On January 1, 2017, California’s minimum wage increases to $10.50 per hour for businesses with 26 or more employees. Small businesses with 25 or fewer employees will continue to pay the current minimum wage of $10 per hour.

The increase for larger businesses is a result of SB 3, a bill that will increase the minimum wage in California to $15 per hour by 2022. Small businesses will not be required to begin the scheduled increases until 2018 and will have until 2023 to reach the $15 per hour rate.

Employers need to be ready for the minimum wage increase. Also, employers should remember that state enforcement agencies have made it a top priority to stop employers from engaging in so-called “wage theft,” which includes not paying the minimum wage for all hours worked.

Employers should examine all pay practices that might be affected by the minimum wage increase. Hint: There are more than you might think!

Practices that may need review include overtime rates of pay, exempt/nonexempt classifications, meal and lodging credits, commission issues, notice requirements and more.

Beginning January 1, 2017, employers with 10 or more employees will be required to electronically submit employment tax returns, wage reports, and payroll tax deposits to the Employment Development Department (EDD).

This requirement will expand to all employers beginning January 1, 2018.

On November 8, California joined several other states in legalizing recreational use of marijuana by adults.

Proposition 64, also known as the Adult Use of Marijuana Act, legalizes the recreational use of marijuana for adults 21 years old and over, imposes a 15% excise tax on marijuana sales and establishes a regulatory framework for the sale of marijuana. The provisions related to legalizing marijuana and workplace protections took effect November 9, the day after the election.

Legalization of marijuana for recreational purposes will be a significant change to current law. Even with the passage of Proposition 64, however, several things will not change. For example, smoking or ingesting marijuana in public will remain unlawful, as will smoking or ingesting marijuana in places where smoking tobacco also is prohibited. Similarly, driving under the influence of marijuana will remain illegal.

But what about smoking weed at work? When it comes to the workplace, California employers can take a deep breath of fresh air, because Proposition 64 intends to maintain the status quo for employers seeking to maintain a drug- and alcohol-free workplace. In other words, employer policies related to drug possession, use and impairment as well as testing should not be compromised with the legalization of marijuana use under Proposition 64.

Forms W-2 and Affordable Care Act (ACA) reporting were the subject of recent communications from the Internal Revenue Service (IRS). The IRS reminded employers and small businesses of a new January 31 filing deadline for Forms W-2. It also extended to March 2, 2017 the due date for employers to provide employees with certain 2016 ACA reporting forms.

W-2 Forms

Under the Protecting Americans from Tax Hikes (PATH) Act, employers are now required to file their copies of Form W-2, submitted to the Social Security Administration, by January 31. The new January 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors.

The accelerated filing date is aimed at making it easier for the IRS to detect and prevent refund fraud. In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms.

Note: The January 31 deadline has long applied to employers distributing copies of the Form W-2 to employees; that date remains unchanged. Now, in addition to being the deadline to distribute Forms W-2, January 31 is also the deadline to file Forms W-2.

ACA Reporting Extension

The deadline for employers to provide to employees Form 1095-B, Health Coverage or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage is March 2, 2017 (extended from January 31, 2017).

Not extended, however, was the deadline for employers to file the 2016 Form 1095and Form 1094 (transmittal forms) with the IRS. Employers must file the 2016 Form 1094-B, Form 1095-B, Form 1094-C or Form 1095-C by February 28, 2017, if filing by mail, or by March 31, 2017, if filing electronically (required for employers who have to submit 250 or more forms).

In addition, the IRS notice extends “good faith transition relief” for one more year. The IRS will not penalize employers for incorrect or incomplete forms if they can show that they have made “good-faith efforts” to comply with the information-reporting requirements — both for furnishing the reports to individuals and filing with the IRS. According to the IRS, the relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement.

Note: No relief is provided if the employer did not timely file or furnish the reports by the applicable deadlines or did not make a good-faith effort to comply.