January 15, 2023

HR challenges

Employers face ‘slew’ of new laws as year begins

Change in human resources laws and procedures have hit employers and their workers from multiple directions as the new year has gotten underway.

Suffice it to say that keeping up has been difficult even for companies with professional HR departments. Small companies that do it themselves may very well be unaware of what the new requirements are.

“As an employer, it’s hard to stay on top of employment law,” said Jeannie Valliere, co-owner of employment services firm HRX Services LLC, based in Greeley. Even though the year is still new, companies have stumbled as they’ve attempted to comply with new laws, or old laws that have new provisions for 2023.

Patricia Bellac, an attorney whose firm, Patricia S. Bellac Law Firm, based in Boulder, said from her perspective “the most transformative” laws affecting employers are changes to noncompete laws — which actually went into effect August 2022 — and the paid leave laws that affect compensation of employees. 

Patricia Bellac
Patricia Bellac

But those aren’t the only new impacts for employers and their workers. Others include compliance with the federal Consolidated Appropriations Act as it applies to health care and benefit plans, changes to the minimum wage, including overtime provisions, Colorado Secure Savings, and changes to laws affecting termination of employees.

A sampling of some of the provisions appear below.

FAMLI

Every employer in the state, except for those such as governments that are permitted to opt out, must now deduct money from their employees paychecks to cover future family-leave benefits. Employers with more than 10 workers are also required to contribute at least half of the amount required under the new FAMLI law, which voters approved in 2020.

While deductions began Jan. 1, benefits under the law will not be available until January 2024. That’s because the state wants to build up a fund that can be tapped in future years.

The money will assist workers who need to take time off for things such as caring for a new child or a sick family member. 

By now, all employees should have been notified; those notices were required prior to the start of this year. The program requires employers to register at FAMLI.colorado.gov. All employees except those working for governments that have opted out are required to pay into the plan — the employee share is 0.45% of pay. Employers pay a similar amount, unless the company has fewer than 10 workers, in which case the employer share can be avoided, although the employee share cannot.

Employers with private plans that meet or exceed the state plan can apply to use their plan and forego the state plan.

The rollout of the new family leave law in some cases has been rocky, Valliere said. 

“I work with several clients who ran their first payroll, and the FAMLI deduction was there,” she said. Others, notably those who work with third-party administrators, or TPAs, didn’t have registrations in place. In those cases, the payroll deductions didn’t occur. 

Consolidated Appropriations Act

The CAA is a federal law meant, in part, to provide greater transparency in health care and health insurance programs. 

It means a lot more paperwork for employers or expense if employers choose to use a third-party administrator to help navigate the system.

While the law required certain disclosure filings by the end of December, employers have received a grace period to comply until the end of January. The CAA runs about 5,600 pages, which was described by the U.S. Senate Historical Office as the longest bill ever passed by Congress.

Companies that offer employer-sponsored health plans are considered fiduciaries under the law and responsible for disclosing certain information.

Companies are responsible for several new provisions, including removal of gag clauses in health care agreements — clauses that insurance companies often put into plans to prevent the dissemination of certain rate and coverage data; for compliance with the Mental Health Parity and Addiction Equity Act that requires physical and mental health coverages to be treated equitably; for requesting information about compensation from third-party providers of services including brokers; and for reporting to the federal government of prescription drug usage and costs.

SHRM, the Society for Human Resource Management, provided guidance on its website that the CAA requires employers with health care plans to have access to cost and quality of care information from their insurance companies and provide employees with the ability to access that information.

In some cases, this would require rewriting service contracts with the insurance companies, although insurance companies would have been well aware that the requirements were coming. 

Group health plans have to disclose compensation paid to any broker who receives $1,000 or more.

The mental health parity requirement requires an assurance that access to care is treated similarly whether a claim is for a physical malady or involves mental health.

Finally, the law requires reports to multiple federal agencies about prescription drug benefits and drug costs. Some of this information may not have been available to employers under older contracts with insurers.

The massive law also contains provisions that don’t affect most employers and are somewhat well-known, including surprise billing rules and expanded access to telehealth, a remnant of the COVID-19 pandemic that has become normalized.

Attorney Bellac, who represents both employers and employees in her practice, said that over time, health insurance companies would likely be required to do this work for employers. “It’s better for the employer not to describe the plans; they’re not qualified to do so,” she said.

Minimum wage, including overtime rules

Most employers already know that the state’s minimum wage law already requires increases. Hourly workers are to receive a minimum wage of $13.65 beginning in January this year. The minimum for tipped workers is $10.63, and if tips don’t make up the difference between that wage and the $13.65, then employers are expected to make up the difference.

The thresholds for employers to avoid having to pay overtime to salaried workers have also changed, Valliere said.

To be exempt from overtime, salaried workers must meet two requirements: a duties and responsibilities requirement, such as supervising at least two other workers, and a minimum salary requirement. This year, that minimum salary is $50,000. 

“That threshold has continued to increase over the years,” she said. “In 2022, it was $45,000. This year it is $50,000. Next year it will be $55,000,” she said. After that, the minimum salary will adjust based on inflation.

Non compete laws

Bellac said that the ability to require noncompete agreements, in which an employee agrees not to go to work for a competitor, are among the biggest impacts on employers. The change in the state law occurred in August last year but is being felt as companies hire new workers.

“Any employer who wants to bind an employee to a new noncompete [to protect trade secrets] has to provide a separate notice — not just in the handbook — and provide a salary of $101,000 or more,” she said. The salary threshold is indexed to inflation.

If an employer wants to bind an employee to a noncompete to prevent solicitation of customers after an employee leaves the job, the minimum compensation is $60,750, she said.

The law provides criminal penalties and fines for attempting to scare employees into compliance with a non-legal noncompete, she said.

Valliere called the new Colorado noncompete law an “aggressive law.” She said the federal government is also targeting noncompete laws and may attempt to eliminate them nationwide. California already prohibits them.

“Too many employers impose these, and employees don’t realize they are being imposed wrong; it [noncompete agreements] can make it difficult to get new jobs,” she said.

Valliere drew a distinction between noncompete agreements and nondisclosure agreements. noncompete agreements can prevent employment for a similar company. Nondisclosure places the burden on the worker to not disclose protected information to a new employer.

She said the new noncompete rules are not retroactive so it applies only to new agreements. 

“I think it’s more straightforward now and clear when you should and shouldn’t use them,” Valliere said.

Wage theft, final paychecks, deductions, notifications

Multiple new rules apply when an employee leaves a company. 

In addition to information about COBRA insurance availability, employers now also need to provide specific notice about access to unemployment pay. Valliere said the Colorado Department of Labor and Employment provides a form on its website that employers can use to give notice that a departing employee has a right to apply for unemployment.

Because so many workers have been working remotely during and since the pandemic, often company equipment might be located offsite. Employers can deduct the cost of that equipment from final paychecks but must follow rules about notice.

If property isn’t returned, an employer has 10 days to give notice and adjust pay to accommodate. If the property is returned, the employer has 14 days to refund the money withheld, Valliere said.

The employer is penalized if the law isn’t followed.

Colorado Secure Savings

The secure savings law is meant to provide all workers with access to a retirement plan even if an employer does not offer one. It’s gotten off to a slow start, however. As of last week, the state did not have a website set up for employers to register for the plans, Valliere said. The law requires employers to auto-enroll their employees — employees can opt out — if five or more people are employed and the company has been in business for at least two years. To avoid, an employer has to demonstrate that an alternative plan exists, Valliere said.

“It’s a lot to read and comprehend for the employer. I’ve spent my whole life doing it, and it’s hard. I feel for employers. Employers don’t want to harm employees — nobody wants to be on that list,” Valliere said.

While companies such as HRX and employment attorneys are available to help employers navigate employment law, online resources also exist.

“The CDLE is there to help. It has a slew of resources on its website. If you call, they aren’t going to track your call; they are there to help explain the law,” she said.