5 new compliance & regulatory issues that small business will face in 2024
Small business employers need to understand the new laws and regulations that start in 2024 related to wages, taxes, loans, labor, and financial crimes. Regulations aim to enhance business practices, prevent exploitative or unlawful conduct, and shield employees. However, for small business owners, these new laws frequently impose additional bureaucracy, elevated expenses, and potential sanctions for noncompliance. In 2024, businesses will need to keep up with the impact of legislation and regulations to advance the employee experience, whether worker safety, workplace retirement plans, or an expected new overtime rule. Governor Newsom recently signed into law numerous bills that will affect California employers come January 1, 2024.
Registering with FinCEN Beneficial Ownership Reporting
To increase financial transparency and prevent money laundering, a new regulation called the Corporate Transparency Act will require around 32 million small businesses to register and provide information regarding the company and its beneficial owners with the Financial Crimes Enforcement Network (FinCEN) starting in 2024-2025. Treasury Secretary Janet Yellen said in 2022 that the act was intended to get a look inside shell companies and crack down on attempts by “criminals, organized crime rings, and other illicit actors to hide their identities and launder their money through the financial system.”
While larger businesses can qualify for exemptions, small companies with over 20 employees and $5 million in revenue cannot. Despite facing legal opposition, this policy is moving forward to compel disclosure of owner data, including photo IDs and home addresses. Small firms created after January 1, 2024 will have 90 days instead of 30 days to comply. Failure to register with FinCEN in time can warrant penalties up to $10,000.
National Labor Relations Board joint-employer rule
In October 2022, the National Labor Relations Board expanded its definition of a “joint employer” in a revised rule. Now, two associated companies sharing decisions about employees, like a franchiser and franchisee, can both be accountable for unfair labor practices. This applies to most private businesses under the National Labor Relations Act beyond just franchises.
Advocates argue it will help safeguard workers, but small business groups find it unduly onerous. Initially taking effect December 26th, pending Congressional and legal disputes have delayed the rule’s enforcement date to February 26th, 2024. Its broadened scope makes more businesses jointly liable for infractions, concerning some small firm owners but promising stronger protections for employees in the view of unions.
Wage and Hour Regulations
After public commentary, the U.S. Labor Department plans to soon announce a final overtime rule that will considerably raise the salary threshold for overtime pay eligibility. The rule will likely face legal disputes, as previous attempts under different administrations have. If enacted as proposed, the new weekly salary threshold would nearly double, impacting countless employees.
Even amidst uncertainty around timing, employers should prepare for potential impacts on budgets, payroll processes, and employee morale. Meeting wage and hour compliance across local, state and federal regulations already proves challenging, especially for multi-state businesses. Violations incur heavy civil fines under the Fair Labor Standards Act and other laws.
Minimum wage hikes take effect January 1st, 2024 in over 20 states, while Nevada’s increase hits July 1st. Some localities have eliminated tip credits and sub-minimum wages as well. Industry-specific requirements continue mounting in hospitality, retail and healthcare. Paychex, an HR software company reported that new California laws will raise minimums for all fast-food workers and healthcare employees. In mid-October 2023, a law (SB 525) was signed in California that gradually would raise the minimum wage for any employees working in healthcare to $25 per hour. This includes medical technicians, nursing aides, and custodians, to name a few.
Using California is just one example of the complexity of multi-tiered requirements that employers must track and understand to stay compliant with wage and hour laws and regulations.
With complex, multi-tiered wage and hour mandates, vigilant tracking is essential for employers to avoid penalties and operate legally. The forthcoming overtime rule signals further change.
OSHA/Workplace Safety rules
As workplace safety standards rapidly advance, OSHA and state agencies are bolstering requirements and enforcement. Employers must diligently follow updated regulations and potentially pursue extra training to avoid violations, with fines and thorough inspections on the rise.
For instance, a proposed federal OSHA rule could enable wider third-party accompaniment during evaluations, including non-employees with specialized knowledge. Separately, a rule taking effect January 1st, 2024 compels designated high-hazard industries like manufacturing and construction to electronically submit expanded injury data.
Various states have outpaced federal action on emerging issues like heat illness protections. California, Colorado, Minnesota, Oregon and Washington instituted heat standards, while California uniquely mandates workplace violence prevention plans in 2024 encompassing training, documentation and communication.
With exponentially growing oversight, employers should: proactively mitigate hazards before citations, closely track regulatory changes, evaluate current practices against new mandates, and invest in updated compliance training. Staying abreast of the rapidly developing safety landscape is essential to avoid enforcement actions.
New reporting requirement for small business loans
Small businesses often face a tough climb when it comes to securing loans, especially women and minority-owned businesses. In an effort to improve transparency and potentially combat discrimination, the Consumer Financial Protection Bureau (CFPB) proposed a new rule requiring banks to report data on small business loan applicants.
- Banks would report demographics and income of loan applicants, similar to the existing system for residential mortgages.
- This data would help identify potential bias or unfair lending practices by banks.
- Proponents hope it will lead to fairer access to capital for small businesses.
- Small business groups argue the reporting requirements will create cumbersome paperwork and unnecessary delays in the loan process.
- They fear it could discourage banks from serving small businesses altogether, limiting competition and further hindering loan access.
- Privacy concerns about the collected data have also been raised.
- Due to legal challenges, the rule’s implementation deadlines have been put on hold for now.
- The debate is likely to continue in 2024, and the ultimate fate of the reporting requirement remains unclear.
What to Watch Out For:
- Monitor developments in the ongoing litigation and any potential changes to the reporting rule.
- Consider how this potential requirement may impact your future small business loan applications.
- Stay informed about resources and advocacy efforts designed to improve access to capital for small businesses.
Ultimately, the goal is to find a solution that promotes transparency and fairness in the lending process without imposing undue burdens on small businesses. Only time will tell if the CFPB’s proposed data reporting will play a role in achieving this goal.