the current state, local, and CDC guidelines.
3. Future of work. The COVID-19 pandemic brought telework opportunities and challenges to the forefront for many businesses, as many employees moved quickly to remote work settings. As employers consider integrating work-from-home policies on a more permanent basis, they must examine any compliance challenges to these arrangements. Tax compliance is one such example if an employee’s home is in a different location than the employer’s place of business. As a result of the pandemic, some states gave businesses a reprieve from establishing tax authority based on the employee’s home location. But that relief is not permanent. Employers should also consider any wage/hour issues for non-exempt employees and how they will track hours. Workers’ compensation obligations still apply for remote workers, but rules can be complex.
4. Healthcare reform. Even as President Biden seeks to establish a pro-Affordable Care Act (ACA) administration, the U.S. Supreme Court is reviewing California v. Texas, a case challenging the constitutionality of the ACA’s individual mandate provision and the entire law. The court heard oral arguments in November, but a decision is not expected until late spring 2021. Currently, the ACA remains in effect and continues to be the law of the land, including the employer shared responsibility provision. To protect health insurance markets and preserve ACA consumer protections, many states passed or considered legislation to incorporate certain ACA provisions into state law, including state-level health insurance mandates, preexisting condition exclusion prohibitions, and essential health benefits coverage requirements. Additionally, President Biden is expected to pursue administrative action to strengthen the ACA, which could include undoing or revising Trump administration regulations or guidance regarding “Association Health Plans (AHPs)”, short-term limited duration plans, “Individual Coverage Health Reimbursement Arrangements (ICHRAs)”, and “State Innovation (1332)” waivers.
5. Worker classification. A focus on worker classification did not end with a new test for covered employers in California under Assembly Bill 5, enacted last January. Enforcing agencies, the courts, and legislatures at the federal, state, and local level are expected to continue to address this complex issue in response to worker challenges in many industries. The DOL Wage and Hour Division finalized their proposed rule, making it easier for employers to classify workers as independent contractors under federal wage and hour law. These workers would be exempt from certain benefits available to employees. However, the future of the rule is uncertain under the Biden administration. While a significant development, other tests for worker classification enforced by other agencies, including the IRS and the National Labor Relations Board as well as many state and local laws and regulations, will continue to apply, and others are likely to be introduced in 2021. Penalties for worker misclassification continue to have a significant financial impact on employers of all sizes.
6. Retirement. With the passage of the SECURE Act in December 2019, one of the most impactful provisions allows employers of unrelated businesses to band together under one pooled employer plan (PEP) to expand the availability of retirement plans to participants. PEPs allow businesses to reduce some of their fiduciary burdens by shifting many administrative duties, including delivering participant notices and government filings, to the pooled plan provider. Also, the recently passed COVID-19 relief bill includes partial retirement plan termination relief as well as non-COVID federal disaster tax relief. To expand on the growing concerns over retirement savings inadequacy, there are pieces of bipartisan legislation that may be proposed in the coming year. Several states have also either recently adopted a state-based program or have one in the works.
7. Marijuana legalization. State and local jurisdictions are expected to continue to enact legislation to address decriminalization of marijuana, recognition of medical marijuana use, and/or legalization of recreational marijuana. As part of the November 2020 election, voters in several states chose to legalize marijuana for medical use (Mississippi and South Dakota) and recreational use (Arizona, New Jersey, South Dakota, and Montana). In addition to marijuana legalization, Oregon decriminalized the possession of small amounts of all drugs. Employers should stay apprised of these developments and consider adjusting their risk mitigation strategies, including workplace policies, to allow for accommodations where applicable for the lawful use of marijuana for medicinal purposes and the parameters of existing drug testing programs, as well as any potential impacts to workers compensation coverage.
Spurred by several years of increasing technology advancements and rapidly changing regulatory landscapes, many HR professionals have solidified their position as strategic leaders within their company. In this role, they can better help their company implement policies in response to new legislation and communicate those policies with employees. While the list above can appear overwhelming, HR and business leaders should take each regulation as it comes, working closely with trusted advisors to ensure compliance and the best outcomes for their organization and employees.
Mike Trabold is director of compliance risk for Paychex Inc.
Note: The information contained within is not tax or legal advice. These issues are complex, and applicability depends on individual circumstances. Businesses should consult tax or legal counsel before taking action on any of the items identified above.