If you’re running a business, you know 2023 is a struggle. As the global economy slows, many small businesses are seeing a drop in demand.
Inflation is high, and will remain. A tight job market makes it difficult to find good talent. Well, here’s some more bad news: The federal government is about to throw another punch in this fight, and it’s going to fall flat on its face.
This is because there will be a group directive in 2023 that will make it harder for small businesses to stay in business.
Staffing is changing: As I’ve written about here before, a new worker classification rule is coming from the Department of Labor (DOL) that will have a significant impact on the way businesses of all sizes determine whether an employee is an employee or an independent contractor. The definition includes many things, but the most important is whether or not the employee is “an integral part” of the business. This means that if an independent contractor is providing services that contribute to the company’s products and services, that person must be classified as an employee, bringing with them the rights, benefits, and additional taxes that come with that classification. This legislation will affect countless small and medium-sized businesses.
Mandated overtime pay includes: Since last year, the DOL has been making changes to the current overtime regulations. Currently, most salaried employees who do not supervise others and perform some administrative duties are not entitled to overtime pay if they work more than 40 hours per week and earn $35,568 per year. The DOL may raise this salary limit to $80,000 per year – although it may be lower. Regardless, this looming rule change means that your highly paid employees will soon be entitled to overtime pay, adding another religious and financial challenge to your payroll. Look for this change to happen this year.
Non-competition agreements shall be waived: Do your employment agreements contain a clause that prohibits an employee from working for a competitor in a certain geographic region if they leave your company? Although this practice has been repealed or limited in some states, others still allow the practice for non-hourly or highly compensated employees.
Thanks to non-compete protections, businesses can use this controversial power tool to restrict a disgruntled employee from working with a competitor and taking trade secrets and customer details with them. Unfortunately, the device will be removed soon. The Federal Trade Commission has now enacted legislation (which could be finalized this year) banning this practice nationwide.
Severance charges are now reduced: Want to get rid of an angry or underperforming employee who is giving up on talking trash about your company to their friends and following them online? You can still tie that person’s severance pay to their silence, protecting your brand from inappropriate criticism from an angry employee. The National Labor Relations Board (NLRB) recently ruled that severance pay cannot be tied to a terminated employee’s silence. So, no matter what a disgruntled ex-employee wants to say (true or false), you now have less protection against a negative reaction.
Associations at your workplace are easy to organize: Severance pay isn’t the only thing our friends at the NLRB have done. Earlier this year, the board allowed small groups of workers in businesses to form “minor unions.” This will likely cause more grief for business owners and make it more difficult for companies with unions to bargain collectively.
But that’s not all. In addition to the “minor union” rule, the Board ruled that employers must compensate workers for “direct or foreseeable” damages caused by unfair labor practices. The board prohibits employers from evicting workers engaged in union-related activities from their property unless the workers “substantially interfere” with the use of the property or there is another “legitimate business reason.” That doesn’t sound too disturbing, does it?
These are not just new rules, but you get the point. Current Labor Secretary Marty Walsh is leaving to focus on hockey and could be replaced by Julie Sue pending Senate approval. Business owners should take no comfort in this matter. Sue is a former California Secretary of Labor and is known for being an avid supporter of all of the above legislation, and has faced opposition from trade groups for implementing California’s AB5 labor classification law and other positions.
This year, businesses are reeling from rising prices, a looming recession, a tight job market, and a lot of uncertainty. Will these extra regulatory fists help them grow, create jobs and invest? Or will it cause them to reduce the number of employees and their compensation? To ask is to answer.
Gene Mark is the founder of a small business consulting firm. He appears frequently on CNBC, Fox Business and MSNBC.
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