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In a matter of months, COVID-19 upended the business world and forced organizations to make seismic shifts in their daily operations. While most executives hope the next year will bring better fortune, businesses can't lose sight of emerging compliance trends with the potential to shift the operating environment in 2021. How will the legal and compliance landscape evolve, and what can businesses do to anticipate those changes? Two legal experts at ADP — Stacy Williams, Senior Counsel, Global Compliance and Ellen Feeney, Vice President, Counsel — identified four trends to watch in 2021. 1. Change in the workplace accelerates "COVID accelerated some of the changes we were starting to see pre-COVID, including working from home and the growth and evolution of the gig economy," says Williams. She points to the passing of California's Proposition 22, which created a hybrid worker status between employee and independent contractor, as an example of how the landscape changed in 2020. While Williams acknowledges that there is promising news regarding a vaccine for COVID-19, she predicts that it might take up to six months for it to become widely available. Even then, employers will face some challenging questions. "Employers are going to have to grapple with employees who balk at getting the vaccine. Can an employer require it?" asks Williams. She notes that employers will also need to accommodate religious beliefs and health conditions that may affect employees' ability to get the vaccine. With respect to working from home, Feeney recommends that employers pay close attention to the guidance from local, state and federal officials. "Look to that guidance to figure out the appropriate return-to-office strategy and how to keep employees safe and productive," she says. 2. Employee leave programs may accelerate While making it safe for employees to enter the workplace is an important goal for many employers, providing employees with time off to recover from such a trying year is also an important consideration. Also, as COVID-19 lingers, some employees will continue to need to take time off to take care of themselves and their family members. "Being proactive in this environment means being nimble and recognizing you're dealing with a very fluid situation. Business leaders have to recognize that good compliance is good for business. You're not just trying to check the box." - Ellen Feeney, Vice President, Counsel, ADP In 2020, Congress passed the Families First Coronavirus Response Act (FFCRA) that required employers with fewer than 500 employees to provide specified paid sick and family leave to employees affected by COVID-19 and provided affected employers with a corresponding employment tax credit. The mandatory leave portion of the FFCRA sunset on December 31, 2020. The Consolidated Appropriations Act, 2021 extended the 100 percent tax credit for voluntary payments through March 31, 2021 for employers with 500 or fewer employees that choose to provide paid sick or paid family leave payments, subject to the limits established by the FFCRA. Before the pandemic and throughout its duration, some local and state governments have established paid leave provisions, and, we will likely see even more paid leave programs that allow employees to step away from their work commitments. In response to COVID-19, some jurisdictions have enacted entirely new paid sick leave laws, some existing laws have been amended, and there also has been some general guidance issued regarding how existing paid sick leave law applies in light of COVID-19. 3. US legal and compliance shifts With the change of presidential administration beginning in 2021, employers should expect some very substantial policy changes. The next administration will be very active, and employers will see a shift in some of the policies championed by the outgoing administration. Every change in administration generally brings policy changes and different areas of focus. One of the main areas of focus for the Biden administration is COVID-19 and economic recovery so expect new stimulus measures and new CDC and OSHA guidance concerning workplace safety. As a specific example, the DOL recently issued a final rule on the test for determining who is an independent contractor and who is an employee under the FLSA that is set to take effect on March 8, 2021. With the new administration, this rule may be delayed, modified or abandoned. There will be more regulatory activity related to the workplace, such as increased efforts to improve pay equity. The changes to the EEO-1 report to include pay data for the 2017 and 2018 reporting years are expected to be revisited and possibly reinstated by the Biden administration. "We expect to see a pivot to be more in line with Obama administration priorities and policies but not necessarily a replica of the Obama era," says Feeney. She notes that the extent of the changes under the new administration and what is possible legislatively depends on the Georgia Senate run-off race, as control of the Senate has enormous implications for the legal and compliance environment businesses will face. However, businesses cannot overlook changes in the compliance and legal landscape from beyond Washington. "Even if we continue to see legislative gridlock on the federal level, state and local governments will continue to be active. We would definitely expect to see that continue or even accelerate," says Feeney. 4. Work from home complicates compliance overseas With millions of employees working from home, achieving compliance with laws and regulations overseas — particularly those that limit working hours — will require careful consideration. For example, in France and Spain, there is the "right of disconnection," which enables employees to disconnect from their employers' technology after normal work hours. With employees working from home, adhering to this policy requires walking a fine line between achieving compliance and not alienating employees for leaving the virtual office when they deem appropriate. "Since employees are working remotely, they may move their physical location, and that may create problems related to taxes and compliance with local laws," says Williams. To that end, employers might want to create policies requiring employees to receive permission before they relocate across borders, or at least notify their employer of their intent to do so. Compliance will always matter While much remains unknown about the 2021 operating environment, businesses cannot wait for a clearer picture of compliance demands to present itself. Instead, they must continue to evolve their policies and give their employees as much advance notice as possible about changes that could affect how and where they work. Compliance starts at the local level and requires subject matter experts with knowledge of the compliance landscape and how it might evolve. "Being proactive in this environment means being nimble, and recognizing you're dealing with a very fluid situation," says Feeney. "Business leaders have to recognize that good compliance is good for business. You're not just trying to check the box." While it's difficult to predict the future, organizations that account for current and emerging compliance trends can better position themselves to meet tomorrow's challenges head on. This story originally published on SPARK, a blog designed for you and your people by ADP®. Learn more about how ADP’s small business expertise and easy-to-use tools can simplify payroll & HR at adp.com.

Article Highlights: Legislation for Major Disasters Definitions Qualified Disaster Distributions Re-Contributing Withdrawals for Home Purchases Retirement Plan Loans Loss Limitations, Revised Relief for Non-Itemizers Employee Retention Credit Other Disaster Area Tax Issues Most of us will always remember the year 2020, as much as we may like to forget it. On top of the COVID-19 emergency, street protests (both peaceful and not), and hotly contested election races, the U.S. has had numerous natural disasters – hurricanes, an unprecedented number of wildfires, severe windstorms, flooding, and what seems like everything except a plague of locusts (so far, the gigantic swarms of the insects that have invaded Africa and the Middle East haven’t made it across the Atlantic). Congress typically passes legislation to provide some temporary tax relief to the victims of major disasters. Recently, Congress did just that when it passed the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which the president signed on December 27, 2020. If you were a victim of one of the disasters covered by this bill, you may be interested to see if any of the tax benefits may be of help for you. First, a few definitions: “Qualified disaster area” means any area in which a major disaster was declared by the president, during the period beginning on January 1, 2020, and ending on February 25, 2021, if the incident period of the disaster began on or after December 28, 2019 and on or before December 27, 2020. However, any area in which a major disaster was declared only because of COVID-19 is not included. “Qualified disaster zone” is the portion of any qualified disaster area that the president, during the date parameters noted above, determined to warrant individual or individual and public assistance from the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act because of the qualified disaster in that disaster area. “Incident period” means, with respect to any qualified disaster, the period specified by the Federal Emergency Management Agency (FEMA) as the period when a disaster occurred. (However, for the purposes of this act, that period shall not be treated as beginning before January 1, 2020, or ending after January 26, 2021.) For a current listing of all affected areas and the dates of storms, floods, wildfires, and other disasters occurring in 2020 in federal disaster areas, go to https://www.irs.gov/newsroom/tax-relief-in-disaster-situations Here are the highlights of the tax-relief measures included in the Taxpayer Certainty and Disaster Tax Relief Act of 2020: Qualified Disaster Distributions – If you have sustained an economic loss because of a qualified disaster, you are allowed to withdraw from your eligible retirement plans – such as a 401(k) or 403(b) – and IRAs up to $100,000, less the aggregate amounts treated as qualified disaster distributions in prior years, without paying the 10% early-withdrawal penalty that applies if you are under age 59½. The distribution is still taxable, but if you choose to, the income from the qualified distribution can be spread over a three-year period beginning with the year of distribution, rather than you paying all of the tax in the distribution year. Re-contribution Option – Further, you can re-deposit any amount of the qualified disaster distribution in one or more re-contributions over the three-year period beginning on the day after the date of the distribution. For example, let’s say you take a qualified disaster distribution of $30,000 from your IRA on Dec. 10, 2020, and opt to spread the tax over years 2020, 2021, and 2022 by including $10,000 of the distribution amount in each year’s return. In 2022, you are financially able to re-deposit the $30,000 to your IRA, which you do on Nov. 1, 2022. You would then need to amend your 2020 and 2021 returns to remove the $10,000 income from each year and claim a refund of the taxes paid on those parts of the distribution. None of the distribution would be reported on your 2022 return. Waived 20% Withholding Requirement – Normally, 20% of a retirement plan distribution is withheld as income tax. This 20% withholding rule will not apply to a qualified disaster distribution. Distribution Timing – Only distributions made on or after the first day of the incident period of a qualified disaster and before June 25, 2021, can qualify. Special Rule for Individuals Affected by More Than One Disaster — The $100,000 limitation is applied separately to distributions made with respect to each qualified disaster. Re-Contributing Withdrawals for Home Purchases – If you are under 59½, the general rule is that you’ll owe a 10% penalty on the taxable part of a distribution from an IRA (or an employer’s retirement plan). However, this 10% early-withdrawal penalty doesn’t apply to a distribution (lifetime maximum $10,000) from an IRA used by a first-time homebuyer to pay the qualified acquisition costs for a principal residence, if the funds are spent within 120 days of receiving the distribution. When disaster strikes, the taxpayer’s plans to purchase or construct a home sometimes are upended, and the funds from the withdrawal can’t be spent during the allotted time period. To prevent the 10% penalty from kicking in when this happens, the act provides that any individual who received a qualified distribution during the period beginning 180 days before the first day of the incident period of a qualified disaster and ending 30 days after the last day of the incident period may make one or more contributions to an eligible retirement plan that total no more than the amount of the qualified distribution. The re-deposit must occur during the period beginning on the first day of the incident period of the qualified disaster and ending on June 25, 2021. To qualify to make the recontribution, the amount distributed must have been intended to be used to purchase or construct a principal residence in a qualified disaster area but was not so used due to the qualified disaster in that area.

At the start of 2020, talent shortages, high turnover rates, and low unemployment rates were critical topics of conversations among talent acquisition teams everywhere. After many years of strong employment growth rates, January 2020 labor data showed the significant gap between workers needed and workers hired, with a national fill rate of 84% - meaning for every 100 job openings, only 84 hires were made. Contributing to the talent shortages were declining labor force participation rates and the large number of workers from the Baby Boomer generation retiring daily. Voluntary turnover plagued organizations, as social media and the continual access to job opportunities allowed quick and plentiful options for new employment. Despite the challenges, wage growth in January was 2.4%, a dip from 2019 figures as high as 3.9%. In order to remain competitive, employer brand and employer value proposition (EVP) were in the forefront of talent acquisition and retention strategies. SOURCE: ADP RESEARCH INSTITUTE, graph by Ellen Gregory In March 2020, the unprecedented employment growth record finally ended after 113 months as the effects of the COVID-19 global health event abruptly weakened the labor market and affected many organizations' ability to operate. By April, the US had lost a record 20.8M jobs due to the widespread shut down – the largest single month loss of jobs in history. Of this decline, the ADP Research Institute® (ADPRI) found 10-11 million of these workers were temporarily laid off. This recession job loss anomaly was not the only unique labor market impact due to the pandemic. ADPRI Head of Labor Market Research, Ahu Yildirmaz, noted, "From industry distribution to business size to worker demographics, this downturn is different than any other in modern U.S. history." Workers earning less than $15/hour saw the largest employment decline at 35%, compared to 9% decline amongst those earning more than $32/hour. Unique to this recession as well, women, younger workers (21 to 30 years), and workers over 60 saw greater rates of employment decline than their respective counterparts. In response to this unprecedented time, Congress introduced and passed the CARES Act to address the widespread consequences of the COVID-19, including federal unemployment assistance and stimulus checks. Despite the extensive job losses at the beginning of Q2, wage growth skyrocketed to 7.3% in May. The circumstances created by the pandemic affected employees' willingness to return to work, and put pressure on employers to entice workers through wages. Labor force participation rates had dropped to 60.2% in April – the lowest seen since 1973. SOURCE: DOL BUREAU OF LABOR STATISTICS, graphic by Ellen Gregory

Article Highlights: 14-Day Exclusive Application Period for Small Businesses and Nonprofits Limited to 19 Employees Loans Based on Gross Income Rather than Wages Certain Restrictions Removed At the direction of the White House and effective on Wednesday, February 24, 2021, the SBA will establish a 14-day, exclusive PPP loan application period for businesses and nonprofits with fewer than 20 employees. This will give lenders and community partners more time to work with the smallest businesses to submit their applications, while also ensuring that larger PPP-eligible businesses will still have plenty of time to apply for and receive support before the program expires on March 31, 2021. In addition, these small businesses will be able to base their loans on gross income. Although details are sketchy, sources have indicated loans are available based upon 2.5 times the average 2019 monthly gross income, rather than net profit. In addition, the SBA will: Allow sole proprietors, independent contractors, and self-employed individuals to receive more financial support by revising the PPP’s funding formula as mentioned earlier; Eliminate an exclusionary restriction on PPP access for small business owners with prior non-fraud felony convictions, consistent with a bipartisan congressional proposal; Eliminate PPP access restrictions on small business owners who have struggled to make student loan payments by eliminating student loan debt delinquency as a disqualifier to participating in the PPP; and Ensure access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use an Individual Taxpayer Identification Number (ITIN) to apply for the PPP loan.

Article Highlights: Employment (Earned) Income Earned Income Tax Credit (EITC) Child Tax Credit (CTC) 2019 or 2020 Earned Income Credit Qualifications Because of the pandemic, many individuals have seen their employment (earned) income plummet. In that situation, two very important tax credits, the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), which are based in part on earned income, will be adversely affected, hitting lower-income taxpayers with a double whammy. Not wanting those who normally rely on those credits to make ends meet to suffer further economically, Congress came up with a special way to calculate the two credits for 2020. So, when figuring these 2020 credits, taxpayers are allowed to use the amount of their 2019 or 2020 earned income, whichever produces the better result. This will only affect the computation of the EITC and CTC and does not impact the gross income used for determining an individual’s income tax for 2020. The option of using 2019’s earned income is only available if it is higher than 2020’s earned income. Earned Income Tax Credit (EITC) – Many years ago, Congress established the EITC as an income supplement for working individuals with lower-paying employment. If you qualify, it could be worth as much as $6,660 in 2020. It is a refundable credit. As mentioned above, the EITC is based on the amount of your earned income for 2019 or 2020 (income from work for wages and/or self-employment) and whether there are qualifying children in your household. Qualifying children are those who live with you for over half the year, are related, and are under the age of 19 (or full-time students under the age of 24). The credit increases, up to a point, as your earned income increases. The table below shows the earned income at which the maximum credit is achieved for 2020. Qualifying Children Earned Income Maximum Credit None $7030 $538 1 $10,540 $3,584 2 $14,800 $5,920 3 or more $14,800 $6,660 The credit amount phases out after reaching the maximum based on filing status and number of qualifying children. The 2020 phase-out ranges are shown in the table below. Qualifying Childeren Filing Status Phaseout Range None Married Filing Jointly $14,680–21,750 None Others $8,790–15,820 1 Married Filing Jointly $25,220–47,646 1 Others $18,030–41,094 2 Married Filing Jointly $25,220–53,330 2 Others $19,330–47,440 3 Married Filing Jointly $25,220–56,884 3 Others $18,660–50,954

Because of the pandemic, the people who normally rely on the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) to make ends meet are adversely affected. To assist them, Congress came up with a special way to calculate the two credits for 2020. .embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; }