resources

  • Tax Alerts

6 New Employment Laws to Ensure Compliance in 2020

January 07, 2020 Blog Post

There are several new federal and state laws that went into effect on January 1, 2020. Paylocity is here to help you comply with ease and train employees on any new procedures with this overview on the six new employment laws.

Welcome to 2020! From employees returning to work post-holidays refreshed and ready to accomplish new goals to new faces at the office, the New Year always brings plenty of excitement in the workplace. At the same time, a new calendar year often means employers have the burden of complying with a slew of new employment legislation. There are several new federal and state laws that went into effect on January 1, and Paylocity is here to help you comply with ease and train employees on any new procedures.

Here are the top six employment laws you should ensure compliance with as we kick off 2020:

New Federal W-4 Form

The Internal Revenue Service’s (IRS) new W-4 (Employee’s Withholding Certificate) took effect Jan. 1. Resulting from the 2017 Tax Cuts & Jobs Act, the new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system. Employees hired in 2020 are required to complete the new Form W-4, while employees hired prior to the New Year aren’t required to complete it unless an adjustment to withholding is necessary for pay dated Jan. 1, 2020 or later. Beginning with the 2020 Form W-4, employees will no longer have the ability to adjust withholdings using allowances. Instead, employees will provide employers with dollar amounts to adjust withholding.

Because complying with the new W-4 can be daunting without the right guidance, Paylocity provides a W-4 Readiness Kit within our Paylocity Education and Knowledge (PEAK) Center. The Readiness Kit provides our clients with trusted expertise from our team, robust training resources and assistance with communicating the changes to employees. Our press release provides more insight into how your organization can best leverage the W-4 Readiness Kit.

Department of Labor Overtime Exemption Rule

On September 24, 2019, the U.S. Department of Labor announced a final rule that will make changes to the current Fair Labor Standards Act (FLSA) overtime rule salary level test, which the agency estimates would make more than 1 million additional American workers eligible for overtime pay. The revised overtime rule increases the salary threshold level from $455 to $684 per week, which is equivalent to $35,568 per year for a full-year worker. This law also increases the total annual compensation for highly compensated employees from $100,000 to $107,432 per year.

If your organization hasn’t already done so, we advise that you review the complete details of the overtime exemption rule and make any changes to ensure your compensation plans align with the finalized salary thresholds. We also recommend that employers audit their current compensation practices and job descriptions to determine whether there is a need to make salary adjustments to meet the new thresholds or make changes to exempt employees’ statuses.

California Assembly Bill 5

Known as a leader in employment law, California enforces some of the toughest employment regulations in the nation. The passage of Assembly Bill 5, which went into effect this month, will be no exception. Meant to better control the gig economy, the law will help determine whether workers are classified as employees or independent contractors in California.

California employers must be able to satisfy all three of the following requirements to meet the test and classify a worker as an independent contractor:

  • The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact
  • The worker performs work that is outside the usual course of the hiring entity’s business.
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

Though the law only affects California-based employers, it is likely that we’ll see more states pass similar laws in the near future, so it’s recommended that HR and compliance professionals in other states take note of the law now so they’re prepared down the line.

Federal 2020 Inflation Adjustments to Contribution Limits

The IRS introduced several new adjustments to benefits contribution limits that employers and employees will need to adapt to starting in January. Here’s an overview of the changes to be aware of:

  • Healthcare Savings Account (HSA) Contribution Limits – The annual contribution limit for self-only HSA is $3,550 and the family contribution limit is $7,100.
  • Qualified Transportation Fringe Benefit Plan Limits – Employees can contribute up to $270 per month toward commuter and transit benefits and $270 per month toward qualified parking benefits. This is a $5 increase for both types over 2019 amounts.
  • Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) – Employers will be able to reimburse up to $5,250 for single coverage and $10,600 for family coverages under a QSEHRA. This is a $100 increase for single coverage and $150 increase for family coverage.

To make compliance seamless for our clients, we’ve automatically updated these limits in our system.

Privacy and the California Consumer Privacy Protection Act (CCPA)

The landmark CCPA, enacted in 2018, creates new consumer rights relating to the access to, deletion of, and sharing of personal information that is collected by businesses. California’s General Attorney requires that all businesses are in compliance with the regulations by July 1, 2020 at the latest. The CCPA applies to for-profit businesses that collect and control California residents’ personal information, do business in California, and meet one of three requirements set forth in the law. Several new protections have been created as a result of the new including:

  • Right to access information – Consumers will be able to know what information is collected about them, who has access to it, and what it’s being used for.
  • Right to deletion – Consumers will be able to request that a company delete their personal information.
  • Right to opt out – Consumers can alert collectors of information that they cannot sell that information.

For businesses located outside of California, it’s important to note that the CCPA is being used as model legislation for several other states. We anticipate that at least a few other states will adopt similar privacy requirements over the next few years, and Paylocity will continue to monitor for future bills.

Regular Rate of Pay Final Rule

Going into effect Jan. 15, the Department of Labor’s final Regular Rate Rule under the FLSA marks the first significant change made to the law in over 50 years. The regular rate of pay is used to calculate the overtime rate of time and a half, and the changes are meant to clarify what employee benefits may be excluded from the regular rate of pay – including certain parking benefits, wellness programs and employee discounts.

 

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.


related