Major Business Regulations Affecting Small Business in 2020
Staying on top of business regulations is simply a necessity for entrepreneurs and small-business owners alike. Certain regulations may require a great deal of change on the part of both you and your business. But with sufficient information and a better understanding of the rules, you can be well-prepared for the year to come.
Here’s a review of some of the most prominent national and California-based regulations (some of which have nationwide ramifications) signed into law in 2019 and taking effect as the new year unfolds.
Small Business Reorganization Act
Starting in February 2020, small-business debtors will have new options for handling large debts under the Small Business Reorganization Act (SBRA). This legislation establishes a new subchapter within Chapter 11 of the U.S. Bankruptcy Code.
Small-business debtors often shy away from filing for Chapter 11 bankruptcy, due to the difficult conditions and costly administrative and legal fees involved. According to Business West, the SBRA accelerates reorganization for these debtors by streamlining some of the requirements associated with Chapter 11 bankruptcy. As with Chapter 13 bankruptcies, a trustee is named by the bankruptcy court to assist the debtor in crafting a reorganization plan. On the plus side, under the new law, the debtor maintains control of their business during this reorganization cycle.
California Consumer Privacy Act
Signed into law in 2018 and going into effect on January 1, 2020, the California Consumer Privacy Act (CCPA) permits consumers living in California to demand access to all data that a company has stored on them, along with names of any third parties with whom that information is shared.
The CCPA affects any business that offers products or services to California residents and that possesses $25 million or more in annual revenue. This also applies to businesses of any size that have collected personal information on 50,000 customers or more, or that compile greater than 50% of their revenue from selling personal data.
Small businesses must comply with the new law, even if they aren’t based in California or represented by a physical presence in the state. Heading into 2020, companies are advised to make sure their data-tracking systems are fully operational. If alerted to a violation by regulators, businesses have 30 days to comply with consumer requests for information.
California Assembly Bill 5
Also going into effect January 1, 2020 is the California Assembly Bill 5 (AB 5) which focuses on classifying independent contractors as employees throughout the state. With AB 5, freelancers and contractors are regarded as employees of a business if they meet certain criteria:
- Their position is directly related to the core business.
- The employer specifically guides the way in which their work is performed.
- The individual doesn’t run an established independent business.
These criteria are designed to introduce more regulation for businesses that mostly rely on hiring contractors or freelancers. AB 5 is generally expected to affect employer practices in other states in 2020, as well.
California Assembly Bill 51
California Assembly Bill 51 (AB 51) prevents businesses from demanding (as a condition of employment) that job candidates, current workers or independent contractors agree to relinquish any rights granted to them under the Labor Code and the Fair Employment and Housing Act. The law covers any work-related contracts agreed upon, altered or extended on or after January 1, 2020. It is not applicable to settlement agreements or negotiated severance arrangements.
Also, as noted by the Office of Governor Gavin Newsom, the new law forbids employers “from threatening, retaliating or discriminating against, or terminating employees or applicants because they refused to waive” such rights, forums or procedures.
With all that in mind, it’s a good idea to get up to speed now on local, state or national legislation that may affect the growth of your business in 2020 and beyond.