To prepare you for this new decade, Melita drafted the following summary of significant changes in law expected to impact employers this year.
Would you like a PDF copy of the “Employment Law Changes for 2020”?
Table of Content
- FLSA Overtime Exemption
- Contribution Limits
- ACA Fulfillment Deadline Extended (For Applicable Large Employers Only)
California and Other State Law Changes
- Equal Employment, Workplace Harassment, and Accommodations (SB 778, SB 530, SB 188, & SB 142)
- Leave of Absence Laws (AB 1223 and SB 83)
- Employee Benefits (AB 1554, SB 129, & SB 30)
- Wages and Worker Classifications (AB 673 & AB 5)
- Employment Agreements (AB 51 & AB 749)
- Privacy Laws (AB 25)
FLSA Overtime Exemption
The U.S. Department of Labor issued its final overtime rule, which updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements. The final rule includes the following changes:
- The standard salary level used to determine whether someone qualifies for these exemptions increases to $684/week or $35,568/year
- The total annual compensation requirement for highly compensated employees increases to $107,432
- Employers are permitted to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level.
NOTE: Just meeting the above salary thresholds is not enough to determine whether an employee is exempt or non-exempt. To qualify for the executive, administrative, or professional employee exemptions, employees must still meet the “duties test”.
In November, the IRS announced several changes to contribution limits for 2020, including:
- Health FSA contribution limits increase to $2,750 (a $50 increase) for plan years beginning in 2020
- Qualified Commuter Parking and Mass Transit Pass monthly limits increase to $270 (a $5 increase)
- 401(k), 403(b), and most 457 plan contribution limits increase to $19,500 (a $500 increase). The catch-up contribution limit for employees aged 50 or over increases to $6,500 (a $500 increase)
- For SIMPLE retirement accounts, the limit increases to $13,500 (a $500 increase)
Dependent care FSAs, or DCAPs, are not subject to similar inflation adjustments and, therefore, the contribution limit remains at $5,000/year.
After these contribution limits were announced, Melita updated client benefit booklets to reflect these increases.
ACA Fulfillment Deadline Extended (For Applicable Large Employers Only)
As we recently reported, the deadline for employers who are ALEs to provide employees with IRS Form 1095-C has been extended from January 31, 2020 to March 2, 2020.
ACA-Related Taxes and Fees
The recently enacted spending bills included the following significant changes:
- PCORI Fees: The PCORI fee deadline which was originally scheduled to sunset this year has been extended an additional 10 years, through plan years ending on or before September 30, 2029. The PCORI fee is paid by carriers for fully insured plans and by employers for self-funded plans.
- Cadillac Tax: The ACA’s intended 40% tax on certain group health plans has been repealed.
As Congress remains paralyzed by its political differences, the states continue taking the lead in making changes to employment laws. While this alert focuses primarily on changes to California law, we include similar changes to laws in other states as well.
In 2019, California passed dozens of laws that impact, either directly or indirectly, human resource practices in some or all industries. In the interest of your time, the below summary is not an exhaustive list of all HR-related laws passed in California.
Instead, this article focuses on those laws with the potential to have the most impact on your HR practices.
Equal Employment, Workplace Harassment, and Accommodations (SB 778, SB 530, SB 188, and SB 142)
Sexual Harassment Training
After many employers already satisfied their workplace harassment training to meet the original January 1, 2020 deadline, in 2019 the Legislature passed several laws to extend the deadline.
Now, the deadline for employers with 5+ employees to provide harassment prevention training for supervisors and employees (FT, PT, temporary and seasonal) is January 1, 2021. None of these changes impact the training requirement/cycle applicable to employers with 50+ employees who were required to train supervisors within 6 months of hire or promotion and at least every 2 years.
- Connecticut – Under prior law, only employers with 50 or more employees were required to provide training to managers. Now, employers with 3 or more employees must provide training to all employees and supervisors within the first 6 months of employment (for new employees), within the first 6 months of promotion (for newly promoted supervisors), or by October 1, 2020 (for existing employees/supervisors). Periodic supplemental training must be provided at least every 10 years.
- Illinois – This year, companies with employees in Illinois must begin providing sexual harassment training for all employees at least once a year.
- California – California expanded its employment discrimination laws to protect individuals from discrimination based on racially associated hairstyles. Specifically, employers are prohibited from discriminating against employees based on their race and traits historically associated with race, including, but not limited to, hair texture and protective hairstyles.
- Other States – New York, New Jersey, and New York City passed similar requirements.
California law previously required an employer to make reasonable efforts to provide nursing employees with the use of a room, or other location, other than a bathroom, in close proximity to the employee’s work area, for the employee to express milk in private. Now, for 2020 and beyond, the lactation space must:
- Be a room or location other than a bathroom in close proximity to the employee’s work area that is shielded from view and free from intrusion while the employee is expressing milk
- Be safe, clean, and free of hazardous materials
- Contain a surface to place a breast pump and personal items
- Have a place to sit
- Have access to electricity or alternative devices, including, but not limited to, extension cords or charging stations, needed to operate electric or battery-powered pumps
Employers must also provide access to a sink with running water and either a refrigerator or other cooling device suitable for storing milk in close proximity to the employee’s workspace. Employers with fewer than 50 employees may seek an undue hardship exemption from the requirements.
Leave of Absence Laws (AB 1223 and SB 83)
Previously, employers were required to provide employees who donate an organ with up to 30 days of paid leave within a one-year period. This year, employers are required to provide employees who donate an organ with an additional 30 days of unpaid leave within a one-year period year.
Paid Family Leave
California’s paid family leave program currently allows eligible employees to receive wage replacement benefits for up to 6 weeks when they take time off to care for a seriously ill family member or to bond with a minor child within one year of the child’s birth, adoption, or foster placement. Effective July 1, 2020, these paid family leave benefits increase from 6 weeks to 8 weeks.
EDD’s PFL and SDI Weekly Benefit Increases to $1,300
Per the EDD website, “For claims beginning on or after January 1, 2020, weekly benefits range from $50 to a maximum of $1,300. To qualify for the maximum weekly benefit amount ($1,300) you must earn at least $28,145.01 in a calendar quarter during your base period.”
LOA Laws in the Other States
- Washington – This year, eligible employees can begin using paid family and medical leave benefits for up to 12 weeks of paid leave to, among other things, recover from a serious illness, take care of a family member with a serious medical condition, or to bond with a new baby or child. Additional time may be available for pregnancy complications (up to 18 weeks) or when an employee requires family and medical leave for more than one event in a year (up to 16 weeks) under certain conditions. Paid family leave benefits are funded by payroll deductions and/or employer contributions which the state began collecting last January.
- New Jersey – This year, the employee wage cap for the Temporary Disability (TDI) and Family Leave Insurance (FLI) program increases from $34,400 to $134,900 per year. Workers contribute 0.16% of the first $134,900 earned during the 2020 calendar year (up to a maximum annual contribution of $215.84) for FLI and 0.26% of the first $134,900 (up to a maximum annual contribution of $350.74) for TDI. Beginning July 1, 2020, New Jersey’s family leave insurance benefits increase from 6 to 12 weeks. Additionally, intermittent leave increases from 42 to 56 days. Finally, the maximum weekly benefit rate will be calculated at 85% of an employee’s average weekly wage, up to a maximum of $881/week.
- New York – This year, employees taking Paid Family Leave will receive 60% (an increase from 55% in 2019) of their average weekly wage for 10 weeks, up to a cap of 60% of the current Statewide Average Weekly Wage of $1,401.17. Thus, the maximum weekly benefit for 2020 is $840.70. Like New Jersey’s program, the program is funded by contributions. In 2020, the contributions increase to 0.270% of an employee’s gross wages each pay period, up to a maximum of $196.72 for the year.
- Illinois – Effective August 1, 2020, Illinois’ school visitation leave law prohibits employers from terminating employees for absences due solely to employees’ attendance at school conferences, behavioral meetings, or academic meetings, if the conferences/meetings cannot be scheduled during non-work hours. Employees may take up to 8 hours a year to attend these conferences or meetings; however, they can no longer use school visitation leave to participate in classroom activities.
- Nevada – Beginning this year, employers with 50 or more employees in Nevada must permit employees to accrue 0.01923 hours of paid leave for each hour of work, up to a maximum of 40 hours a year.
- Other States – Several states recently enacted paid family leave laws which will be effective in future years, including Colorado, Connecticut, Oregon, and Massachusetts. Employers’ first quarterly reporting for Massachusetts paid family leave benefits (based on contributions beginning in October 2019) is due January 31, 2020. Additionally, Maine enacted an earned paid leave law that goes into effect on January 1, 2021. Eligible employees may earn up to 40 hours of leave a year that can be used for any purpose.
Employee Benefits (AB 1554, SB 129, and SB 30)
This year, employers who sponsor Flexible Spending Accounts (FSAs), including, but not limited to, health FSAs, Dependent care FSAs (DCAPs), and adoption assistance FSAs, must notify their California employees of any deadline to withdraw funds before the end of the plan year. Notice must be provided in 2 forms, one of which may be electronic. In addition to electronic notification, notice may also be provided by mail, telephone call, text message, or in-person notification; however, this list is not exhaustive.
The law leaves very little detail about the notice requirement and does not prescribe a timeframe within which notice must be provided. Legal experts believe the notice requirement may be partially satisfied if the information is communicated in an SPD; however, that would only satisfy one of the two notice requirements. If an employer provides SPD’s electronically to employees, then the second notice cannot be provided electronically.
Some options for a notification beyond the SPD could include, providing notice through a worksite poster, texting a notice to employees, placing a reminder call to employees, including notice in a hand-delivered benefit enrollment guide, or mailing notices to employees. Employers may communicate with their FSA vendor to determine the vendor’s plan for communicating this information to employees; however, the responsibility to ensure this requirement is met falls on the employer, not the FSA vendor. Because this issue impacts employees who terminate mid-year, we recommend notice be provided to employees at termination.
Health Care Coverage Reporting
- California – This year, California’s individual mandate goes into effect. This means that individuals in California are required to have minimum essential coverage in 2020 or pay a fine to the state. Reporting for California’s individual mandate begins next year, with the first report due on March 31, 2021. Thereafter, reporting will be due each January 31st. Insurers complete the reporting for employers with fully-insured medical plans using the federal 1095-C form unless or until the federal form significantly changes due to the repeal of the federal individual mandate. Employers with self-funded medical plans are required to handle their own filing.
- Other States – Several other states, including Vermont, Rhode Island, DC, and New Jersey have passed similar laws. Reporting begins in 2020 for employers with employees in DC or New Jersey.
Domestic Partnerships (SB 30)
Under prior law, in order to register a domestic partnership in California, domestic partners had to be either of the same sex or of the opposite sex and over 62 years of age. This requirement has been eliminated this year. Therefore, couples can register their domestic partnership if:
- Neither person is married to someone else or is a member of another domestic partnership with someone else that has not been terminated, dissolved, or adjudged a nullity;
- The two persons are not related by blood in a way that would prevent them from being married to each other in this state;
- With limited exceptions, both persons are at least 18 years of age; and
- Both persons are capable of consenting to the domestic partnership.
Wages and Worker Classifications (AB 673 & AB 5)
As we previously reported, the “ABC Test” (adopted by the California Supreme Court last year in Dynamix Operations West, Inc. v. Superior Court) was codified into law and is effective this year. Under the “ABC Test” for an individual to be an independent contractor, the employer must show three things:
- The worker is free from control and direction of the hiring entity in connection with the performance of the work (both under the contract and in fact);
- The worker performs work outside the usual course of the hiring entity’s business; and
- 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.
The ABC Test applies to the California unemployment insurance, Labor Code, and wage orders issued by the Industrial Welfare Commission in certain instances. Certain occupations are exempted from the ABC Test, as are bona fide business-to-business contracting relationships. In these cases, the former Borello test will be used to determine whether an individual is an employee or an independent contractor.
This year, employees have a private right of action to directly seek recovery of wages owed to them by an employer. Through such an action, employees may recover $100 plus 25 percent of the late paid wages. Any additional violation carries a penalty of $200 plus 25% of the late paid wages.
Employment Agreements (AB 51 & AB 749)
California passed AB 51, which would prohibit employers from requiring employees or applicants to waive the right to bring a claim against the employer under the California Fair Employment and Housing Act or Labor Code and prohibits retaliation against or threatening employees who refuse to sign a waiver. While the law was intended to be effective January 1, 2020, on December 30, 2019, the law was temporarily enjoined by a court due to pending litigation.
In another new law this year, employers are precluded from including a “no-rehire” agreement against any aggrieved person (employee, former employee, or party with whom they have settled a claim) unless they have made a good faith determination that the settling party engaged in sexual harassment or assault. This prohibition extends to certain related business entities, including parent companies, subsidiaries, divisions, contractors, or affiliates. This law does not require an employer to continue to employ or rehire a person if there is a legitimate, non-discriminatory, non-retaliatory reason to terminate or rehire the person.
Privacy Laws (AB 25)
California Consumer Privacy Act of 2018 (CCPA)
In 2018, California passed one of the most, if not the most, comprehensive consumer privacy laws in the country. The CCPA applies to companies that do business in California that collect consumers’ personal information and: (1) Alone or in combination, annually buy, receive for the business’ commercial purposes, sell, or share for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices; (2) Generate gross revenues in excess of $25 million per year; and/or (3) derive 50% or more of their annual revenue from selling consumers’ personal information. The law goes into effect on January 1, 2020. If you do not meet one of the above criteria, read no more!
If you do meet the criteria, then this summary only pertains to your role as an employer. You have many responsibilities pertaining to your clients/customers under the CCPA. We encourage you to consult with your privacy counsel about those responsibilities.
The CCPA extends beyond business practices to your company’s responsibility to its employees (as a covered employer). As originally passed, the CCPA law left many questions pertaining to its applicability to employer-employee/applicant relationships. AB 25, exempts covered employers from most of the CCPAs requirements for 1 year (until January 1, 2021); however, employers must still ensure reasonable security measures are in place to protect employee data and must meet the notice requirements, which require employers to notify employees (by category or categories) of their personal information it collects. Furthermore, the exemption does not apply to the employer’s obligation to its employees if the employees are also your clients/customers.
Even though the law is already in effect, the regulations are only proposed at this point and enforcement does not begin until July 1, 2020. We will continue to follow progress, including when final regulations are implemented and any details on the requirements for employee notices.
If your firm lacks the resources and expertise the navigate the employment laws and regulations landscape, it is worthwhile to work with an experienced HR outsource provider.