Regulatory Changes for Small Businesses in 2023

Expertise provided by:

• Robert Hambleton, BBSI Area Manager
• Kent Rice, BBSI Risk & Safety Consultant

As a business owner, you're no stranger to the challenges that come with running your own enterprise. From managing operations to staying ahead of the competition, you have a lot on your plate. However, there's one aspect that should never be overlooked: compliance with regulatory requirements. 

Business owners constantly face new regulatory requirements that demand their attention. But achieving compliance is not always easy, especially when you’re working with limited resources. Let’s dive in and explore which regulatory changes you should be on the lookout for and practical tips for preparing your business to meet these regulatory requirements.

Small Business Regulatory Changes 2023

Although there will undoubtedly be more proposals in the near future, there are currently four significant regulations every small business owner should know about.

#1 OSHA Enforcement Efforts

In 2023, the Occupational Safety and Health Administration (OSHA) announced new enforcement guidance “to make its penalties more effective in stopping employers from repeatedly exposing workers to life-threatening hazards or failing to comply with certain workplace safety and health requirements.”

These measures apply across general industries, agriculture, maritime, and construction sectors, and encompass the following enhancements to OSHA enforcement: 

• The authority to issue citations on a case-by-case basis for a wide range of violations.
• The discretion to avoid grouping violations, in some instances, ensuring enforcement actions have a stronger deterrent impact on employers.
• Revision of the Combustible Dust National Emphasis Program, signaling a heightened commitment to inspect facilities that generate or handle combustible dust. 
• The most significant increase in maximum penalties since 2016, with the maximum civil liability for each serious, other-than-serious posting requirement and failure to abate violation rising to $15,625 per violation. Furthermore, the maximum civil penalty for each willful or repeat violation has escalated to $156,259 per violation.

For small business owners, these enhanced penalties and enforcement measures could be particularly detrimental to their company's growth and sustainability. Even a single violation could potentially threaten the future of the business.

There are several steps you can take to avoid these hefty penalties. Start by preparing for inspections, creating action plans, utilizing training programs, and establishing safety protocols that foster a secure work environment. 

#2 Proposed Changes to Worker Classifications

In October 2022, the Department of Labor (DOL) proposed a new rule for worker classifications under the Fair Labor Standards Act (FLSA), potentially impacting 6.5 million small businesses and 22.1 million independent contractors.

The rule would govern federal minimum wage and overtime rules, using six economic reality factors to determine whether to classify the worker as an employee or an independent contractor. These economic reality factors include: 

1. Opportunity for profit or loss, depending on managerial skill
2. Investments by the worker and the employer
3. Degree of permanence of the working relationship
4. Nature and degree of control
5. The extent to which the work performed is an integral part of the employer’s business
6. Skill and initiative 

While the proposed rule is still pending, you should closely monitor these changes and understand their potential impact on your operations. 

The good news is that these changes could benefit businesses in the long run by transforming legally ambiguous topics into clear-cut matters. Clarifying the classification process will make sure your employees receive the benefits and legal protections they need. Plus, following these classification rules will help safeguard you from legal liability. 

#3 Proposed Changes to Salary Thresholds for Exempt Employees

The DOL is also expected to propose a new rule that would significantly increase the salary threshold for workers, specifically non-unionized administrative, executive, and professional employees, in order to be classified as exempt employees. These worker protections are meant to ensure employees are paid fairly for the work and hours they put in. 

This new rule would significantly increase the salary threshold for exempt employees who are not subject to minimum wage and overtime rules. The current threshold is $684 per week, but the proposal could raise it to $900 or even $1,000 per week ($46,800–$52,000 annually).

Because unions don’t cover these workers, they would need to meet the increased monetary requirement to remain exempt from minimum wage and overtime rules. Although this rule has not been finalized, as Fisher Phillips notes: “These potential changes would create additional steps for employers when it comes to reviewing their employees’ job duties and making determinations on whether they are still exempt from overtime pay.”

Before the rule is finalized, it’s a good idea to review your employee compensation data to determine which exempt employees fall within the $684 and $1,000 a week window and who may be impacted by future changes.

#4 Pay Transparency Laws 

In the last year, states like California and Oregon have introduced strict pay transparency laws. 

For instance, the California bill signed by Governor Newsom in September 2022 requires employers with 15 or more employees (including part-time employees) to disclose pay scales for positions published in job postings. 

Pay transparency laws are designed to promote visibility into pay scales and fair compensation practices. These laws are helping to build a more inclusive and diverse workforce for the future. 

Some of the new pay transparency law requirements include: 

• Providing current employees with the pay scale of the position in which they are currently employed, but only if they ask for it.
• Maintaining documentation of job titles and wage rate history for each employee.
• Submitting a separate pay data report disclosing the median and mean hourly rates within each listed job category by race, ethnicity, and sex (for employers with 100 or more workers hired through staffing agencies).

These laws are relatively new, so many employers may not fully understand their implications. On top of that, the specifics of pay transparency laws can vary by state, which can make it challenging for you to keep track of the requirements if you own and operate businesses in multiple locations.

By taking a proactive approach to pay transparency, you can not only avoid future headaches but also position your business as one that values transparency and fairness in the workplace. 

Why Compliance is Key to Long-Term Success 

Complying with all these regulations may seem like a daunting task, but the benefits are well worth it. By staying up-to-date with regulatory changes and taking proactive measures to make necessary changes, small businesses can unlock long-term advantages, including: 

• Averting financial and legal repercussions – Non-compliance can lead to expensive fines, penalties, and legal disputes, impacting your financial stability and tarnishing your reputation.
• Safeguarding your employees – Adhering to regulations helps promote the safety and well-being of your workforce, which reduces workplace accidents, injuries, or illnesses that could put your business in legal jeopardy.
• Maintaining competitiveness – Failure to comply with regulations could put your business at a disadvantage and harm your reputation, especially if competitors are abiding by the laws.  
• Fostering trust with stakeholders – Upholding regulatory standards helps establish trust among stakeholders, including customers, employees, investors, and regulators, which improves your public standing. 
• Securing long-term success – A successful business must maintain regulatory compliance to avoid costly errors, minimize risk, and position itself for growth and success.

Staying proactive and adhering to regulatory standards will minimize risks, enhance your reputation, and position your business for significant growth.

Partner With BBSI for Trusted Regulatory Compliance Expertise

With a seemingly endless stream of new regulations coming down the pipeline, small business owners must be informed and prepared. As experienced regulatory compliance professionals, BBSI can provide your business with tailored solutions that make managing HR, payroll, and benefits administration easy. With our team as your trusted partner, we can help you stay compliant with regulations and minimize risk.

Don't let compliance concerns distract you from running and growing your business. Contact BBSI today to learn more about our HR services.