It wouldn’t be a new year without several U.S. employment law changes! In 2020, employers are going to need to stay on top of more than a dozen federal and state laws that came into effect on January 1, 2020.
While we can’t cover all dozen-plus new labor laws and regulations in one article, let’s look at three that could have a big impact on your business.
1. A new 2020 Form W-4
Each year, the Internal Revenue Service issues a new W-4, and this year is no different. The 2020 Form W-4, Employee’s Withholding Certificate, is something an employee must fill out when they’re hired, or anytime they want to make a change to the amount of tax that is withheld from their paycheck. It tells you what they want to declare as their marital status, number of withholding allowances and any additional amount to use when you deduct federal income tax from their pay.
Ensure you’re giving the new 2020 Form W-4 to all new employees in 2020. Current employees aren’t required to complete a new form, unless they want to make changes to their withholding in 2020.
What can happen if an employee fills out the form incorrectly? The IRS may issue a notice to you to adjust the withholding of income taxes from their wages. Basically, you’ll have to deal with more paperwork, accounting issues and contact with the IRS. No fun!
2. Increasing I-9 audits
The current Employment Eligibility Verification Form (Form I-9) expired on August 31, 2019. However, the Department of Labor (DOL) hasn’t issued the new form so until they do, continue using the form with this expiration date. Form I-9 is used to verify the identity and employment authorization of individuals hired in the United States.
The DOL is cracking down on illegal employment and has increased I-9 audits significantly. In 2018, over 6,500 employers’ I-9 records were audited, which led to numerous civil and criminal convictions.
Because these enforcement efforts have increased, it’s more important than ever to keep Form I-9s up to date. You don’t want to face civil fines and criminal penalties, which range from $573 to $20,130 per violation for knowingly hiring and continuing to employ anyone who does not have the legal right to work in the U.S.
However, when it comes to this U.S. employment law and new labor laws, you can still face fines for making an honest mistake. Don’t think that pleading ignorance will help you! As a small business owner, are you ready for an ICE audit of your I-9 forms?
3. Fair Labor Standards Act Overtime Provisions
The Fair Labor Standards Act (FLSA) details federal overtime laws. Generally, it requires employers to pay non-exempt employees’ overtime if they work more than 40 hours in a workweek.
Approximately 1.3 million workers in the United States will now be eligible for overtime pay of at least time-and-a-half under the Fair Labor Standards Act (FLSA). This act raised the standard salary level from $455 to $684 a week for the first time in more than 15 years, making all employees who earn less than $35,568 annually eligible. The salary level is only one of the criteria that must be met for the job to be considered as overtime eligible.
The Wage and Hour Division recovered a record $322 million wages owed to workers in FY2019. That’s a lot of employers who aren’t playing by the rules! Employers who wilfully or repeatedly violate overtime pay requirements can be penalized up to $1,000 for each violation.
That violation would include any paycheck to any employee that you did not pay properly, so classifying employees accurately is a must. For example, say you misclassify an employee as “exempt” when they don’t qualify.
That means that you possibly have $52,000 in fines, plus backpay and taxes for that one employee who worked more than 40 hours each week! Multiply that by the number of employees you have who meet that criteria and the impact on your bottom line can be devastating.
One small business owner that called me in when they received a notice of an audit found themselves on the wrong side of this very issue. There were months of pulling together time records and job descriptions to plead the case that some of the employees were exempt from the overtime rules.
The company clearly made a mistake by deciding that some of their employees were “salaried” and not eligible for overtime. Even though we were able to negotiate down some of the penalties, the company was required to go back and recalculate wages and pay the employees what they should have received.
Additionally, they paid a very large fine. Even if you use a 3rd party to process your payroll, there is no guarantee that employees are paid correctly because the vendor only knows what you’ve told them; they don’t know your employees or what work they are performing.
As I mentioned earlier, there are all sorts of new labor laws you need to be aware of. The U.S. Department of Labor (DOL) administers and enforces more than 180 federal laws! From the Family and Medical Leave Act to the Occupational Safety and Health Act (OSHA), you need to ensure you’re filling out every single employee form correctly.
Why risk huge headaches and whopping penalties over erroneous paperwork? This year be proactive rather than reactive. I’ve helped small and large organizations protect themselves—even if they’re already being audited by the IRS or DOL. Call and book a free consultation with me today.
Check out my blog on 5 HR trends for 2020.
Business Leadership, Business Management, Team Management