December 14, 2017

The top HCM compliance issues to watch for in 2018

The HCM world has seen a flurry of recent compliance changes that will continue into 2018. Employers should start planning their responses to this changing landscape over the coming year. We’ve put together a summary of major HCM compliance issues and trends we believe will be important to employers in 2018.

Tax Reform is Coming

Employers should anticipate major tax reform changes in 2018. Congress’s latest tax reform package, H.R. 1, the Tax Cuts & Jobs Act of 2017 (TCJA), passed the U.S. House of Representatives and the U.S. Senate in late 2017. It will have a major impact on businesses if both houses can reconcile the differences in their tax bills in time for President Trump to sign it into law in late 2017 or early 2018.

Although no final decisions have been made while the House-Senate Conference Committee on Finance works on reconciling the differences between the two tax bills, we expect several key reforms will impact employers, including:

  • Changes to the federal withholding structure and tax calculation tables
  • Elimination of the employee tax exclusion for adoption assistance programs
  • Elimination of the employer deduction for qualified transportation fringe benefits
  • Rollback of the Affordable Care Act’s individual mandate
  • An employer tax credit for paid family leave benefits to qualifying employees
  • Changes to 401(k) hardship withdrawal rules
  • A favorable reduction in tax rates for pass-through entities
  • A reduction in the corporate tax rate from 35% to 20%
  • A repeal or modification of the corporate alternative minimum tax
  • The ability to immediately expense certain asset purchases
  • A complete overhaul of international tax structure

For additional background on tax reform, see parts one, two and three of our tax reform blog series.

Expect Strict Enforcement of Immigration Laws

Employers can expect to see increased enforcement of U.S. immigration laws because the Trump administration sees it as a top priority. In October 2017, Tom Homan, Acting Director of the Immigration and Customs Enforcement agency, reportedly said that he had instructed his agency to dramatically increase the number of I-9 audits targeting U.S. employers.

This increase in I-9 enforcement could lead to significant fines and workforce losses if employers are not closely monitoring their hiring processes. Civil penalties for I-9 violations can range from $100 to $1,100 per violation, even when omissions and mistakes are unintended.

Employers should review their hiring procedures and immigration policies to ensure compliance with U.S. immigration requirements relating to employee identification verification and employment authorization. Employers should also take steps to ensure that their employees are not discriminating against individuals on the basis of national origin, immigration status, or citizenship.

Leave Laws are Here to Stay

Employers can expect the trend around offering more paid leave to employees to continue in 2018. As of December 2017, eight states, the District of Columbia, and many local jurisdictions guarantee paid sick leave for workers.

In 2018, laws requiring employers to provide various forms of leave are going into effect in California, Nevada, New York, Oregon, Rhode Island, and Washington State as well as New York City.

Employers are becoming increasingly concerned with the myriad of complex state and local leave laws that are popping up all around the country. At least one member of Congress, Rep. Mimi Walters (R-Calif.), is trying to make leave laws easier on employers with the Workflex in the 21st Century Act. The bill proposes to give employers the option to offer paid time off and flexible work arrangements. The bill also seeks to pre-empt all state and local paid leave laws.

For now, employers should closely watch proposed leave laws that may impact them. Large employers and employers with workers in multiple locations will need to make sure they have a comprehensive solution in place to comply with an increasing number of complex and inconsistent leave laws.

Curbing Sexual Misconduct in the Workplace

Reducing sexual misconduct in the workplace is likely to continue to be an important issue for employers in 2018.

Many state laws prohibit sexual harassment and discrimination in the workplace, and legislation is being introduced at both the state and federal level to strengthen these types of laws in light of recent news, including the resignations of three members of Congress over allegations of sexual misconduct.

For example, California requires large employers to provide harassment prevention training to supervisors. At least one California senator has also promised to introduce legislation to ban secret settlements in sexual assault, discrimination, and harassment cases. Democratic Congresswomen have also introduced legislation at the federal level to combat harassment on Capitol Hill. We may see other similar laws introduced as the #MeToo movement continues to gain momentum.

Employers should take steps to prevent sexual harassment in the workplace, which may include reviewing anti-harassment policies. In November 2017, the Equal Employment Opportunity Commission issued informal guidance on policies it recommends employers put in place to prevent harassment. Employers should consider following these best practices when handling allegations of sexual misconduct, and review their current policies related to sexual harassment training, reporting and investigation procedures to ensure complaints are properly handled if the need arises.

Look for a New Proposed Federal Overtime Rule

After a series of setbacks in 2017, the U.S. Department of Labor (DOL) is expected to develop a new overtime rule that will increase the minimum salary threshold for exempt employees. This has the potential to push U.S. employers to consider increasing wages for tens of thousands of workers.

In the fall of 2017, the DOL sought feedback on a potential new rule by issuing a Request for Information that asked for the public’s opinion on:

  • multiple salary thresholds by employer or state
  • different salary thresholds for executive, administrative and professional exemptions
  • automatic updating of the salary threshold on a periodic basis

For additional background on the state and fate of the overtime rule, read our earlier post, Texas Judge Blocks Obama-Era Overtime Rule Nationwide.

Salary History Inquiries are Going to be History

Many jurisdictions are passing laws banning salary history questions and requiring employers to pay employees equally regardless of gender. California, Massachusetts, Puerto Rico, and San Francisco, CA, are all passing salary history and/or equal pay laws in 2018.

Employers should consider reviewing their current hiring practices to ensure that they are not asking about or relying on salary history in states and localities that ban them. Employers may also want to train recruiters and hiring managers about how salary history and equal pay laws may impact their recruiting practices.

For additional background on pay equity and salary history laws, read our earlier post, Equal Pay and Salary History Inquiries: Burning Questions Answered.

Minimum Wages are on the Rise

Minimum wage rates in 22 states, the District of Columbia, and the U.S. Virgin Islands are set to increase in 2018. Most of these increases will occur on January 1, 2018. Minneapolis, Minnesota is going to raise the minimum wage of most employees within its city limits, and Cleveland, Ohio is going to raise the minimum wage of its city employees.

Minimum wage has been a hot topic nationally for several years now, and states, counties, and cities are all going to continue to write new minimum wage increases into law in 2018. Employers should consider reviewing their pay policies to ensure that they are in compliance with the complex web of minimum wage rates that are likely to impact their businesses.

To stay up to date on minimum wage rates, employers should visit our State Summaries and Charts page.

Related: The Seven Biggest HCM Compliance Issues of 2017

Emerson Beishline

Emerson is Compliance Counsel at Ceridian with many years of experience in U.S. and international legal research and writing. In his current role, Emerson tracks U.S. and international employment legislation impacting Ceridian products, works closely with development teams to integrate compliance changes into the company’s Dayforce HCM software, and conducts legal research as needed. 

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