[YWH S1E15] Legislators gonna Legislate, New Laws for 2020
Would you rather watch paint dry, or study new employment laws for 2020? Personally, I’d prefer to do neither, however, business leaders need to be well versed in employment laws that govern the employees they lead. Ignorance of the law is no excuse. As one prepares for the end of 2019, one needs to add the review of 2020 laws to their to-do list. This feels like déjà vu as I just wrote about compliance 3 weeks ago, however, here we go again, a true testament to the ever-changing world of employment law. While there are many state specific changes in 2020 that one can review by researching their respective state’s department of labor website, the Federal Department of Labor Overtime Rule and California’s AB5 are two of the hottest topics.
Exempt workers in states that fall under the Fair Labor Standards Act (FLSA) have not had an increase in the weekly minimum threshold since 2004. According to the consumer price index (CPI) calculator available through the bureau of labor statistics (BLS) (https://data.bls.gov/cgi-bin/cpicalc.pl), there has been a 35% rate of inflation from November 2004 to November 2019, yet America’s exempt workers have not had a subsequent increase in the minimum weekly threshold. This means that under Federal Law, employers with employees that met the duties test for exemption AND were paid at least $23,660 annually would not have to pay overtime. Effective January 1st, 2020 that threshold increases to $35,568 per year forcing employers to either raise employee salaries to remain exempt from overtime or switch those employees to a non-exempt status making them eligible for overtime.
One year I ventured out after Thanksgiving dinner in an attempt to get a trampoline from Target that was featured in their Black Friday add. OMG! I thought the world had ended and I was witnessing Armageddon fist hand. I had never seen such chaos as people lost their minds over televisions, toys and the hot sale items for that year. I have never ventured out during holiday shopping since then, thank you online shopping! Listening to California employers talk about AB5 is reminiscent of that fateful Black Friday experience. It seems as though employers are losing their minds over this, yet the ABC test has been in effect since the Dynamex case in 2018, AB5 simply codifies it. Making the ABC Test a law would now require legislation to change that law, whereas if the ABC test were left as case law, a subsequent case could have changed it. I know many employers feel as though this is some sort of punishment, however, it is designed to protect both employees and employers because it provides basic employee coverages under workers’ compensation, proper taxation, proper pay and proper treatment of employees, lowering an employer’s overall risk due to claims and litigation. Having an employee misclassified as a contractor is very costly for an employer if it were challenged. Typically, those challenges occur when a “contractor” is injured during the course of work, or is dismissed from the job and files an unemployment claim. At present AB5 will also hamper the rapidly growing Gig Industry created by the likes of DoorDash and Uber. However, we’ll see how it shakes out in 2020 as there are already more than 50 industries exempt from AB5, such as licensed insurance agents and certain licensed health care professionals, however, being exempt from AB5 does not give an employer carte blanche as these contractors still fall under the Borello test.
Do the right thing, classify workers appropriately, pay those that work as they need to be paid and enjoy a prosperous 2020 and beyond!