Payroll Insights
December 21, 2021

It’s Groundhog Day all over again: The 2021 U.S. HCM compliance year in review

From ARPA to OSHA, Delta to Omicron, 2021 has been another serving of HCM alphabet soup.

Table of Contents

When I was asked about my plans for my annual year-in-review article, first I had to come to terms with the fact that 2021 is nearly over. I checked the calendar three times to assure myself it is truly December, then I began to plot the “highlights” of this article.

That’s when the writer’s block began.

In a year that feels almost exactly like the one before, what could I say that hadn’t already been said? In fact, I began to wonder just how much of last year’s article could remain exactly the same, perhaps with a few minor changes to state or statute names. Would anyone notice?

While I was procrastinating, I stumbled across a meme describing the feeling “when you realize it will be 2022 in one month and 2019 will be three years ago.” Ouch.

Still, while 2021 has been something of a slow blur, there have been a few “that’s so 2021” aspects.

Start as you mean to go on: Uncertainly

If the word of the year for 2020 was “unprecedented,” then I suspect the word of the year for 2021 was “uncertainty.”

As 2021 began, the primary source of compliance uncertainty and confusion was navigating which, and how much, of the previous year’s COVID-19 response efforts would be renewed, extended, or even completely redrafted for the year ahead.

Tax relief and leave entitlements that were expected to expire in December were still relevant and needed, leaving lawmakers working late into the holiday hours (and employers uncertain what would be required come January 1).

After considerable ado, FFCRA and CARES became the (record-breaking) 5,593-page CAA (later to be joined by the blissfully briefer 243-page ARPA). Both new laws paired further COVID-19 stimulus relief with a variety of temporary tax and benefits assistance. Somewhat surprisingly, while both laws extended available tax credit incentives for employers who provided qualifying paid COVID-related leave, neither law extended the 2020 requirements that covered employers actually provide such leave.

As the year progressed, an already confusing paid leave patchwork became all but unmanageable as some COVID-related leave mandates continued, some expired, some were renewed, some were made retroactive, and some, as noted above, were made voluntary.

At the same time, the qualifying reasons for taking leave evolved – first, expanding from needs specifically related to the employee’s illness to include those related to family members (including school and childcare closures). Later, as vaccines became available, then readily accessible, then approved for younger individuals, leave entitlements began to also cover employees’ vaccination and recovery to, most recently, employees’ minor children’s vaccines and recovery.

As 2021 wraps up, it appears likely that the new New Year will ring in with another theme of uncertainty, this time on the topic of vaccine mandates. OSHA, an agency with which some employers may have previously had only fleeting familiarity, has joined the DOL and IRS in the list of agency websites U.S. employers should bookmark and monitor frequently.

At the time I’m writing this article, three separate federal efforts to mandate COVID-19 vaccination in the workplace have been challenged in, and blocked by, federal courts. While it appears unlikely that these federal vaccine mandates will be resolved, let alone enforced, until well into the new year (if at all), state and local lawmakers are again stepping into the fray, with initial local mandates arising in New York City and Puerto Rico.

Minimum/subminimum wages

While not necessarily an uncontroversial topic, minimum wage increases do tend to be among the less volatile aspects of an annual compliance lookback. 2021 brought the usual rounds of scheduled increases and cost of living adjustments across numerous states and locals, with many increases occurring in July and more coming in January.

There were also a few unique minimum wage developments and trends in 2021. Hazard pay requirements arose for several industries and localities, offering additional support to frontline and essential workers who had not had the luxury of spending the past year being told they were on mute. Many states, including Colorado, Hawaii, and Washington, also eliminated subminimum wage provisions—exceptions that had previously allowed trainees and, most commonly, workers with disabilities to be paid a reduced wage. California will also phase out subminimum wages by 2025.

Another type of subminimum wage—wages that allow for tip credits (allowing employers to pay a reduced cash wage, then receive credit against the higher minimum wage for tips employees receive)—also experienced reforms in terms of identifying when employees can be considered qualifying tipped workers. For example, Maine significantly increased the minimum amount of tipped earnings an employee must earn per month to be considered a “service employee.” Federally, the resurrection of the “80/20” rule places limitations, including specific time limits, on the amount of time tipped employees may spend performing non-tipped work. An increase to the minimum wage for certain federal contractors and subcontractors also includes a gradual phasing-out of the tip credit.

Familiar territory—ban the box—with a twist

For each of the past several years, a few additional states and localities have joined the growing list of “ban the box” jurisdictions—jurisdictions in which employers are restricted or prohibited in requesting or considering certain criminal history information during the hiring process.

Illinois, Louisiana, Maine, and Pennsylvania joined this Ban the Box list in 2021, while states such as Rhode Island and Nevada joined the similar, smaller list of states prohibiting the request or use of certain wage history information during the hiring process.

Embarking on more rugged territory this year were Colorado, Connecticut, and Rhode Island. These states joined the much shorter list of jurisdictions with wage disclosure requirements in their hiring processes. For example, Colorado’s Equal Pay for Equal Work Act requires covered employers to proactively disclose compensation and benefits in job postings. Connecticut’s law is similar—requiring disclosure of wage ranges to applicants and current employees.

A separate new Connecticut law also enhances the state’s existing discrimination law by prohibiting requests for age information during the hiring process, including an easily overlooked bit of information that could readily reveal an individual’s age: dates of educational attendance/graduation.

By the way, employers considering a “Coloradans need not apply” workaround to these types of wage disclosure laws—probably shouldn’t.

Leave—not COVID

Now that we’ve taken a brief respite from discussing the C-word, let’s review the handful—truly, just a handful—of 2021 leave developments that weren’t specific to the pandemic.

Well, actually, it’s just one new voluntary paid family leave law (New Hampshire), one new paid sick leave law (New Mexico), and a developing local law (Allegheny County, PA). Washington D.C. also enacted recent amendments to their existing paid family leave program (snuggled into their annual budget process). These amendments will convert the District’s well-established paid leave program to a variable program with a new annual review process during which leave entitlements and, perhaps, the employer’s payroll tax contribution will adjust. The amendments are intended to better address budget surplus in the paid leave fund.

Otherwise, the paid leave landscape has been fairly dominated by, well, you know what.

Federal paid family and medical leave discussions also remain characteristically tangled up in uncertainty. The U.S. House of Representatives has passed a version of the Build Back Better Act that includes a paid family and medical leave benefit, but whether the provision will remain—and pass—in the Senate may be a question for 2022.

A cornucopia of miscellany

Finally, there are several 2021 developments that have not yet firmly defined themselves as compliance topics, but that will certainly shape workforce policy in the year(s) ahead. These include, but are far from limited to, the continuing-to-wander workforce, the Great Resignation, rising inflation, a volatile and stressed supply chain (including the supply of interested and available job candidates), and a nearly tangible shift in bargaining power in the workplace.

As the pandemic continued to, well, continue, many organizations had to postpone—or completely reconsider—anticipated worker returns to the office. Employers that had previously set firm deadlines by which displaced workers were expected to return to office locations often softened—or abandoned—these requirements. Meanwhile, in April 2021, a record 4 million Americans quit their jobs, with comparable metrics to follow in later months.

The relationship of remote work to The Great Resignation is a complex and multi-faceted one. Did employees quit their jobs in direct response to requirements to otherwise return to physical workplaces before they were ready or able (for example, due to conflicting child and family care demands)? Are more employees leaving their jobs because more remote opportunities (and, from that, more opportunities in general) are available? Are employers now shifting to offer more remote opportunities—or to a fully-remote workforce—in targeted efforts to retain and attract more workers?

What does seem clear is that remote work is no longer the exception or a temporary workaround to accommodate COVID.

We—and, more notably, lawmakers—still don’t have all the answers to the tax implications of the no-longer-temporary move to remote work. Meanwhile, new questions are arising as employees consider the mobility that reliably remote work can offer them.

For example, some workers began to consider—and ask—whether they could pick up their newly remote jobs and relocate, perhaps to be closer to family or to choose a lower cost of living area. For some employers, the response may be a (comparatively) simple matter of assessing new requirements when a Texas employee moves to Ontario. For other employers—let’s say, those in Silicon Valley—where an employee’s ZIP code has been a significant factor in setting compensation, the conversation is a difficult one to have in the best circumstances. Many organizations are likely to stumble on the way to finding the right balance.

For now, I’ll save discussion of location agnostic pay policies and whether ZIP code discrimination could be a trend of the future for a future forward-looking article or, perhaps, the 2022 year in review.

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