Business laws have been evolving rapidly in recent years. In California, state law AB5 dealing with workers in the gig economy created waves in many industries. But federal law has changed as well. In Washington state, entrepreneurs also need to be aware of the ways that legal changes may impact their businesses. Violating one of these new rules can have effects, even if it is done accidentally.
Some of the key changes to business law are about the way employees are classified. The nationwide PRO Act is designed to protect the right of workers to unionize. It also provides a test to determine whether someone is most properly classified as a contractor or an employee.
Typically, contractors are freelance and are not eligible for company-sponsored benefits like sick days or retirement plans. Since they cost less, companies are incentivized to misclassify positions as freelance and not full-time employment. The ABC test in the Pro Act is designed to protect worker rights.
Other changes to business law include clearly defining the threshold for classifying someone as a manager. Managers are exempt from the overtime payments that must be made to hourly employees. In the future, managers will have to make a minimum of about $36,000 per year to be classified as exempt from overtime. This requirement for a wage floor is expected to make big waves in the service industry.
These laws are changing quickly. That’s why it’s a good idea to follow this issue closely in the news. Many times, people read up on business law when forming a company. But that’s not the only time a business owner will require information about staying compliant with the law. Make it a point to look into this issue annually, at minimum.