Business Regulation Changes to Watch Out For in 2024 (USA)

Business Regulation Changes to Watch Out For in 2024 (USA)

Business Regulation Changes to Watch Out For in 2024 (USA)

In the world of business, staying abreast of regulatory changes is crucial to maintaining compliance and avoiding costly penalties. This year, several significant changes are on the horizon that could impact how businesses operate. Here are seven key regulatory changes that businesses should be aware of in 2024.

1. Corporate Transparency Act: Reporting Beneficial Owners Requirement

The United States enacted the Corporate Transparency Act (CTA), a landmark legislation designed to combat illicit activities such as money laundering, tax evasion, and terrorist financing. The Act requires businesses to disclose their beneficial owners, i.e., those who own or control the company, to the Financial Crimes Enforcement Network (FinCEN). This significant change aims at increasing transparency in the corporate sector and shedding light on entities that could potentially be involved in illegal activities.

Under the CTA, a beneficial owner is defined as an individual who directly or indirectly owns or controls 25% or more of the company’s ownership interests, or exercises substantial control over the entity. Every beneficial owner is required to provide their full legal name, date of birth, residential or business address, and an identification number. Companies must report this information. The purpose of this requirement is to prevent individuals from using the veil of corporate anonymity to engage in unlawful activities.

To comply with these new obligations, businesses need to have a robust system in place for accurately reporting their beneficial owners to FinCEN. This includes not only collecting and maintaining up-to-date information on beneficial owners but also being able to provide this information promptly upon request from FinCEN. Businesses that fail to comply with these requirements may face civil or criminal penalties, highlighting the importance of understanding and adhering to these new regulatory changes.

2. Minimum Wage Increases in Over 20 States

The issue of minimum wage has always been a hot topic in the United States, and 2024 is no exception. This year, over 20 states have decided to increase their minimum wage rates, impacting businesses across various sectors. This move is largely in response to ongoing debates about living wages and the rising cost of living. However, for businesses, especially small and medium enterprises, this change means they will need to adjust their payroll budgets to accommodate these wage increases.

Businesses in states where the minimum wage increase is set to take effect must actively assess their current payroll structures and actively make necessary adjustments to ensure they actively comply with the new wage requirements. This process might mean increased labor costs for many businesses. While larger corporations may be able to absorb these extra costs, smaller businesses may find it more challenging. They may need to reassess their budget allocations, cut back on other expenses, or even reconsider their hiring strategies.

Moreover, the increase in minimum wage rates could also necessitate a re-evaluation of pricing strategies for some businesses. If a significant portion of a business’s operating costs goes towards salaries, an increase in the minimum wage could lead to higher overall operating costs. To maintain profitability, businesses may need to pass these additional costs onto the consumer, which could result in higher prices for goods and services.

3. Mandatory Sick Time Mandates in Certain States

In the wake of the ongoing pandemic, the issue of sick leave has come to the forefront of labor rights debates across the United States. Several states have enacted legislation requiring businesses to provide mandatory sick time to their employees, even though there is currently no federally mandated paid sick leave law.

Currently, over a dozen states, including Arizona, California, Colorado, Connecticut, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, Oregon, and Rhode Island, along with Washington D.C., require state-mandated sick pay. The specifics of these laws can vary widely from state to state. For instance, some states may require employers to provide a certain number of paid sick leave hours per year based on the size of the business.

The purpose of these laws is to ensure that employees do not have to choose between their health and their paycheck. They allow workers to take the necessary time off to recover from illness or care for a sick family member without the fear of losing wages. These laws have become particularly important during the COVID-19 pandemic, as they enable employees to self-isolate or seek treatment if they contract the virus.

For businesses, these mandates mean that they need to review the specific laws in their state and ensure they are in compliance. Businesses that fail to provide the mandated sick leave may face penalties. Thus, it is crucial for businesses to stay informed about these changes and implement policies that align with these state mandates.

4. New Workplace Harassment Rules by EEOC Effective 2024

The Equal Employment Opportunity Commission (EEOC) has recently updated its rules and guidance concerning workplace harassment, with these changes being effective from 2024. This move comes as part of a broader effort to create safer and more inclusive workplaces across the United States.

The new EEOC rules provide more robust definitions of distinct types of unlawful harassment. It expands the definition of sexual harassment and broadens the types of harassment that can be based on sex, including harassment based on pregnancy, childbirth, and other related medical conditions. The rules also confirm that we consider sexist, racist, or otherwise discriminatory speech as harassment, even if it’s communicated via digital platforms.

One significant update is the clarification that harassment can include the intentional and repeated use of a name or pronoun inconsistent with an individual’s gender identity. Furthermore, the new guidance states that harassing conduct can create a hostile work environment even when the behavior isn’t specifically aimed at the individual alleging harassment. This update is particularly important in the context of increasing recognition and protection of the rights of transgender and non-binary individuals in the workplace.

The EEOC’s proposed guidance also emphasizes the importance of employers having an effective complaint process in place. This process should include prompt and effective investigations and appropriate corrective actions in response to complaints.

For businesses, these changes mean they need to review their current policies and training programs to ensure alignment with the new EEOC rules. Employers should also take this opportunity to reinforce a culture of respect and inclusivity in their workplaces. By doing so, businesses can not only comply with the new EEOC rules but also foster a work environment where all employees feel safe and valued.

5. Proposed Overtime Rule: Increase to $55,000 Annually

In an effort to extend protections to low-paid salaried workers, the Department of Labor (DOL) has proposed a rule that would increase the salary threshold for overtime pay from $35,568 to $55,000 per year. This significant hike in the overtime salary threshold could have profound implications for both employees and employers across the United States.

Under the Fair Labor Standards Act, workers who are salaried and make more than a certain amount per year are exempt from overtime pay. The proposed rule aims to restore and extend these overtime protections, particularly to those workers who often work alongside hourly employees but do not receive overtime pay due to their salaried status.

If approved, this change might lead to 3.6 million more U.S. workers becoming eligible for overtime pay. This development could be especially impactful for businesses with salaried employees who regularly work long hours. These businesses might need to either reclassify their workers or raise wages to meet the new threshold.

While the proposal has received some criticism — with some organizations calling it “highly disruptive” — it also revives an Obama-era policy effort aimed at increasing wage protections for lower-income workers.

As we move through 2024, businesses should closely monitor this proposal and its potential implications. Employers might need to adjust their payroll budgets and policies to accommodate changes in overtime eligibility. Businesses should actively review their current employee classifications and payment structures now to ensure they’re prepared for any upcoming changes.

The proposed overtime rule underscores the ongoing evolution of labor laws and the importance of staying informed about these changes. By doing so, businesses can ensure they remain compliant with labor laws, protect the rights of their workers, and maintain a fair and equitable workplace.

6. End of Worker Classification Common Period: Changes in Independent Contractor Classification

In a significant development, the U.S. Department of Labor (DOL) published its long-awaited Final Rule regarding independent contractor classification on January 10, 2024. This new rule actively enforces the entitlements of workers and actively enhances protections for them.

The rule, which goes into effect on March 11, 2024, establishes more consistent guidance for employers when tasked with the question of whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). The rule adopts a “six-factor test” that weighs various aspects of the worker’s relationship with the employer to determine their status.

One of the key changes brought about by this rule is that it narrows the scope of who can be classified as an independent contractor. This could potentially lead to an increase in misclassification lawsuits as businesses navigate the new guidelines.

The six-factor test introduced by the DOL includes considerations such as the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss. If the economic realities indicate that the worker operates their own business, they are classified as an independent contractor. However, if the employer holds economic control over the worker, they are classified as an employee.

This change in regulation underscores the importance of correctly classifying workers. Misclassification of employees as independent contractors can deny workers minimum wage, overtime pay, and other protections. Therefore, businesses should review their current worker classifications and adjust their policies as necessary to align with this new rule.

7. Joint Employers’ Shared Liability: Impact on Franchisees

The National Labor Relations Board (NLRB) has introduced new regulations that significantly expand the scope of joint employment, potentially increasing the shared liability of joint employers. This shift in policy could have far-reaching implications for businesses, particularly those operating on a franchise model.

Under the new rule, two entities can be found to be joint employers of a group of employees if they share or codetermine aspects of the employees’ terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. This means that the NLRB may hold both employers jointly liable for violations of employee rights under the National Labor Relations Act.

The Board’s expansion of the joint employer definition overrides and rescinds its 2020 rule, which previously provided a more narrow context for a business to be deemed a joint employer. The new rule drastically broadens the potential for holding businesses jointly liable for labor law violations.

For businesses that contract with third parties to provide labor or services, this new rule could pose a significant risk. In particular, businesses that operate on a franchise model could face increased exposure to liability. The new rule could potentially deem franchisors and franchisees as joint employers because they often jointly control or supervise employees.

In response to these changes, businesses should monitor this situation closely and consider seeking legal advice to fully understand the implications of the new rule. It’s crucial for businesses to review their current contracts and business relationships to ensure compliance with the new regulations and minimize potential liability.

In conclusion, 2024 promises to be a year of significant regulatory change for businesses. Staying informed and proactive in addressing these changes can help businesses stay compliant and avoid unexpected challenges.

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Jennifer comes from a discipline of Operations, including Finance and Technology. Having worked in operational and financial management for more than fifteen years, Jen has a distinct set of skills and is known for complex analysis of operations, finance, and technology to improve core business strategies.

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