HR 2016: New Year, new challenges

A new year is here. With the arrival of 2016 comes hundreds of proposed federal, state, and local employment laws, such as new overtime rules, mandated sick leave and more restrictions on criminal history inquiries, to name just a few! Top this off with more Millennials entering the workforce to join the Baby Boomers opting not to retire, and you’ve got some exciting new challenges ahead. Whether your business is large or small, seasonal or year-round, 2016 is sure to bring changes to your human resource practices. Here are a few of the more notable changes to expect.

1. New overtime rules: In June 2015, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM) setting forth its rationale for a higher salary test for employees classified as exempt from overtime under the White Collar Exemptions covering executive, administrative, and professional employees. The DOL proposed a new guaranteed salary level of $50,440 per year and $122,148 per year for Highly Compensated Employees (HCEs), both with automatic annual salary updates. Employers may be permitted to offset a small portion of the guaranteed salary with discretionary bonus earnings that meet certain requirements. Changes could also be made to the duties tests for each exemption.

The NPRM is expected to be finalized later in 2016 than originally expected, which means there will likely be a shorter period of time (such as 60 days rather than the more customary 120 days) for employers to make the necessary changes to comply.

Due to the anticipated short period of time for compliance, employers should prepare to make the necessary changes by auditing their compensation plans and policies now, before the Final Rule is issued. These changes could include:

• Increased salary rates for employees who meet the duties tests, but not the new salary level test
• Changes to bonus/incentive programs
• Changes to performance-management programs
• Changes to pay ranges in compensation plans
• Reclassification of positions
• Restrictions on work hours for employees who do not qualify for an overtime exemption
• New recordkeeping procedures

2. More mandated sick leave laws: Although 65 percent of all workers currently receive paid sick leave benefits, across the nation state and local governments are enacting ordinances and laws that require private employers, including small businesses, to provide paid sick leave to employees. Many employers oppose mandated benefits such as sick leave; however, these initiatives gained momentum over the past year.

In 2015, President Obama issued an executive order requiring government contractors and subcontractors to provide one hour of paid sick leave for every 30 hours worked by employees, up to 56 hours per year. This federal law becomes effective in January 2017. Although it only applies to government contractors, business owners recognize that it lays the groundwork for more private-sector legislation.

Case in point: The Healthy Families Act, a pending bill in Congress that, if passed, would require private employers with 15 or more employees to provide up to 56 hours of paid sick leave per year, available to use on the 60th day of employment. This act would also require smaller businesses to provide the same amount of unpaid time off to workers.

Lest you think your business may be exempt based on size, current state and local sick leave laws can cover companies with only one employee. So small businesses beware!

In addition to allowing time off for the employee’s own illness, most of these laws allow time off to care for a family member and to address issues related to domestic violence.

Adding to the heartburn of mandated paid leave, many of the laws also require covered employers to adopt an accrual method of tracking available time off, which can be burdensome on small businesses that lack payroll or time tracking systems with the capability to log sick time accruals automatically.

Currently, California, Connecticut, the District of Columbia, Massachusetts, and Oregon mandate paid sick leave for private employers, in addition to several cities and counties throughout the country.

In addition to current regulations, Hawaii, Michigan, Minnesota, New Jersey, Pennsylvania, Vermont, and Washington have sick leave bills pending that are likely to pass.

Employers should expect more cities and states to mandate paid sick leave in 2016, with provisions that allow time off ranging from 24 to 72 hours per year. Now is the time to evaluate your current time off policies. Of course, if your business is located in a city or state with a current sick leave law, ensure that your sick leave policy and practices comply with the applicable rules.

3. Additional criminal inquiry restrictions: Employers across the nation are continuing to face restrictions related to criminal inquiries during the hiring process. Referred to as “ban-the-box” laws, supporters (who refer to their work as the “fair chance” initiative) seek to enact local and state laws that prohibit private employers from asking questions (orally or in writing) about criminal histories during the pre-hire process. These restrictions include eliminating the popular employment application question, “Have you been convicted of a crime?” (The “box” in the “ban-the-box” phrase refers to the box an applicant checks on an application form to answer “yes” or “no” to this question.) Although employers covered by these laws can conduct criminal background checks, the timing of the criminal background check (or other inquiry) is subject to restrictions.

Currently, 19 states, more than 100 cities and counties, and the District of Columbia have enacted ban-the-box laws and ordinances; however, most of these apply to public employers only.

In the private sector, 11 cities, two counties, seven states and the District of Columbia have enacted laws or ordinances that restrict employers’ abilities to ask applicants about their criminal histories, in most cases, prior to a conditional job offer.

Most ban-the-box laws cover small businesses; however, each law carries its own definition for coverage. Many laws include steep penalties for noncompliance and unique restrictions. For example, covered employers in New York City are prohibited from including the common phrase “Background Checks Required” on employment advertisements. And, covered employers in many localities must provide a written explanation to applicants who are denied employment based in whole or in part on criminal record information.

Employers currently covered by a ban-the-box law or ordinance should ensure that their hiring process, position advertisements, employment applications, and employment forms are compliant.

Indeed, 2016 will be a transformational year in the HR arena! Small businesses would do well to ensure that they have adequate resources and knowledgeable professional advisers in place early on to assist with preparing for and implementing necessary changes.