As we approach the new year, it's crucial to stay informed about the latest developments…
Here are some state-specific updates on laws that could affect your business, along with the latest ERTC and other government information:
California Statewide Right of Recall
California Gov. Gavin Newsom signed Senate Bill 93, effective immediately, which requires covered employers to offer employees laid off due to COVID available jobs based on a preference system. The ordinance applies to hotels; private clubs; event centers; airport hospitality operators; airport service providers; and building services to office, retail, or other commercial buildings.
Under the new law, employees who were employed by the employer for six months or more in the 12 months preceding Jan. 1, 2020, and whose most recent separation from active service was related to COVID, must be offered jobs the employees are qualified for first before the employer hires new employees. To be qualified, laid-off employees must have held the same or similar job at the time of layoff, and among other things, they must be given five business days to respond to offers of reemployment. The bill will sunset on Dec. 31, 2024.
Illinois Background Check Compliance
On March 23, 2021, Governor Pritzker signed into law new requirements for background checks in Illinois that take effect immediately. Overall, the changes made impose many new requirements on employers if they decide to take adverse action due to an employee’s background check. Those new requirements can be categorized into three areas: (1) adverse action requirements; (2) pre-adverse action notice requirements; and (3) post-adverse action notice requirements.
- Adverse Action Requirements
If an employee has a criminal record, an Illinois employer cannot take adverse action based on that record unless (1) there is a substantial relationship between the prior criminal offense and the employment sought or held, or (2) granting or continuing employment would involve an unreasonable risk to property or to the safety of specific individuals or the general public.
- Pre-Adverse Action Notice Requirements
After an employer determines that the conviction disqualifies the employee for the position, the employer must follow new pre-adverse action notice requirements that are in addition to the Fair Credit Reporting Act (“FCRA”) notice requirements. This new notice to the employee must include:
- notice of the disqualifying conviction(s) that are the basis for the decision and the employer’s reason for disqualification;
- a copy of the conviction history report (if one exists); and
- an explanation of the employee’s right to respond to the notice before the decision becomes final.
The notice must inform employees that their response may include, but is not limited to, the following: submission of evidence challenging the accuracy of the conviction record, or evidence of mitigation including rehabilitation. The employer must provide the individual at least five business days to respond and must consider any response before such decision becomes final.
- Post-Adverse Action Notice Requirements
The new law also adds a post-adverse action notice requirement, which again is in addition to the FCRA requirements. Following any final decision disqualifying an employee the employer must notify the employee, in writing, of the following:
- the disqualifying conviction(s) that are the basis for the final decision and the employer’s reasoning for disqualification;
- any existing procedure for the employee to challenge the decision or request reconsideration; and
- that the employee has a right to file a charge with the Illinois Department of Human Rights.
Kentucky COVID-19 liability shield law
On April 11, COVID-19 liability shield legislation became Kentucky law without Democratic Governor Andy Beshear’s signature. Retroactive to March 6, 2020, S.B. 5 will protect business owners against COVID-19 liability except where there is gross negligence, or wanton, willful, malicious, or intentional misconduct.
New Mexico Paid Sick Leave
New Mexico Governor Michelle Lujan Grisham on April 7 signed into law the “Healthy Workplaces Act” (H.B. 20)— a measure guaranteeing paid sick leave to New Mexico workers. The law applies to private employers with at least one employee and becomes effective on July 1, 2022.
Under the HWA, employers must allow employees, including part-time, seasonal, and temporary workers, to accrue earned sick leave (ESL) at a rate of one hour for every 30 hours worked. Employees may use up to 64 hours of ESL per 12-month period. ESL must be paid at the employee’s regular hourly rate. Employees may carry over any accrued, unused ESL; however, “an employer is not required to permit an employee to use more than  hours in a -month period.”
As an alternative to the accrual process, the HWA permits employers to frontload ESL by granting the full 64 hours to employees on January 1 of each year (or a prorated amount for employees who begin employment after January 1). While the statute does not specify whether frontloading ESL relieves an employer of carryover obligations, future regulations may answer that and other outstanding questions.
However, if an existing PTO provides “an amount of [ESL] sufficient to meet the accrual requirements of the Healthy Workplaces Act”, “that [policy] may be used for at minimum the same purposes and under the same terms and conditions.” However, the sick leave required by the HWA is “in addition to any paid time off provided by an employer pursuant to a collective bargaining agreement unless that paid time off provided may be used for the same purposes and under the same terms and conditions as the Healthy Workplaces Act.”
OSHA Reporting for Vaccine Reactions
As COVID-19 vaccines become widely available, many employers are asking if they can require employees to get vaccinated, and what they can do if workers refuse. Some employers are even firing workers who won’t take the vaccine.
To encourage more widespread vaccinations, President Joe Biden highlighted a paid-leave tax credit for employers that provide full pay for employees who take time off to get and recover from a COVID-19 vaccination. Available to organizations with fewer than 500 employees, the tax credit covers up to $511 per day for each vaccinated employee and is funded by the American Rescue Plan.
On April 20, OSHA issued guidance regarding employers’ obligation to record adverse reactions to the COVID-19 vaccine. The guidance, which is a Q&A, clarifies that if an employer adopts a mandatory vaccination policy, an adverse reaction to the COVID-19 vaccine is recordable on an employer’s OSHA 300 log if the reaction is: (1) work-related; (2) a new case; and (3) meets one or more of the general recording criteria set forth in 29 C.F.R. 1904.7.
According to the guidance, if an employer requires employees to be vaccinated as a condition of employment (i.e., for work-related reasons), then any adverse reaction to the COVID-19 vaccine is work-related. Therefore, the adverse reaction is recordable in the OSHA 300 log if it (i) led to the employee missing more than one day of work; (ii) required medical treatment beyond first aid; or (iii) resulted in restricted work or transfer to another job. Employers that recommend the vaccine, but do not require it, do not need to record adverse reactions.
On the other hand, as more become vaccinated, employers are considering lifting mask mandates. Employment law attorneys caution employers not to move too quickly.
ERTC Changes – Q3 and Q4 2021
- Beginning in the third quarter of 2021, the following modifications apply will apply to the ERTC:
- Applicable employment taxes are the employer’s share of Medicare (also called hospitalization insurance or HI) taxes (equal to 1.45% of the wages) and the amount of the tax under the Railroad Retirement Tax Act payroll tax that is attributable to the employer’s HI tax rate. For the first and second quarters of 2021, ‘‘applicable employment taxes’’ were defined as the employer’s share of Social Security tax (equal to 6.2% of the wages) and the amount of the tax under the Railroad Retirement Tax Act payroll tax that was attributable to the employer’s Social Security tax rate.
- Recovery startup businesses are qualified employers. A recovery startup business is generally a business that began operating after February 15, 2020, and that meets certain gross receipts requirements. A recovery startup business will be eligible for an increased maximum credit of $50,000 per quarter, even if the business has not experienced a significant decline in gross receipts or been subject to a full or partial suspension under a government order.
- A ‘‘severely financially distressed’’ employer who has suffered a decline in quarterly gross receipts of 90% or more compared to the same calendar quarter in 2019 will be able to treat all wages (up to the $10,000 limitation) paid during those quarters as qualified wages. This rule will allow a large employer (i.e., an employer with over 500 employees) under severe financial distress to treat those wages as qualified wages whether or not its employees actually provide services.
- The statute of limitations for assessments relating to the ERTC will not expire until five years after the date that the original return claiming the credit is filed or treated as filed. For example, if the Form 941 for the fourth quarter of 2021 claiming the ERTC is treated as filed on April 15, 2022, the return could be audited with respect to the ERTC as late as April 14, 2027.
Furthermore, employers have until July 19, 2021 to submit two years of EEO-1 Component 1data. Recognizing the continuing differential impacts of the pandemic on workplaces nationwide and the requirement to submit two years of EEO-1 Component 1 data, the EEOC is extending the data collection period this year from 10 weeks to 12 weeks to provide employers additional time to file. Employers should begin preparing to submit data in anticipation of the July 19th filing deadline.
Under the Biden administration, the Office of Federal Contract Compliance Programs (OFCCP) likely will have a renewed focus on wage and hour data and pay discrepancies among federal contractors. Hiring discrimination will also be a priority issue.
Lastly, in our previous update we erroneously stated that the deadline for filing the ERTC for 2020 is May 17th, but this date is simply suggested as federal taxes are due on that date. You still have plenty of time!!