May Your Legal Compliance Game be as Strong as Your Margaritas

Topics Discussed

Cinco de Mayo is upon us and while some of you equate this holiday with margaritas the size of your heads, it’s meant to commemorate Mexico’s victory over the Second French Empire at the Battle of Puebla in 1862. To that end, we hope that by the time you finish reading this you’ll be fully equipped with business and employment law updates to lead you to your own personal victories.

In our arsenal this edition: New Jersey and Pennsylvania’s Workers’ Misclassification Task Force, New York City’s artificial intelligence law, New York State’s updated model sexual harassment policy, and some really big news from the Small Business Administration (“SBA”) for those of you in the market to buy (or sell) just a piece of a small business.  

But first . . .

Welcome Kelley!

We’re on a roll lately! Please join us in extending a warm welcome to our newest associate attorney: Kelley Rutkowski. Kelley is an outstanding attorney with several years of litigation experience and a passion for solving complex legal issues. Welcome to the team, Kelley! Please feel free to connect with Kelley on LinkedIn!

SBA Changes Rule Governing Use of 7(a) Financing to Acquire SMBs

The SBA has made a significant change to its rules that will impact businesses seeking to acquire small and medium-sized businesses (or as we call them in the biz – “SMBs”) using SBA financing. Currently, when acquiring an SMB using SBA 7(a) financing, buyers are required to acquire 100% of the target business. However, effective May 11, 2023, the SBA will permit the use of SBA 7(a) financing to purchase partial ownership in a business and equity rollovers. Equity rollovers allow the seller to retain a portion of the target company. Perhaps even more importantly, this change will also help business owners establish long-term succession plans while still remaining involved in the business.

New Jersey and Pennsylvania Develop Misclassification Task Force  

While we may disagree on sports teams and the names for certain sandwiches (it’s Taylor Ham), our governments do agree on the importance of cracking down on worker misclassification.

In the latest move in the war on worker misclassification, New Jersey and Pennsylvania have teamed up to launch a “Workers’ Misclassification Task Force”, consisting of representatives from both New Jersey and Pennsylvania’s labor departments and relevant agencies. The task force will be responsible for investigating claims of worker misclassification and wage theft, and will also be responsible for educating employers and employees about their rights and obligations under both Federal and State laws.

Worker misclassification occurs when an employee is improperly classified as an independent contractor. As you may know, employees are entitled to certain benefits (minimum wage, overtime, unemployment insurance, etc.), while independent contractors are not.

This joint effort isn’t new. As we’ve previously discussed, New Jersey has been cracking down on worker misclassification for quite some time and violations can have severe repercussions, resulting in stop work orders, hefty fines, and insurance fraud violations. With more and more workers being treated as independent contractors, and with wage theft issues remaining a widespread problem, it’s important that you revisit your wage and hour policies (even if you’re not in New Jersey or Pennsylvania). Be careful how you classify your workers – the task force is watching . . .

New York Updates its Model Sexual Harassment Policy

New York State recently announced that it has updated its model sexual harassment policy to reflect recent changes to its sexual harassment laws (including New York’s recent establishment of a sexual harassment hotline). Some of the most significant changes to the model policy include:

  • Explicit references to the sexual harassment hotline;
  • Stating that both harassment and discrimination are prohibited, and not just on the basis of gender, but on any protected characteristic under the law;
  • Including more detailed definitions of harassment to include examples of gender expression and identity, including prohibitions on misusing an individual’s preferred pronouns, and including specific definitions of what it means to identify as cisgender, transgender and nonbinary;
  • Identifying the legal standards for sexual harassment claims, which are focused on impact, and are observed through both subjective and objective lenses;
  • Addressing manager/supervisor responsibilities and prohibitions on retaliation;
  • Stating that harassment and discrimination can occur anywhere, at any time, to address the prevalence of remote work; and,
  • Providing tools for bystander intervention and witnesses.

All employers are required to update their policies and notify their employees of those changes. Employers’ policies must also be consistent with the model policy, and cannot exclude any of the model policy’s sections. And, as a reminder, all New York employers are required to provide their employees with annual sexual harassment prevention training. If you haven’t done yours yet, haven’t updated your sexual harassment policy, or don’t even have a sexual harassment policy, don’t fret, we’re here to help.

New York City Finalizes Regulations Governing Use of Artificial Intelligence in Hiring

With all of the recent updates related to A.I. it’s hard to believe that it’s been almost a year since we first flagged New York City’s new laws governing the use of automated tools in hiring candidates. After several rounds of public comments, revisions, and pauses on enforcement, NYC finally published the long-awaited ordinance. Effective July 5, 2023, NYC employers will no longer be able to use automated tools to screen candidates unless the employer:

  • audits the tool both before its use, and on an annual basis;
  • publishes a summary of that audit’s results;
  • provides notice to applicants and employees of the employer’s use of the screening tool within 10 business days prior to use of the tool; and,
  • provides notice that candidates are permitted to request an accommodation or alternative selection process.

An employer’s notice requirements can be accomplished by posting the notices on the employer’s website, in each job posting, or by way of U.S. mail or e-mail to candidates (although we suggest that keeping the posting on your websites is the preferred method since it can be accessed by anyone, at any time). Employers can expect fines of $375 for the first violation, and from $500 to $1,500 for each additional violation of the ordinance. If you’re not sure if your hiring practices are covered under the law (spoiler alert: asking ChatGPT if you should hire someone isn’t the move), it’s a good move to reach out and ask for some assistance.

Enjoy Cinco de Mayo (responsibly)! Please go easy on your HR Department and avoid dressing up to celebrate.

As always, if you’ve got questions, you know we’ve got answers.

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