NAPEO
For our May edition, I would normally say “Welcome to the Cap Summit issue!” but I’ll get to that in a minute. Instead, I’ll say “Welcome to the National PEO Week issue!” Thanks to the combined creativity of Kerry Marshall and the work of Thom Stohler to have it recognized, we are celebrating the first-ever National PEO Week during our PEO Capitol Summit, May 21- 27.
In recent years, NAPEO has seen growing threats to a PEO’s ability to offer large group health plans in Democratic-led states. For example, in New Mexico, this started in 2019 with PEOs receiving “a cease and desist” letter from the New Mexico Office of Superintendent of Insurance (OSI) for operating an illegal multiple employer welfare arrangement (MEWA).
A core mission of our state government affairs efforts is passing the NAPEO Model Act in every state. In states with the model act on the books, PEOs enjoy the benefit of operating in a fair regulatory environment that does not disadvantage PEOs and our small business clients simply because of the unique nature of the PEO business model. Kentucky is the latest state where NAPEO successfully worked to pass a Model Act thanks to the efforts of many members.
An increasing number of states and localities across the country have enacted laws expanding pay transparency requirements to even the employment playing field for women and persons of color. Up from several years ago, over 25 states and localities have enacted some form of pay transparency law that: (i) prohibits an employer from requesting or relying on salary history; (ii) requires employers to report salaries across different job descriptions; or (iii) requires an employer to disclose a salary range for any given position in a job advertisement or at various points in the application process or upon a reasonable request by the applicant.
The rise in remote work has brought new challenges. Sometimes, a client notifies its PEO that they are hiring an employee in a new state where the PEO might still need to be licensed. So, what should you do? Below are some key points to consider when a PEO does business in a new state.
Over the past few years, state and local governments have materially expanded the legalization of medical and recreational use of marijuana. While it remains illegal under federal law, most states have legalized marijuana use in a number of circumstances, presenting several practical problems for PEOs and staffing agencies— especially those that conduct workplace drug testing. Employers should become familiar with these laws to avoid legal claims from employees in 2023 and beyond.
The U.S. Supreme Court’s (SCOTUS) current term is already well underway, and there are several cases on the docket that will have important implications for PEOs. SCOTUS has already decided one workplace law case this term, and there are several remaining cases that will surely shape labor and employment law in 2023 and beyond. What do PEOs need to know about these recent and pending decisions and their impact on your clients?
Use of arbitration and class-action waiver agreements allows for the private resolution of employment claims on an individual basis. While arbitration is not a low-cost alternative, it can be a very strong hedge against runaway jury awards and swollen class-action damages.
The COVID-19 pandemic caused workplace safety to be viewed through a lens of magnified importance, but as the world regains a sense of normalcy three years later, many employers have placed it on the back burner. However, now is not the time for complacency in California, particularly considering Cal/OSHA’s vacillating view of PEOs.
As more and more states adopt paid family leave laws, the PEO industry is confronted with both challenges and opportunities as we adapt and manage these laws on behalf of our worksite employer clients. Like the Americans with Disabilities Act (ADA) or the Family Medical Leave Act of 1993 (FMLA) or the Occupational Safety and Health Act (OSH Act), and other laws that have been bestowed on us, we are in a great position to use what we have learned and accomplished over the years to handle the challenges brought on by state paid family leave laws.
Employee mobility and turnover continue to plague many employers. Naturally, this breeds concerns about what else might go out the door along with a departing employee. Implementing a strategy for protecting a PEO’s or client’s goodwill, business relationships, other employees, confidential information, and trade secrets is crucial. What an appropriate protective strategy should look like depends on numerous factors, and one PEO’s or client’s successful strategy might be disastrous or unworkable if simply duplicated elsewhere. Combined with the challenges of the ever-changing legal landscape of non-compete agreements and other restrictive covenants, many companies struggle knowing where to start.
As a result of the workforce evolution in recent years, remote, hybrid and onsite work has been redefined, and is a top-of-mind subject in daily conversations. Many companies and teams like ours at LandrumHR have an employee base geographically widespread throughout the U.S. In our case, this pre-dates the pandemic, but like these other companies we, too, are still evaluating the pros and cons to re-engaging teams physically onsite where and when possible, without causing disruption to workflow and requiring facilities (re)construct.
As we begin to close out the year and look ahead to 2023, one trend we believe should garner significant attention from PEOs is data protection and privacy, and the impact of new laws. Protecting data in this increasingly data-driven economy isn’t a new concept. However, when the new year rolls around, new legislation in California will take effect that will add a level of complexity to data protection efforts.
When writing his theories on evolution, Professor Leon C. Megginson said, “It is not the strongest or the most intelligent who will survive, but those who can best manage change.” The global business world continues to shrink for the modern employer, and change is inevitable. New business opportunities are just an email away. Employees want remote work options, and employers wish to find talent wherever they can. As businesses expand their borders regarding services and products, and evolve their internal company makeup, international barriers still exist- laws, language, and resources. However, enterprises view these obstacles as manageable. There are avenues to expand globally, and our clients are looking for those solutions.
As of the writing of this article, it appears that the Democrats will retain control of the Senate. The only question is whether their majority is 50-50 (with Vice President Harris breaking ties) or 51-49. That will be determined by the Georgia run-off between incumbent Sen. Raphael Warnock and challenger Herschel Walker. The House of Representatives will be controlled by the Republicans, though by a very slim margin. From a legislative perspective, with Republican’s controlling the House, President Biden’s remaining legislative agenda has little to no possibility of being enacted. Split control of Congress means that the only bills that will be enacted into law will have to be bipartisan in nature. This is another way of saying “expect gridlock” this session of Congress.
Earned wage access (EWA) is the increasingly accepted term referring to an employee’s ability to access a portion of earned wages in between pay periods. EWA is not a loan, but an advance payment on funds available in the employees’ next paycheck. Financial technology advancements have allowed for significant growth in EWA solutions. However, growing input from state and federal regulatory agencies suggests that PEOs need to carefully consider which solutions most closely adhere to regulatory guidance.
When a PEO offers a 401(k) plan to clients, the company becomes a fiduciary on the plan and assumes numerous ongoing responsibilities. This is not an employee benefit that can be set up and delegated in its entirety to the 401(k) service providers; as the fiduciary, you always have ultimate responsibility for the plan and for participant assets. The number of 401(k) lawsuits has grown in recent years, and as a result, you should select a combination of service providers that helps optimally protect the company from claims surrounding mismanagement of the retirement plan.
On September 7, 2022, the National Labor Relations Board (NLRB) released a Notice of Proposed Rulemaking (NPRM) that would update the requirements for whether a company is a joint employer under the National Labor Relations Act (NLRA). The NPRM proposes to rescind and replace the current final rule, entitled “Joint Employer Status Under the National Labor Relations Act,” that took effect on April 27, 2020.
As more and more states legalize the use of cannabis for both medical and recreational purposes, worker advocates have increasingly pushed for corresponding employment legislation that protect employees’ right to use cannabis without the fear of adverse employment action. This is a growing area of the law that can create real compliance challenges for PEO clients on issues ranging from hiring decisions to workplace drug testing.
As PEO industry professionals serving our companies and our customers, it is prudent to have an introductory knowledge about ESG, consider reasons why our industry should pay attention to ESG, identify ways you can help further ESG initiatives within your own organizations, and aid your customers in doing the same. While the aspects of ESG covered here easily merit separate articles or hour-long webinars, this article will serve as a primer and cover ESG ideas at a high level.
As the industry continues to grow, we will continue to expand our lobbying presence in Washington. Ramping up our efforts and resources will be necessary to meet the challenges presented to PEOs. The hiring of Mehlman has, and will continue to, helped NAPEO and the PEO industry navigate the many challenges that await.
The past few years set the stage for significant upheaval in the regulatory landscape for employers across industries and localities. COVID-19 sent certain regulatory agencies into high gear as they rushed to introduce new policies to meet the unique moment. But the pandemic wasn’t the only factor that reshaped the business landscape. Heading into 2022, concerns around equity, security, privacy, benefits access, and other larger issues took center stage, changing long-held practices at small and large businesses alike—and more of these changes are in the pipeline.
The PEO industry has made great strides in recent years in raising public awareness in large part due to NAPEO’s industry marketing efforts. While the future seems bright, it is unfortunate that still many people do not have a clear understanding of what PEOs are all about. Regrettably, many legislators and regulators fall into this category which is why industry advocacy is so very important.
Just as the pandemic seems to be at a manageable point and you think you can breathe easy for a bit, it’s time for you to gear up for the next wave of workplace troubles. A confluence of several events will likely lead workplaces across the country to face a wave of employment litigation at the end of 2022 and well into 2023. What forces are leading to this inevitable future, what will it look like, and what should PEOs do to prepare?
