Top 10 Regulatory Issues Facing Businesses in 2021
In what is clearly a challenging time for many businesses, keeping pace with new and changing federal and state regulations is one of many factors that will be critical to your success in 2021. To help, our team of more than 200 in-house compliance experts at Paychex has compiled the top 10 issues that should be top of mind as business owners and HR leaders continue to manage the impacts of the COVID-19 pandemic and plan for the year ahead.
Here are the top 10 regulatory issues identified by Paychex for 2021:
- #1 New COVID-19 Stimulus
- #2 Family Leave, Sick Leave, and COVID-19 Leave
- #3 Taxes
- #4 Workplace Safety/OSHA
- #5 Future of Work
- #6 Healthcare Reform
- #7 Marijuana Legalization
- #8 Joint Employment
- #9 Worker Classification
Each of these issues in more detail below.
#1 New COVID-19 Stimulus
The Consolidated Appropriations Act, 2021, provides businesses impacted by the COVID-19 pandemic an opportunity to secure stimulus funds that provide financial relief.
The relief package includes another round of targeted Paycheck Protection Program (PPP) funding for businesses, plus a second draw for targeted businesses hardest hit by the pandemic. Also included is an extension of the Families First Coronavirus Response Act (FFRCA) tax credits and an extension and expansion of the Employee Retention Credit, both of which were set to expire on Dec. 31, 2020. Also, beginning in 2021, the social security tax deferral for the employer and employee will begin payment reconciliation and new reporting will be required for employers.
You can find more details on the extension of PPP and tax credits, including the employee retention credit, and more information on unemployment insurance benefits, retirement and healthcare plans.
#2 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.
For instance, employers with 500 or fewer employees became subject to the FFCRA, which provided mandatory paid leave time for workers diagnosed with COVID-19, those caring for a family member with COVID-19 or 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.
While many COVID-19-related leave provisions are scheduled to sunset at the end of 2020, including the leave provisions in the FFCRA, the relief package extends the tax credits for the FFCRA leaves through March for employers previously required to offer this leave who choose to continue it through March 31, 2021. It is also anticipated that certain state and local leave laws may be extended as the pandemic continues.
There is bipartisan interest in a permanent federal paid family leave law, with several proposals expected in the coming year. In addition, many state and local jurisdictions also enacted paid leave laws.
To help you stay abreast of the many state leave laws, we have included guidance (when available) on our interactive state-by-state tool on our Coronavirus Help Center. We also have more in-depth state-specific articles in our Knowledge Center, including webinars focused exclusively on New York leave laws and California leave laws.
Taxes are always top of mind for business owners. A potential increase in IRS enforcement is expected under the Biden administration, and it is also possible there will be some legislative action on tax policy. An article covering the potential for changes brought on by the new presidency includes more details on the Biden platform on taxes.
Another factor at play is if any future COVID-19 stimulus legislation addresses state and local funding. In the meantime, individual states may increase tax enforcement, as well as introduce or increase taxes to balance their budgets. Additionally, depletion of state trust funds with the recent high unemployment levels could result in increased rates and potential surcharges if states attempt to replenish funds without additional federal stimulus funds.
#4 Workplace Safety/OSHA
Over the past nine months, President-elect Biden has repeatedly advocated for the creation and enforcement of an “Emergency Temporary Standard” regarding COVID-19.
Currently, most COVID-19 violations fall under the umbrella of OSHA’s General Duty Clause. However, this guidance is broad, and enforcement has varied considerably across the country. Four states (California, Michigan, Oregon, and Virginia) have implemented emergency standards, and a new national standard will likely adopt similar requirements for employers regarding the development of an exposure control plan, stricter implementation controls, maintaining of records and the effective training of employees.
Once a national emergency standard is in place, the expectation is that greater enforcement and accountability can be expected. OSHA and the CDC will also likely be tasked with creating a permanent infectious disease standard for the future. As the COVID-19 vaccine becomes more widely available, considerations on state requirements for the vaccine 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. You can view this on-demand webinar to learn more about maintaining workplace health and safety during the pandemic.
#5 Future of Work
The COVID-19 pandemic brought telework challenges and opportunities 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 should follow best practices when it comes to creating a robust virtual workplace. They must also examine any potential compliance challenges that can accompany these arrangements. Tax compliance if an employee’s home is in a different location than the employer’s place of business is one such example. While some states gave reprieve from businesses establishing a nexus for taxability based on the employee’s home location as a result of the pandemic, that relief was not permanent.
Employers should also consider any wage/hour issues for non-exempt employees and how they will track hours. Additionally, workers’ compensation obligations are still applicable, but how these obligations apply can be more complex.
#6 Healthcare Reform
Even as President-elect 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, and 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, pre-existing condition exclusion prohibitions and essential health benefits coverage requirements.
Additionally, President-elect Biden is expected to pursue administrative action to strengthen the ACA, which includes 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.
#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.
#8 Joint Employment
The franchise community, subcontractors and other similar working arrangements were impacted by the U.S. Department of Labor’s (DOL) Joint Employer rule released in 2020.
This final rule revised the agency’s regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA) and clarified when an employer can be held jointly liable for federal wage and hour obligations to the employee. However, critical portions of the new rule were soon struck down in federal court, citing the rule inappropriately narrowed the definition of joint employer, leaving these same employers awaiting the outcome of the current administration’s appeal of the ruling or potential action by the new administration to undertake rulemaking to broaden the definition of joint employer liability.
Employers should also watch for the National Labor Relations Board (NLRB) to consider changes to their own recently adopted final joint employer rule.
#9 Worker Classification
A focus on worker classification did not end with a new test for covered employers in California under AB5, 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 is expected to soon finalize their proposal addressing worker classification under the FLSA. As proposed, the rule would make it easier for employers to classify workers as independent contractors under federal wage and hour law, making them exempt from certain benefits available to employees. While a significant development, other tests for worker classification enforced by other agencies (for example, the IRS and the NLRB, as well as many state and local laws and regulations) will continue to apply and others are likely to be introduced in 2021.
This is a critical issue for businesses, as penalties for worker misclassification continue to have a significant financial impact on employers of all sizes.
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. You can learn more about PEPs in our article, The Pooled Employer Plan (PEP): 5 Big Benefits for Your Small Business.
Also, the recently passed COVID-19 relief bill includes partial retirement plan termination relief, as well as non-COVID Federal Disaster Tax Relief. In addition, to expand upon the growing concerns over retirement savings inadequacy, there have been a few proposed pieces of bipartisan legislation that have retirement impact, including:
- SECURE 2.0 - Provisions may include required auto-enrollment retirement plans for 10 or more employees, further increase of the Required Minimum Distribution (RMD) age, and student loan repayments;
- SAVERS Act - Includes raising retirement plan contributions limits by 300 percent.
Finally, in an effort to increase retirement savings availability, several states have either recently adopted a state-based program or have one in the works, including California, Illinois, Maryland, Colorado, Connecticut, and New Jersey.
Paychex is Here to Help
With the new round of stimulus and the priorities of the incoming Biden administration coming into focus, businesses should be preparing for another year of fast-paced regulatory change. To help you stay up-to-date, visit our interactive state-by-state tool (updated daily with reopening orders and regulations), our Coronavirus Help Center, and our Paychex Knowledge Center. You can also subscribe to our newsletter to get the latest information delivered right to your inbox.
* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.