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Updated: March 27th, 2020
The beginning of a new year is a time of change. That’s true for business owners who may set new goals for the year, and it’s also true of the laws that can impact your business. New laws affecting businesses that were agreed to and signed often have a delay before going into effect, and January is a popular month for starting.
For 2020, a wide range of federal and state laws or rules changes could impact small businesses across the country. Here are a few of the big ones you’ll want to watch out for:
The minimum wage rose in over 20 states at the end of 2019 or beginning of 2020:
The new hourly rate will vary depending on your state. These new employment laws could also wind up impacting businesses in neighboring states that share a border with one of the states that increased its minimum wage.
Several states (Connecticut, Illinois, Nevada, New York, and Oregon) and Washington, D.C. also have minimum wage increases later in 2020. The National Consumer Law Center has a table with each states’ current minimum wage and the planned changes.
In most states, there were significant tax changes that could impact small business owners or businesses themselves. These included changes to the individual income tax rates, corporate tax rates, sales and excise taxes, and new requirements for remote sellers.
The Tax Foundation has a guide to the changes that went into effect on January 1, 2020.
There’s no longer a federal individual mandate, and you don’t have to pay a federal tax penalty if you didn’t have health insurance in 2019. However, in 2020, California, Rhode Island, and Vermont joined Massachusetts, New Jersey, and Washington, D.C. in adding state-level individual mandates to their books.
Residents of these states may have to pay a penalty when they file their 2020 tax return (in 2021) if they didn’t have health insurance. As a small business considering this employment law change, you may want to offer health insurance (and highlight how it’s required) to attract and retain talent. You can choose from different types of group plans and stipend programs depending on your budget and needs.
The California Consumer Privacy Act (CCPA) is a state law that was passed back in 2018 and went into effect in 2020. Whether or not your business is based in California, you may need to comply with the law if you collect or sell personal information about Californians or conduct business in the state.
However, the new law only affects businesses that meet at least one of these criteria:
For many small business owners, the second point may be what currently (or eventually) requires them to comply with the law. For example, if you’re building an email list or customers can make accounts on your website, that could qualify as receiving personal information.
Complying with the law can be a complicated and expensive endeavor, as you’ll need to give California-based consumers a notice before collecting their personal information. Also, you need to add a “Do Not Sell My Info” link to your website or mobile apps, and have a procedure for responding to the consumer’s request to opt-out or have their personal information deleted.
The new business law is also still a work in progress and new requirements could be added. However, although the law went into effect, California can’t bring enforcement actions against companies before July 1, 2020.
Another new state law that could affect small businesses nationwide is California Assembly Bill 5 (AB 5). The law sets news standards for who businesses can hire as independent contractors and who they must hire as employees. It applies to businesses based in California and outside businesses hiring California-based workers.
The new employment law is being met with a big backlash by businesses and contractors (who’d prefer to remain contractors) alike. It may undergo changes, but in the meantime, look into the law if you’re based in CA or work with California-based contractors.
It’s not technically a law, but new U.S. Department of Labor rules went into effect on January 1 and impact who is eligible for overtime pay. Now, employees who make less than $684 per week—the previous limit was $488 weekly—are eligible for overtime when they work more than 40 hours in a week. The new weekly rate comes out to $35,568 annually for full-time employees.
The U.S. Small Business Administration (SBA) is no longer going to allow Women-Owned Small Businesses (WOSBs) or Economically Disadvantaged WOSBs (EDWOSBs) to self-certify. The new rules are expected to come into effect in July 2020.
Having WOSB or EDWOSB certifications can help these small businesses gain work by qualifying for set-aside and sole-source contracts. Once the new small business laws are in effect, you can still become certified by going through the free SBA process at certify.sba.gov or using one of the four approved third-party certification organizations.
Although you don’t need to proactively update your employees’ withholdings, know that the IRS released a new Form W-4 that you should offer new hires. For a small business, this employment law also means you could also encourage employees to update their withholding using the revised form to ensure they’re not having too little (or too much) money withheld from their pay.
While the new year is often when new laws affecting business come into play, that’s not always the case. New employment laws could impact your small business throughout the year, and newly passed laws may have a runway that gives you time to comply before they go into effect. You also want to keep an eye out for local laws or industry-specific changes that could impact your business but don’t receive wide news coverage.
Owning a small business and staying up to date on employment laws is essential. To stay ahead of upcoming changes, you may want to subscribe to newsletters from industry groups, join groups with other small business owners in your area, and regularly consult with an attorney and accountant.