To say that HR professionals have a lot on their plate is quite an understatement. Between attracting and retaining talent to managing a dispersed workforce to upskilling and reskilling workers, HR professionals face continual challenges in the ever-changing world of employment.
Add to that – understanding the dynamics of federal, state, and local statutes and regulations that change year-in and year-out. HR professionals not only must understand these legal updates, but they must acknowledge how these laws and regulations impact their organizations.
And 2023 is no exception, as it ushered in hundreds of new laws at the federal, state, and local levels, creating additional compliance challenges for HR departments everywhere.
Here, we break down six important HR legal updates that you should know about in 2023.
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Pay Transparency Laws
Inc. may have called 2022 “The Year of Pay Transparency,” but 2023 isn’t going to sit by idly. On January 1, 2023, new transparency laws in California, Rhode Island, and Washington became effective, with more waiting in the wings (shout-out to New York State with pay transparency legislation taking effect in September 2023, and then Massachusetts and South Carolina with pending pay transparency legislation).
Pay transparency laws require employers to report salary ranges on their job postings. These laws are related to pay equity laws, which prohibit employers from asking about salary histories during the hiring process.
For example, California amended its labor code, now requiring employers with 15 or more workers to list salary ranges on job postings on the employer’s website or on third-party recruiting sites such as LinkedIn and Glassdoor. Further, if a California employee requests the salary ranges for their current position, the company must provide this information.
Because of this new law, California is now home to the highest number of workers who will now see legally-required salary information on job listings.
To ensure that they’re in compliance with their state’s or city’s pay transparency laws, HR professionals should consult with qualified employment counsel.
SECURE Act 2.0 of 2022
On December 29, 2022, the Consolidated Appropriations Act of 2023 was signed into law, which included an expansive set of 90 provisions impacting employer-sponsored retirement plans. These provisions are called SECURE Act 2.0 of 2022.
Here are some key changes impacting retirement plans:
For any new retirement plans started after December 29, 2022, these employers must automatically enroll employees in these new plans beginning in 2025 at a rate of at least three percent (but not more than ten percent) of employees’ eligible wages. Employees may opt-out of this enrollment.
New companies in business for less than three years or employers with ten or fewer employees are exempt from this automatic enrollment requirement.
Student Loan Payments and Matching Contributions
Effective for 2024 plan years, employers can treat student loan payments as retirement contributions for the purpose of making matching contributions to the company’s retirement plan. This will help employees who cannot contribute to their company’s retirement plan because of the amount owed on student loans.
Long-Term, Part-Time Employees Expanded Eligibility
Under current law, employees who work between 500 and 999 hours over three consecutive years must be allowed to participate in their employer’s retirement plan. Effective in 2025, the SECURE Act 2.0 reduces this three-year timeframe down to two years.
HR professionals will need to consult with employee benefits counsel or their plan’s recordkeeper to ensure that their plan documents and operations comply with SECURE Act 2.0’s provisions.
Cannabis Use in the Workplace
Cannabis use is becoming increasingly acceptable among Americans, with nine in ten supporting the legalization of marijuana, according to a recent Pew Research study. And, with 21 states legalizing cannabis for recreational purposes and 37 for medical purposes, employers are consistently finding themselves facing challenges surrounding cannabis use in the workplace.
To complicate matters, in October 2022, President Joe Biden asked the Secretary of Health and Human Services as well as the U.S. Attorney General to initiate the process of determining how marijuana is scheduled under federal law, which it’s currently labeled as a Schedule I drug under the Controlled Substances Act (just like heroin), but scheduled higher than fentanyl.
Balancing this new federal approach with the continually evolving state laws protecting workers who use cannabis, HR professionals are finding themselves re-writing employee policies and job descriptions while taking another look at drug testing.
Paid Family Leave Laws
Paid leave under the Family Medical and Leave Act (FMLA) has always been a top priority for HR professionals. However, many states are now re-examining “who” is considered a family member under the law.
For example, under the FMLA, typically only immediate family members – such as children, spouses, or parents – qualify for care under federal law. In other words, domestic partners, step-children, or grandparents would not fall under the FMLA’s family member definition.
For 2023, New York, for example, now expands the list of family members to include siblings with a serious health condition, including biological, adopted, half, and step-siblings.
California has also expanded family leave laws in 2023, with employees now having the opportunity to appoint a “designated person” for family medical leave purposes. The expanded family leave law impacts both the California Family Rights Act (CFRA) as well as California’s Healthy Workplaces Health Families Act (HWHFA).
For example, under the CFRA, a designated person means “any individual related by blood or whose association with the employee is the equivalent of a family relationship.” Under the HWHFA, a designated person means “a person identified by the employee at the time the employee requests paid sick days.”
To understand the interaction of state expanded leave laws and the FMLA, HR professionals should consult their employment counsel to ensure compliance.
Independent Contractors vs. Employees
The legal determination of independent contractors versus employees still remains a hot HR legal topic.
On October 11, 2022, the Department of Labor (DOL) proposed a new independent contractor test under the Fair Labor Standards Act (FLSA), which would “[r]estore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.”
Proper classification of employees and independent contractors is critical to wage and hour compliance, as employers aren’t required to track independent contractors' hours, determining whether they qualify for overtime.
HR professionals must continue to monitor the DOL’s position on independent contractors’ tests into 2023, as more guidance is expected.
COVID-related Form I-9 Flexibilities Ending
The US Immigration and Customs Enforcement (ICE) has announced an end date for the flexibility in conducting I-9 employment verification due to COVID-19. Employers who utilized virtual verification during the pandemic will now need to complete in-person verification of employment documents by August 30, 2023. This means that visual inspection or remote methods can no longer be relied upon to complete the I-9 form for remote hires.
Although the deadline has been extended multiple times in the past, ICE emphasizes that this new deadline is firm. To assist employers, ICE has provided a set of Frequently Asked Questions and instructions on properly annotating the Form I-9 during the in-person inspection following the initial virtual inspection.
HR professionals need to take certain steps in response to these changes. Firstly, it is crucial to maintain a list of employees whose documents were virtually inspected to identify those requiring in-person verification. If such a list does not exist, employers must review their records and create one.
Secondly, designating a trusted authorized representative responsible for in-person document inspection is essential. This representative should possess attention to detail and adhere to the verification process method established by the employer.
Thirdly, consider having an HR team member remotely oversee in-person inspections via phone or video to ensure a consistent process and address any employee or representative questions.
Accurate completion of Form I-9 is of utmost importance to avoid legal violations. Selecting a reliable authorized representative and providing them with detailed training on the verification process and appropriate documentation is crucial.
Non-compliance with I-9 requirements can result in significant fines, making it imperative for employers to meet the August 30th deadline for in-person verification. It is essential to recognize the impact of this deadline and begin planning for the necessary changes. Stay informed about the required documentation and ensure compliance with I-9 requirements to prevent potential setbacks that could harm businesses in the future.
It’s a tall order, but HR professionals must stay on top of evolving legislation impacting their employees and organizations. Want to stay current while someone else does the heavy lifting?
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