With the potential economic slowdown, we have already seen layoff announcements in the last quarter of 2022 from big technology companies and the financial sector in particular. While we haven't seen as much of that for many mid-sized businesses here in South Carolina, as overall demand for workers is still pretty strong, there are several factors to keep in mind if you are considering a layoff.
Before making any layoff decisions or announcements, be sure to use valid, nondiscriminatory business criteria to determine who to lay off. Layoffs are more complicated than a typical termination of an employee because it triggers other laws and can lead to discrimination claims.
In response to a workforce reduction or layoff, many employers will offer a separation package to affected workers. In doing so, employers must comply with specific laws, like the Worker Adjustment and Retraining Notification (WARN) Act and the Older Workers Benefit Protection Act (OWBPA).
Most significant employment regulation today comes through Federal agencies like the Department of Labor, Federal Trade Commission and the Equal Employment Opportunity Commission (EEOC). Here are a few updates to note from the midterm elections:
One federal agency that employers probably interact more with than any other is the EEOC. With a Democratic advantage of 3-2 on the EEOC, typically, more aggressive action is taken on behalf of the EEOC, with more lawsuits filed against employers.
In the midterm elections, two more states approved ballot measures to allow recreational marijuana use. It's not yet legal in South Carolina, but it will be a topic in the General Assembly again this year, with growing support. One thing to point out here is that even if not legal in South Carolina, marijuana usage is growing, and employers must have a strategy for dealing with the issue, especially if you have workers spread out over several locations across the country or remote workers.
Two more states increased their minimum wage in the midterm elections. With inflation and wage pressure, the Federal minimum wage has become less and less relevant. The Federal and South Carolina minimum wage remains at $7.25 per hour. This is not an issue for most companies, particularly in the post-2012 economy. Theoretically, it could become an issue again if we go into recession and wages go down, but that seems unlikely.
We see more issues lately involving increased pay and how to handle that with the current workforce to avoid potential discrimination complaints around pay disparity.
Pay transparency has been an increasing trend seen across many states to address and fill the gender pay gap. New York City recently passed a pay transparency law, which:
It's unclear how this will impact employers not looking to hire in New York. Still, advocacy groups are trying to get companies to comply with the New York City law even if they are not explicitly targeting New York City or someone in that area, so keep that in mind.
One of the big employment buzzwords of 2022 was "quiet quitting," which referred to employees that put in the absolute bare minimum effort to keep their job and no more, likely holding out until they find something better.
It's unlikely, but it depends on the shape of the labor market and whether or not we go into a recession.
Everything in your traditional HR toolbox can help employers identify and address potential employee issues, like performance evaluations and monitoring employee performance.
In late 2022, we started to see this idea of flexibility fatigue. COVID ushered in a new era of remote work, and while many companies allowed remote work, bringing employees back into the office has been a big challenge for employers. It is creating tension between management and the workforce. HR managers complain about flexibility fatigue and want to deny requests for remote work and hybrid work situations. Be mindful and careful of the ADA, mainly with broad policies that say everyone has to be back in the office because many requests for remote work have some type of ADA component.
Companies increasingly use independent contractors (1099 workers) or freelancers to fill workforce needs. According to a McKinsey study, independent workers make up an estimated 36% of the U.S. workforce, up from 27% in 2016. Usually, you see these numbers decrease with any economic downturn, but the fact that it has increased during a strong labor market suggests a more permanent shift in business models. This is an area where employers need a strong agreement in place since it is not the same as at-will employment. With independent contractor agreements, employers should consider including specific details outlining the role, responsibilities and under what circumstances they can terminate the agreement.
Independent contractor misclassification has been an area on the Department of Labor's radar for quite some time. The new independent contractor test focuses on answering, "Is the worker economically dependent on the employer or in business for themselves?" HSB's Katie Busbee wrote a blog post outlining the factors to help employers determine a worker's classification in this new independent contractor test. Read more here.
The Federal Trade Commission has proposed a rule that would ban non-competes, which would require current non-competes to be rescinded. We discuss the proposed ban in more detail on our blog here.
PWFA is similar to the South Carolina Pregnancy Accommodations Act. It requires employers with 15 or more employees to provide reasonable accommodations to employees with conditions related to pregnancy and childbirth.
Employers are already required to provide reasonable time for employees to express milk/pump in an area other than the bathroom. The PUMP Act extends the period of accommodation for salaried employees from one year (FLSA) to two years (PUMP Act).
HSB's Chris Gantt-Sorenson outlines the details of each Act and highlights how it affects employers on our blog here: What do the PUMP Act and PWFA mean for employers?
The Speak Out Act was passed on November 17, 2022. The Act prohibits the use of nondisclosure and nondisparagement agreements in the case of sexual harassment and assault before a dispute arises.
To learn about the topics covered above, you can watch the full webinar recording here.