Federal regulations are interpretations by administrative agencies of laws passed by Congress. Saying that regulations are becoming overwhelming is an understatement. In 2023 alone, Congress passed 247 laws, while agencies introduced 3,168 rules. For small businesses, keeping up with many of these rules is a significant burden. Additionally, state and local regulations add to this burden. Here are some recent regulatory updates that small businesses should be aware of.
**DoL’s Independent Contractor Rule**
In January 2024, the U.S. Department of Labor (DoL) issued a final rule that replaced an earlier rule from 2021 regarding independent contractor status. The new rule, which took effect on March 11, 2024, uses a six-factor test to determine whether a worker is considered an employee or an independent contractor for purposes of federal minimum wage and overtime pay rules.
Key points to note:
– The DoL rule does not apply to federal employment taxes.
– States have their own rules for determining worker classification according to state wage and hour laws.
– Several lawsuits are challenging the DoL’s new rule.
– There is a compliance guide available for small entities regarding this new rule.
**NLRB’s Joint-Employer Status Rule**
The National Labor Relations Board (NLRB) oversees rules that enable employees to form and manage unions. A new rule, originally set to take effect on March 11, 2024, introduced a joint-employer standard requiring a joint employer to collectively bargain with employees.
However, a federal district court stopped the NLRB’s new rule from taking effect. Under this rule, an entity would be considered a joint employer if it shares or codetermines essential employment terms and conditions with another employer’s employees.
Key points to note:
– The NLRB might appeal the decision, potentially leading to changes in a higher court.
– Without the new rule, the old standard from 2020 applies, which requires “substantial direct and immediate control” over essential employment terms for joint-employer status. This makes it harder to qualify as a joint employer under the old rule.
**IRS’s Voluntary Program for ERC**
During the pandemic, some employers claimed the employee retention credit (ERC) to help cover wages during business closures and downturns. However, some promoters falsely suggested that all small businesses could qualify for this credit. The ERC expired on September 30, 2021 (December 31, 2021, for startups), with amended returns allowed for three additional years.
The IRS has been scrutinizing ERC claims, both paid and pending. To help businesses correct erroneous claims, the IRS offered the Voluntary Disclosure Program (VDP) for employers who received payments before December 22, 2023. This program required repayment of the ERC minus 20% and ended on March 22, 2024.
Key points to note:
– Different procedures apply for those who received payments after December 21, 2023; they cannot use the VDP.
– The IRS continues civil and criminal investigations against promoters, potentially affecting small businesses that used these services.
**Conclusion**
Small businesses typically lack in-house legal departments or employment law attorneys, so it’s essential for owners to stay informed about regulatory changes. This can help them comply with new rules and avoid penalties. Owners can keep up with developments through trade associations and small business advocacy groups, like the NFIB and the SBE Council.
