In June 2018, Massachusetts passed a law that will gradually raise the state minimum wage to $15.00 per hour and establish a paid family and medical leave program for employees in the state. The Massachusetts Department of Family and Medical Leave, a newly established state agency created to administer the leave program, recently issued FAQs for employers and employees, available here. The requirements of the new law, as clarified by the FAQs, are explained below.
Minimum Wage and Premium Pay
The Massachusetts minimum wage will be gradually increased, in yearly increments, from the current $11.00 per hour to $15.00 per hour by 2023. The minimum “service rate,” which employers can pay tipped employees in certain circumstances, will also be increased incrementally from the current $3.75 per hour to $6.75 per hour by 2023.
In addition, the law will incrementally phase out the time-and-a-half premium pay currently required for retail workers working on Sundays and certain holidays, and the Commonwealth will now have an annual two-day sales tax holiday in August.
The year-by-year changes are detailed in the following chart:
|Date||Minimum Wage||Service Rate||Retailer Premium Pay|
|January 1, 2019||$12.00||$4.35||1.4|
|January 1, 2020||$12.75||$4.95||1.3|
|January 1, 2021||$13.50||$5.55||1.2|
|January 1, 2022||$14.25||$6.15||1.1|
|January 1, 2023||$15.00||$6.75||None|
Paid Family and Medical Leave
Beginning on January 1, 2021, Massachusetts employees will be entitled to take up to 12 weeks of paid leave to care for a family member with a serious health condition or a newborn child, and up to 20 weeks paid leave to attend to their own serious health condition. The law broadly defines a “family member” to include a spouse, domestic partner, child, parent or parent of a spouse or domestic partner, grandchild, grandparent, sibling and person who acted “in loco parentis” when the covered individual was a minor child. A “serious health condition” is broadly defined as an illness, injury, impairment or physical or mental condition that involves either (i) inpatient care in a hospital, hospice or residential medical facility; or (ii) continuing treatment by a health care provider. Employees taking leave under the law will be eligible for a percentage of their weekly pay, up to a weekly cap that will start at $850 and be adjusted annually.
The leave program will be administered by the newly established Department of Family and Medical Leave (the “Department”) and funded through the payroll tax described below. The law imposes several new obligations and prohibitions on employers, including the following:
- By July 1, 2019, employers must inform employees of their rights under the law by (1) conspicuously posting a notice of benefits prepared or approved by the Department, which must be in English and any other language which is the primary language of 5 or more employees or self-employed individuals of that workplace; (2) issuing to each new employee, within 30 days after the employee’s start date, written information provided or approved by the Department in the employee’s primary language explaining the available benefits, the employee’s contribution amount and obligations, instructions on how to file a claim for family and medical leave benefits, and related information. We anticipate that the Department will issue the required poster and notice before the notice requirements go into effect.
- Starting on July 1, 2019, Massachusetts employers must remit 0.63% of each employee’s wages (up to the first $128,400) to the state trust funding the paid leave, but may deduct from the employee’s wages to cover the employee’s share of the payroll tax.
- Employers with 25 or more employees or other “covered individuals” (as explained below) may deduct up to 40% of the payroll tax for medical leave and up to 100% of the payroll tax for family leave from the employee’s wages, leaving the employer financially responsible for 60% of the payroll tax for medical leave.
- Employers with fewer than 25 employees or other “covered individuals” may deduct the full payroll tax from employees’ wages.
- The Department may adjust the contribution rate annually by October 1 for the coming calendar year. The Department will apportion the payroll tax between family and medical leave each year, with the first year’s apportionment to be published before July 1, 2019.
- Note that any employer whose workforce is majority independent contractors (e., any employer who issues Form 1099s for more than 50% of its workforce) must consider such independent contractors “covered individuals” for purposes of the law. Such “covered individuals” are counted when determining employer size (25+ or less than 25), and the payroll tax must be remitted for independent contractors just like the business’s employees.
- Starting on January 1, 2021 (for personal medical leave) and July 1, 2021 (for family leave) employees will be able to take leave and file claims with the Department for benefits. Including an initial 7-day waiting period, employees will be entitled to up to 12 weeks of family leave per year, and up to 20 weeks of medical leave per year, with a maximum aggregate of 26 weeks of leave. After the 7-day waiting period, employees on leave may receive wage replacement equal to 80% of their wages up to 50% of the state average weekly wage, and then 50% of their wages above that amount, up to an $850 maximum per week. The maximum weekly benefit amount will be adjusted annually to be 64% of the state average weekly wage, and the adjusted maximum weekly benefit amount will take effect on January 1 of the following calendar year. Leave under the law will run concurrently with leave taken under the Massachusetts Parental Leave Law or the federal Family and Medical Leave Act.
- Employers must continue to honor accrual of employee benefits (such as vacation time, sick leave, bonuses, advance, seniority or length of service credit) and to contribute to employer-sponsored health insurance plans during an employee’s period of family or medical leave.
- Employers will continue to be bound by any preexisting laws, company policies, and/or collective bargaining agreements that provide for greater or additional leave rights. Employers with a private plan option that provides for benefits at least as generous as those required under the law may apply to the Department for an exemption from the program.
- Employers must restore an employee who has taken family or medical leave to the employee’s previous position or an “equivalent” position, unless employees in the same or equivalent positions have been laid off due to economic conditions or other changes in operating conditions.
- Employers are prohibited from retaliating against employees for exercising their rights under the law, and any adverse employment action taken against an employee during leave or within six months of leave will create a rebuttable presumption of retaliation, which the employer can rebut with clear and convincing evidence that the action was not retaliatory and was based on an independent justification.
- The law provides employees with a private right of action with a 3-year statute of limitation to pursue claims for retaliation or violation of the job restoration or benefits accrual provisions. A prevailing employee may be awarded job reinstatement, benefits reinstatement, injunctive relief, treble damages for lost wages, benefits and other remuneration, as well as interest, reasonable costs and attorney’s fees.
By March 31, 2019, the Department will publish proposed regulations for public comment and hearing, which will be promulgated by July 1, 2019 and will provide further details concerning the implementation of the new family and medical leave program.
Next Steps for Employers
Employers should immediately determine whether any employees will need to receive wage adjustments on January 1, 2019. Employers should also budget for the new payroll tax and review their payroll systems to ensure that they will have a mechanism in place to make the required payroll tax remittances and deductions from employee wages starting on July 1, 2019. In addition, employers should be ready to post and distribute the government-issued notices on or before July 1, 2019, and will eventually need to modify their leave policies and practices to address the new family and medical leave entitlements becoming effective in 2021. We at Bello Welsh are available to assist our clients to comply with the new law.