The news cycle is often hyper-focused on policy developments at the federal level, which can easily create blind spots for small business owners at the state and local levels. While federal rules and regulations are important, they do not diminish the importance of state or local regulations. Entrepreneurs need to be just as aware of their own state legislature and municipal governments as they are of the U.S. Congress and White House.
Cities and states largely operate independently of the federal government, albeit within the confines of federal law, and can act to pass new regulations and measures regardless of Congress' focus. Mike Trabold, compliance director at Paychex, told Business News Daily that it's critical for entrepreneurs to remain aware of what's going on in the broader regulatory environment.
"A lot of states and cities [are starting] to gear up to make some changes for [deregulation] they anticipate at the federal level," he said.
Nearly two years into the tenure of the Trump administration, cities and states have enacted their own rules to either compensate for or parallel the policy of the deregulation emanating from Washington, D.C. Here's a look at some of the major trends in states and cities across the country, and what entrepreneurs should understand about each.
Minimum wage increases
One of the most common local and state policies in recent years has been to increase the minimum wage. While the federal minimum wage today stands at $7.25 per hour, it is significantly higher in many states and cities. Some cities have required a minimum wage of $15 per hour. Wage increases have been mandated by New York City, Chicago and San Francisco, to name a few. As the federal minimum wage remains level, more city and state increases should be expected, said Carol Wood, people operations director at employee scheduling software company Homebase.
"With the absence of any federal minimum wage increases, it's likely we'll see more attempts to increase the minimum wage locally or eliminate the tipped minimum wage," Wood said.
However, the future of minimum wage hikes in many areas remain uncertain.
"Interestingly, this fall, the D.C. City Council will consider a measure to repeal the $15 minimum wage bill passed by voters this past spring," Wood said. "Likewise, Michigan just approved an increase to the minimum wage … with the plan to repeal them in a subsequent legislative session. That way, they can avoid the measures going on the ballot, where they'd need three-fourths of the legislature to repeal the increase. Between the D.C. City Council's move and the Michigan legislature's, additional local minimum wage laws have a cloudy future."
Data privacy and security
The European Union's General Data Protection Regulation (GDPR) is coming ashore. California recently adopted the California Consumer Privacy Act (CCPA), which is its own version of a consumer data privacy law. These laws aim to protect consumer data collected by companies by imposing rules about transparency, data sharing, and the management of consumer data.
In some cases, businesses that collect consumer data could be on the hook for compliance issues if a third-party company mishandles that data on their client's behalf. This has led to an influx of requests to small businesses from their clients that are subject to the laws, even if they themselves do not collect consumer data.
"Small businesses are getting requests from big companies asking them how they're complying with rigorous cybersecurity rules, and that's been a challenge," Trabold said. "A lot of SMBs [are] not always well suited to comply with [these rules]."
As states and cities adopt more data privacy and security measures, businesses will have to become increasingly aware of each measure in jurisdictions where they do business. These laws typically cover the users in a given region, so even if your company doesn't operate there, it will be on the hook for any user data it collects from IP addresses in that location. Being aware of the rules and how strict they might be is essential to avoiding big fines that could ultimately be fatal.
Sexual harassment policies and training
In the wake of the #MeToo movement, states and cities are rapidly expanding regulations surrounding sexual harassment training and policies. New York and Delaware are among the states that have passed laws with specific training requirements, while New York City and other cities have moved to tighten policies surrounding aspects like disclosure, channels through which to escalate complaints, and tighter penalties for violating sexual harassment policies.
"We've seen a bunch of states either pass or contemplate some very specific targeted incremental regulatory requirements related to [sexual harassment]," Trabold said. "That's a trend that has started to snowball a little bit and have a direct impact on businesses."
Pay equity legislation
Under the Obama administration, the Equal Employment Opportunity Commission (EEOC) issued new federal requirements for pay equity and salary reporting by businesses. The measure would have required companies with 100 or more employees to submit pay data based on their workers' W-2 earnings. However, last year, the pay data collection rules were suspended for review by the Office of Management and Budget.
Still, pay equity legislation is moving forward at the local and state levels. States including California, Maryland, Massachusetts, New York and Oregon recently passed laws expanding employer obligations and penalties regarding equal pay, especially surrounding gender pay disparities. These laws often impact smaller businesses than the federal rule change would have, Trabold said.
"At the federal level, reporting was only for 100-plus employees, but a lot of the state- and local-level ones are really for all businesses," he said. "It's [often] a pretty low threshold, so most or all businesses will have to do this type of reporting."
Paid leave laws
Another big push in local and state governments has been for paid sick and family leave laws. Today, 45 states and localities have adopted paid sick leave laws, while five states have adopted paid family leave beyond the purview of the federal Family and Medical Leave Act.
A major concern surrounding these laws is their patchwork nature from location to location, Trabold said. Some are just paid sick leave, and some are paid family leave. This opens questions of which employees are eligible, whom it applies to, differences around record keeping and so on, especially for employers with multiple locations.
"For example, in California, there are closely situated cities that have these requirements," Trabold said. "So, if you run a pizza place that has a number of locations in these cities with somewhat different requirements, do you adopt the most generous, or just have each location abide by [the] particular requirement of [the] city you're located in?"
In New York, a measure to expand paid leave to include 12 weeks of bereavement leave is on Governor Andrew Cuomo's desk awaiting his signature. If signed, it would bolster the existing paid leave laws on the books in the states.
Some multilocation employers in localities with paid leave laws simply abide by the most stringent rule, regardless of which one applies where. Others alter operations from location to location based on standing regulations.
Healthcare reform is a topic long discussed on Capitol Hill, but Republican efforts to "repeal and replace" the Affordable Care Act have thus far stalled. Whether spurred by the uncertainty of federal action or just the general complexity of healthcare policy, lower layers of government are often spearheading projects of their own.
"There's tremendous ambiguity [on healthcare policy] at federal level," Trabold said. "States in reaction and anticipation are going out and doing their own things that employers might have to react to or be aware of."
These laws and proposals include attempts to gain greater latitude when it comes to ACA mandates, such as in Massachusetts; proposals to shore up markets, as in Minnesota and Alaska; or proposals for single-payer healthcare systems, oft touted by the progressive wing of the Democratic Party. Integral to these efforts is Section 1332 of the ACA, which allows states to apply for waivers from specific ACA requirements; waivers are intended to encourage experimentation and innovation on healthcare policy.
State collection of online retailer sales tax
In June, the Supreme Court decided in South Dakota v. Wayfair to close a sales tax loophole that disallowed states from collecting sales tax from out-of-state online retailers that sold products in those states. Brick-and-mortar retailers long maintained that the rule was granting an unfair advantage to online retailers, and the Supreme Court ruled in their favor. As a result, many states are considering how they will go about collecting sales taxes from out-of-state online retailers, but in an environment where every revenue stream is needed by governments at every level, businesses that sell online should rest assured that collections will begin soon.
"If you're an entrepreneur with online sales presence, that whole sales tax piece could be very, very impactful," Trabold said. "Most states right now are evaluating how they'll administer it, and what we're seeing is that [sales tax on out-of-state online retailers] is a tempting revenue source for states."
Some states, Trabold added, might set thresholds under which an online retailer would not be subject to state sales taxes. Other states might not. For those small businesses that sell out of state over the internet, state policies that arise surrounding South Dakota v. Wayfair will be crucial to keep an eye on.
State retirement plans
With the announcement that the Obama administration's myRA retirement saving initiative would be wound down by the Treasury Department, concerns around the dearth of Americans' retirement savings were renewed. State retirement plans are cropping up as an avenue to provide access to retirement savings accounts to employees who otherwise wouldn't have a 401(k) or the ability to open an IRA.
"There is no traction at [the] federal level around workplace savings programs, so a lot of states have their own plans," Trabold said.
So far, nine states have passed some kind of retirement savings legislation. Oregon, Illinois and California have passed Roth IRA programs. Vermont adopted a multiple-employer plan called the Green Mountain Secure Retirement Plan, and Philadelphia and New York City are amid proposals for savings programs as well.
"Talk around retirement plans has slowed a little bit [because of] some movement at federal level about potential legislation that would make it easier for small businesses to start retirement plans," Trabold added. "In D.C., there might be some agreement on it, so some states might take a wait-and-see attitude. So there's a temporary hiatus, but it's definitely worth keeping an eye on."