New Employment Laws 2023: What SMBs Need to Know
Quick look: A new year brings a range of new HR and employment laws. From minimum wage and salary regulations to evolving employee leave rules, here’s what SMBs should have on their compliance radar this year.
The new year is in full swing, and just like last year, if there’s one thing that human resources (HR) professionals can expect in 2023, it’s a slew of new employment laws.
It’s important to become informed of new HR and employment laws before they are enacted to pivot your business’ operations and remain compliant. To help you do so, Dominique Thomas, ExtensisHR’s Senior Director of Training and Compliance, has outlined six key 2023 employment law changes to keep on your organization’s radar this year.
1. Minimum wage regulations
State minimum wage laws change regularly (the minimum wage is indexed for inflation and automatically adjusted annually in 29 states and Washington, D.C.). However, employers often only focus on hourly wage laws and may need a refresh on current regulations for exempt, salaried employees.
While the federal Fair Labor Standards Act (FLSA) wage for exempt workers is set at $684 per week, several states have a minimum salary threshold higher than that, including Alaska, Arkansas, California, Colorado, Maine, New York, and Washington. Business leaders should keep in mind that the national salary threshold is expected to rise to around $900-$1,000 per week or between $46,800 to $52,000 annually.
Employers should ensure their workers are correctly classified and meet minimum wage requirements, whether paid hourly or salaried. And businesses in certain states, like New York, should be aware that their states have tiered salary thresholds. For example, for employers in Upstate New York (outside of New York City and Nassau, Suffolk, and Westchester counties), the minimum is $1,064.35 per week ($55,341 annually), while the rest of the state has a threshold of $1,125 per week ($58,500 annually).
2. Pay transparency laws
Pay transparency is a hot topic, and more states and regions than ever now have laws in place for it. Statutes similar to New York City’s will be implemented in 2023 in California, Washington, and Rhode Island.
California
Employers with 15 or more employees are required to “include the pay scale for a position in any job posting,” including posts by third-party organizations hired to advertise an employer’s role.
Additionally, all employers must provide a position’s pay scale to an applicant “upon reasonable request” or to an employee “for the position in which the employee is currently employed.” Organizations that fail to disclose pay scales are subject to a fine of $10,000 per violation.
Washington
Employers with 15 or more employees must “disclose in each posting for each job opening the wage scale or salary range” and provide a “general description of all the benefits and other compensation to be offered to the hired applicant.” These benefits should include, but are not limited to, “health care benefits, retirement benefits, any benefits permitting days off (including more generous paid sick leave accruals, parental leave, and paid time off or vacation benefits), and any other benefits that must be reported for federal tax purposes, such as fringe benefits.”
Washington defines a “job posting” as “any solicitation intended to recruit job applicants for a specific available position, including recruitment done directly by an employer or indirectly through a third party” and specifies that its regulations apply to “any postings done electronically, or with a printed hard copy, that includes qualifications for desired applicants.”
Rhode Island
This state requires that employers provide upon request “the wage range for the position for which the applicant is applying” before discussing compensation for the role with the application. Additionally, businesses must “provide an employee the wage range for the employee’s position both at time of hire and when the employee moves into a new position” and a wage range for a worker’s current position at their request at any time “during the course of employment.”
Some pay transparency laws are city-specific, like Jersey City, New Jersey’s rule which states that employers with five or more employees that have a principal place of business within the city and use any print or digital media circulating within the city to advertise jobs must post a minimum and maximum salary or hourly wage and benefits. The law also prohibits employers from screening a job applicant based on their salary history or requiring their previous salaries to satisfy any minimum or maximum standards.
New York State, Massachusetts, and South Carolina also have pending pay transparency legislation:
- New York State: Taking effect on September 17, 2023, the law will require private-sector employers to disclose salary ranges in their job postings.
- Massachusetts: The proposed legislation would require employers with 50 or more employees to provide current employees and job candidates with pay scale information for their current positions or the ones they are interviewing for.
- South Carolina: The state’s pending Act to Establish Pay Equity would require employers to disclose the pay range to job applicants upon request, when asking about the candidate’s wage expectations, or when making a compensation offer (whichever occurs first).
Organizations must also note if pay transparency laws apply to their remote workforce. For example, New York City regulations apply not only to employers based there but any position in which a resident of New York can be hired. Some states, like California and Washington, also have similar rules.
Employers must ensure they have established pay ranges and pay equity across their positions. Creating salary bands and conducting an internal pay audit, which can be completed with a tool like ExtensisHR’s DEI Dashboard, can help them accomplish this. However, these tactics may uncover a need for pay corrections, and if this occurs, the organization should partner with legal counsel for guidance on how to rectify these discrepancies.
3. Employee leave rules
Employee leave is another facet of employment law continuing to transform in 2023.
Many states are implementing new or expanding current family leave laws this year. For example, Oregon’s new Paid Family and Medical Leave Insurance (PFMLI) program will apply to any employer with one or more employees (however, only employers with 15 or more employees will be required to pay into the program). PFMLI will allow workers 12 weeks of paid family, medical, or safe leave (which may be needed because of domestic violence, stalking, or sexual harassment). Staff with limitations regarding pregnancy, childbirth, or lactation are eligible for an additional two weeks of leave. Further eligibility requirements can be found here. And while pay deductions for the program began on January 1, 2023, employees can start taking leave on September 3, 2023.
Colorado’s Family and Medical Leave Insurance (FAMLI) program is also taking hold in 2023. Under FAMLI, workers are entitled to up to 12 weeks of paid leave for qualifying reasons and an additional four weeks for pregnancy or childbirth-related reasons during a 12-month period rolling backward and beginning on the first day the employee starts taking FAMLI benefits. Like Oregon’s PFMLI program, FAMLI began payroll deductions on January 1, 2023, and employees will be eligible to take leave beginning on January 1, 2024.
Additionally, many states with established family laws are expanding the amount of time and/or compensation allotted to employees and the definition of a qualified family member. For example, California now states that a “designated person” is “any individual related by blood or whose association with the employee is the equivalent of a family relationship.”
While not federally mandated, another form of leave that is getting a refresh in many states this year is bereavement leave. On January 1, 2023, California and Illinois began requiring employers to offer this time off, and some states require that this leave covers pregnancy- and adoption-related loss.
4. Artificial intelligence (AI) regulations
Many businesses use decision-making tools, like an applicant tracking system, to determine whether a job candidate is a good fit or if a current employee is eligible for promotion. However, some of these programs use data and AI that have not been coded to remove bias and may isolate individuals. For example, a tool may rank an Ivy League graduate more strongly than a graduate of a school with a student base primarily comprised of historically underrepresented groups.
Some states and regions are introducing legislation to address this bias. Starting in April 2023, New York City, for instance, plans to require a bias audit of automated employment decision-making tools to be conducted before their use. Additionally, candidates and employees residing in the city must be made aware of the use of these programs and the job qualifications and characteristics they will use.
Potential bias caused by AI has also caught the federal government’s attention—the U.S. Equal Employment Opportunity Commission (EEOC) recently launched an initiative to ensure that these tools comply with federal civil rights laws.
5. Non-compete agreement limitations
Several states have existing laws in place blocking or limiting non-compete agreements, including California, Colorado, Illinois, Maine, Maryland, New Hampshire, North Dakota, Oklahoma, Oregon, Rhode Island, Virginia, Washington, and Washington, D.C.
2023 is slated to be the year that non-compete disclosures enter the federal government’s radar. On January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule to ban employers from imposing non-compete agreements on their staff. It claims the practice can stifle wages, hinder innovation, and prevent entrepreneurs from creating new businesses.
6. Marijuana laws
The laws surrounding medical and recreational marijuana use continue to evolve, and employers must keep up with what that means for their policies.
For example, New Jersey recently announced guidance on its Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (CREAMMA). The Act provides protections for recreational and medical use and states that organizations are prohibited from refusing to hire or taking adverse action against an individual solely because they engage in the recreational use of the drug. Additionally, before conducting a marijuana drug test, CREAMMA requires employers to complete a physical evaluation of the employee in question and to utilize a Workplace Impairment Recognition Expert (WIRE) to “detect and identify an employee’s usage of, or impairment from, a cannabis item or other intoxicating substance.”
While marijuana is still illegal on the federal level, employers must be conscious of any applicable job protections for recreational and medical use and ensure they maintain proper workplace safety.
Partner up to stay on top of 2023 employment law changes
If you find keeping up to date with all the regulations that apply to your business burdensome, you’re not alone. Luckily, a professional employer organization (PEO) can confirm that your organization abides by all applicable rules and free up your valuable time.
A PEO, like ExtensisHR, has a team of risk and compliance experts that specializes in staying on the pulse of new federal and state- and region-specific laws and helping small- and medium-sized businesses (SMBs) stay compliant.
Working alongside them, many PEOs feature payroll and tax specialists and dedicated HR managers who ensure an organization makes proper payroll deductions and adjusts its policies appropriately.
And lastly, some PEOs provide recruiting solutions to ensure you’re hiring the best talent in a fair, unbiased, and legal way. For example, ExtensisHR provides full-cycle recruiting services (at no additional cost) that include:
- Job advertisement creation
- Salary surveys and skill assessments
- Interview assistance
- Offer letter consultations
- Unlimited phone consultations with a recruiting specialist
- And more
New HR and employment law changes can feel daunting—but they don’t have to. Contact the experts at ExtensisHR today to discover how we can help you stay compliant and grow.
