As the new year approaches, HR professionals should be aware of the latest legal developments that may affect their organizations in 2023. From pay transparency laws to retirement plan changes, employers will need to update their policies and practices to comply with the new regulations and avoid potential penalties. Here are some of the key HR compliance and legal updates that employers should know about in 2023.
Pay Transparency Laws
Several states have enacted or proposed pay transparency laws that require employers to disclose salary ranges for their job postings or upon request by employees or applicants. These laws are intended to promote pay equity and prevent wage discrimination based on gender, race, or other protected characteristics. For example, California, Rhode Island, and Washington have implemented pay transparency laws that took effect on January 1, 2023. New York State will follow suit in September 2023, while Massachusetts and South Carolina have pending legislation on the same issue. Employers should consult with qualified employment counsel to ensure that they are in compliance with their state’s or city’s pay transparency laws.
SECURE Act 2.0 of 2022
The Consolidated Appropriations Act of 2023, signed into law on December 29, 2022, included a comprehensive set of provisions affecting employer-sponsored retirement plans. These provisions are known as SECURE Act 2.0 of 2022 and aim to enhance retirement savings and security for workers. Some of the key changes impacting retirement plans are:
• Automatic Enrollment: Employers that start new retirement plans after December 29, 2022, must automatically enroll employees in these plans beginning in 2025 at a rate of at least three percent (but not more than ten percent) of employees’ eligible wages. Employees can opt out or change their contribution rate at any time.
• Higher Catch-Up Contributions: Employees who are age 62, 63, or 64 by the end of the calendar year can make additional catch-up contributions to their retirement plans beyond the regular limit of $6,500 for 2023. The maximum catch-up contribution for these employees is $10,000 for 401(k), 403(b), and governmental 457(b) plans, and $5,000 for SIMPLE IRA and SIMPLE 401(k) plans.
• Partial Rollovers: Employees who take a distribution from their retirement plan can roll over a portion of it to another eligible retirement plan or IRA within 60 days, while keeping the rest as taxable income. This allows employees to have more flexibility and control over their retirement funds.
• Increased Required Minimum Distribution Age: The age at which employees must start taking required minimum distributions (RMDs) from their retirement accounts has increased from 72 to 73 in 2023, 74 in 2030, and 75 in 2032. This gives employees more time to grow their retirement savings before they have to withdraw them.
Employers should review their retirement plan documents and procedures to reflect these changes and communicate them to their employees.
Cannabis Use in the Workplace
As more states legalize recreational or medical cannabis use, employers face challenges in balancing their drug-free workplace policies with their employees’ rights and expectations. While federal law still prohibits cannabis use, some states have enacted laws that protect employees from discrimination or retaliation based on their lawful cannabis use outside of work hours and premises. For example, Connecticut, Maine, Nevada, New Jersey, New Mexico, and New York have such laws in effect as of January 1, 2023. However, these laws generally do not prevent employers from enforcing their drug testing policies or taking action against employees who are impaired by cannabis during work hours or perform safety-sensitive duties. Employers should review their drug-free workplace policies and drug testing procedures to ensure that they comply with the applicable state laws and respect their employees’ privacy rights.
Paid Family Leave Laws
Several states have expanded or introduced paid family leave laws that provide employees with partial wage replacement for taking time off work to care for themselves or their family members due to a serious health condition, a new child, or a military deployment. For example, Colorado and Oregon have enacted paid family leave laws that will take effect in January and July 2023 respectively. These laws will cover most private-sector employees and employers in these states and will be funded by payroll contributions from both parties. Employees will be eligible for up to 12 weeks of paid family leave per year (or more in some cases) at a percentage of their average weekly wages (up to a cap). Employers should familiarize themselves with the paid family leave laws in their states and prepare for the payroll deductions and reporting requirements.
Independent Contractors vs. Employees
The classification of workers as independent contractors or employees has been a hot topic in recent years, as it affects the workers’ rights and benefits, as well as the employers’ tax and legal obligations. While the federal government has not issued a clear and consistent standard for worker classification, some states have adopted or proposed their own criteria for determining whether a worker is an independent contractor or an employee. For example, California has implemented the ABC test, which presumes that a worker is an employee unless the employer can prove that the worker meets three conditions:
(A) the worker is free from the employer’s control and direction; (B) the worker performs work that is outside the usual course of the employer’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business. Other states, such as Massachusetts, New Jersey, and New York, have similar tests or pending legislation on worker classification. Employers should review their contracts and relationships with their workers and ensure that they comply with the relevant state laws on worker classification.
Conclusion
These are some of the major HR compliance and legal updates that employers should know about in 2023. However, this is not an exhaustive list, as there may be other federal, state, or local laws or regulations that affect employers’ benefit and HR Compliance in various countries. Employers should consult with qualified employment counsel to stay updated on the latest legal developments and ensure that they are in compliance with the applicable laws.
HR Strategies for Effective Talent Management and Retention
Effective talent management and retention are vital for an organization’s long-term success. HR professionals play a crucial role in implementing strategies that attract, develop, and retain top talent. By employing talent assessment, succession planning, performance management, employee engagement initiatives, training and development programs, and competitive compensation and benefits, HR teams can create an environment that nurtures talent, fosters growth, and ensures organizational stability HR Compliance.
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