08.09.2018 | Client Alerts

Massachusetts “Grand Bargain” Law: What Employers Need to Know

By Valerie C. Samuels, Nancy J. Puleo

Massachusetts’ “Grand Bargain” Bill Requires Minimum Wage Increases, Eliminates Premium Pay, Creates an Annual Sales Tax Holiday, and Mandates Paid Family Medical Leave

On June 28, 2018, Governor Charlie Baker signed into law “An Act Relative to Minimum Wage, Paid Family Medical Leave and the Sales Tax Holiday.” The so-called “Grand Bargain” law is a hard-fought compromise between the business community and progressive groups on the issues of paid family and medical leave, minimum wage, and a reduction of the state sales tax. To characterize the law as “sweeping” would be an understatement. It incrementally increases the state’s minimum wage to $15.00 an hour, as well as raises the minimum wage significantly for tipped workers, eliminates premium pay for Sunday and holiday workers, implements a guaranteed paid family and medical leave program and an accompanying payroll tax, and finally, establishes a two-day annual sales tax holiday to occur every summer. Below is a summary of the drastic changes to the wage and leave laws.

Minimum Wage Increased While Premium Pay is Eliminated

The law incrementally raises the current $11.00 minimum wage to $15.00 by 2023. This increase puts Massachusetts on track to have one of the highest statewide minimum wages in the country. The increases begin in 2019, when the state minimum wage will be $12.00 and rise by 75-cent increments on January 1st of each year until it reaches $15.00 in 2023. The law also includes incremental increases for the tipped minimum wage, raising the current tipped minimum wage of $3.75 by annual 60-cent increments until it reaches $6.75 in 2023.

As a counterbalance for the substantial minimum wage increases, the law also provides for the elimination of so called “premium pay,” i.e., the increased rate of pay mandated for certain employees working on Sundays and certain holidays. Massachusetts law currently provides that employees in many retail establishments must receive 1.5 times their regular hourly rate of pay for work on Sundays and holidays. Under the new law, effective January 1, 2019, the premium pay rate for Sunday and holiday work will drop to 1.4 times the regular hourly rate. The premium rate will continue to decrease by 0.1 each year until the premium pay requirement is eliminated completely in January 2023. Despite the gradual elimination of premium pay, the law maintains its historically strong protection of employees: employees cannot be required to work on Sundays or holidays and refusal to work on these days cannot be grounds for discrimination, dismissal, discharge, reduction in hours, or any other penalty.

Mandatory Paid Family and Medical Leave

The law includes one of the most generous family and medical leave programs in the country. Beginning January 1, 2021, employers will be required to provide current employees, employees who have been separated for 26 weeks or less, and self-employed independent contractors (where independent contractors comprise more than 50 percent of the workforce), with 12 weeks of paid family leave and 20 weeks of paid medical leave (with a maximum combined benefit of 26 weeks per year). Employees can use this job-protected leave: (1) to provide care for the employee or a family member due to their or their family member’s serious health condition; (2) to bond with a newborn, foster, or adopted child within the first 12 months of birth, placement, or adoption; (3) for needs arising out of a family member’s active military duty or impending call to active duty; or (4) to care for a family member who is a covered service member.

Employees cannot use more than 26 weeks, in the aggregate, of family and medical leave in the same benefit year. In addition, if paid leave taken under the new law also qualifies as protected leave under the federal Family and Medical Leave Act or the Massachusetts Parental Leave Act, the paid leave taken under the new law will run concurrently with, and not in addition to, the protected leave.

The law creates a new state agency, the Department of Family and Medical Leave (“the Department”), to administer the paid family and medical leave program. Benefit amounts will be determined based on a percentage of the employee’s weekly income, up to a maximum of $850.00 per week. The program will be funded by a new payroll tax at the initial rate of 0.63 percent, which goes into effect beginning July 1, 2019. In most cases, employers are required to pay 60% of the contribution for family leave, and employees must contribute 40%; however, employers are not required to pay any portion of the contribution for medical leave and may deduct the full amount from employees’ wages. Further, employers have the option to provide equivalent benefits through an approved private plan or self-insurance. The Department is expected to propose additional regulations by March 31, 2019 and begin collecting the payroll tax on July 1, 2019.

The law also contains very strong anti-retaliation provisions. Specifically, there is a rebuttable presumption of retaliation if any adverse action is taken against an employee’s terms and conditions of employment during leave or within six months of the employee’s return from leave. To rebut the presumption, an employer must be able to show with “clear and convincing” evidence that it would have taken the same action in the absence of the employee taking leave. Notably, the statute also includes a private right of action for employees, who may seek, among other things, reinstatement and treble damages for any lost wages under the Massachusetts Wage Act.

Although the right to take leave will begin in 2021, employers must take certain actions in the interim. For example, beginning January 1, 2019, employers will be required to post a multi-lingual notice to be prepared by the Department. Employers will also be required to provide each employee (not more than 30 days from the date of hire) a similar notice that explains their rights, including both their and the employer’s tax contributions, and instructions on how to file a claim for benefits. Employers must obtain a written acknowledgement of receipt of the notice, or sign a statement indicating the employee’s refusal to sign the acknowledgment. Employers must also provide a required notice to self-employed independent contractors at the time they are contracted, describing how they may obtain paid family and medical leave benefits. Any failure to comply with these notice requirements will result in a civil penalty of $50 per employee for the first violation; subsequent violations will result in a civil penalty of $300 per employee.

Looking Ahead

This new law represents major changes for Massachusetts employers and employees. Although its substantive provisions do not take effect until July 1, 2019, Massachusetts employers should begin preparing for the law’s implementation. Employers will need to review their wage payment practices to ensure compliance with the minimum wage and paid leave portions of the new law. We recommend employers:

  • revise payroll procedures to account for incremental increases to the minimum wage, including minimum wage for tipped workers;
  • revise payroll procedures to account for incremental decreases to premium pay;
  • revise payroll procedures to account for paid family and medical leave deductions or devise a policy that provides equivalent benefits through an approved private plan or self-insurance;
  • revise employee handbooks to reflect new paid family and medical leave requirements;
  • prepare to post required paid family and medical leave notices and update minimum wage posters; and
  • prepare to implement new hire notices and acknowledgments, as well as independent contractor notices.

Moreover, employers should anticipate that the Department will be releasing additional regulations and, expectantly, guidance regarding the proper implementation of the new paid leave requirements and the interaction between those requirements and existing federal and state laws.

Employers should consider consulting experienced employment counsel to ensure compliance with this new law and attendant regulations.

If you have any questions or need additional information concerning this topic, please contact Valerie Samuels, Nancy Puleo or any other attorney in our Employment Law Department.

This Alert is provided for information purposes only, and does not constitute legal advice. According to Mass. SJC Rule 3:07, this material may be considered advertising. ©2018 Posternak Blankstein & Lund LLP. All rights reserved.

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