United States: Massachusetts Increases Minimum Wage, Eliminates Premium Pay For Sunday Work, And Enacts New Paid Leave Program

Last Updated: July 9 2018
Article by Christopher B. Kaczmarek and Alice A. Kokodis

On June 28, 2018, Massachusetts Governor Charlie Baker executed legislation that makes sweeping changes to Massachusetts law. As part of this so-called "Grand Bargain" legislation (the "Act"), Massachusetts will incrementally raise the minimum wage from $11 to $15 an hour and eliminate the need for most retail employees to receive premium pay for work performed on Sundays and holidays. The new law also creates one of the most generous paid family and medical leave programs in the country. Massachusetts now joins California, New York and Washington, D.C. as the only states to have both a $15 minimum wage and mandatory paid family and medical leave.

The Minimum Wage Will Increase Over Time

The Act gradually increases the minimum wage in Massachusetts from $11/hour to $15/hour over five years, culminating in 2023. It will increase to $12/hour on January 1, 2019, and will then go up by $0.75/hour every year until it hits $15/hour on January 1, 2023. Municipal employees are not covered by the minimum wage increase. Also, over the same period of time, the minimum cash wage for tipped workers, known as the "service rate," will also increase from $3.75/hour to $6.75/hour, at a rate of $0.60/hour every year.

Sunday Premium Pay Is Eliminated Gradually

Massachusetts law currently requires most non-exempt employees who work in retail establishments to receive time-and-a-half for work performed on Sundays and certain holidays. The new law gradually eliminates this requirement. Retailers will see this premium rate decrease from 1.5 times the regular rate to 1.4 times the regular rate on January 1, 2019, to 1.3 times the regular rate on January 1, 2020, and so on, until January 1, 2023, when the mandatory premium pay requirement is eliminated altogether.

The New Family and Medical Leave Program

Effective January 1, 2021, all private Massachusetts employers must provide "covered individuals" with paid family and medical leave, funded through a payroll tax. Under the Act, a "covered individual" is defined as: (1) a current employee of a Massachusetts employer; (2) a self-employed individual who has elected coverage under the Act and reported self- employment earnings; and (3) a former employee, assuming that the employee has not been separated from employment for more than 26 weeks at the start of the former employee's family and medical leave.

Eligible employees may receive 12 weeks of paid family leave: (1) to provide care for a family member because of the family member's serious health condition; (2) to bond with their child during the first 12 months after the child's birth, or during the first 12 months after placement of the child for adoption or foster care; or (3) to attend to obligations arising because a family member is on active duty or has been notified of an impending call to active duty in the United States armed forces.

Under the program provided by the Act, covered employees may apply for paid leave following the occurrence of a qualifying event. Payment is subject to a one-week waiting period during which no benefits are payable. Eligible employees may utilize other paid leave, such as sick leave or vacation, during this period. Intermittent leave may be available, except for bonding with a child unless agreed to by both employee and employer.

Leave Benefits Financed By Payroll Deduction

The Act creates a new state agency, the Department of Family and Medical Leave ("the Department"), to administer the paid family and medical leave program. The program will be paid for by a mandatory 0.63% payroll tax contribution, or an adjusted amount set annually by the Department, and submitted to a state trust fund. Employers may require employees to pay a portion of those contributions, and employers with fewer than 25 employees are exempt from paying the employer share of the contributions.

The benefits of the program will replace a worker's pay with a weekly benefit cap of $850 or a rate adjusted to equal 64% of the state average weekly wage (SAWW). Up to the first half of the SAWW (currently $669.03), the worker will be reimbursed at a rate of 80%. Then, the employee would be paid half of the difference between his or her weekly wage and the SAWW. Employees will be required to cover all of the family leave contribution and 40% of the medical leave contribution. Employers will cover at least 60% of the contribution to the medical leave trust fund.

The law requires the Department to craft proposed regulations by March 31, 2019, and to start collecting the new tax on July 1, 2019.

Requesting Paid Leave

The Department is required to establish reasonable procedures and forms for filing claims under the Act and to specify what supporting documentation is necessary to support a claim of benefits, including requiring proof of a serious health condition and the length of leave expected. Benefits will not be paid to any employee who willfully makes false representations to the Department. The Department will notify applicants of their eligibility for benefits within 14 days of receiving a claim and shall pay the benefits not less than 14 days after the eligibility determination has been made. The Department will further notify the employer within 5 business days of a claim being filed. The Act also calls for the Department to establish an administrative appeals process that will adjudicate claims within 30 days of the notice of decision.

Interactions with Other Laws and Employer Policies

If paid leave taken under the Act also qualifies as protected leave under the Family and Medical Leave Act or the Massachusetts Parental Leave Act, the paid leave taken under the Act will run concurrently with, and not in addition, to such protected leave. Employers must restore employees who return from leave to their previous, or an equivalent position, with the same status, pay, benefits and seniority, barring intervening layoffs or changed operating conditions. Employers are also required to maintain an employee's existing health insurance benefits for the employee's family leave, as if they had no taken such leave.

The benefits under the Act will not affect any collective bargaining agreement or employer policy so long as employee receives the greater of the various benefits available for the covered reason. Thus, employers will have the option of providing equivalent benefits to their employees through an approved private plan or self-insurance.

Employer Notice Requirements

Under the Act, 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 to be prepared by the Department 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.

Failure to comply with the 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.

Retaliation Prohibited

Employers may not retaliate or discriminate against employees for exercising their rights under the new law, may not otherwise interfere with their exercise of those rights, and may not retaliate or discriminate against employees for filing a civil complaint to enforce such rights. Any negative change in the terms or conditions of employment that occurs during a leave, within 6 months after an employee returns from leave, or within 6 months after an employee files a civil complaint is presumed to be unlawful retaliation. Employers can rebut the presumption only by clear and convincing evidence of an independent justification for the change.

The Act provides for a private right of action. Employees will have 3 years to file a civil action against the employer for a violation of the new law. Employers found liable may be ordered to reinstate the employee and to pay 3 times the employee's lost wages and benefits, including reasonable attorneys' fees and costs.

Recommendations for Employers

While the Act represents major changes for Massachusetts employees, its substantive provisions do not take effect until July 1, 2019, providing employers with time to prepare. It also remains to be seen how and when the Department will be established and what guidance, if any, it will provide regarding the proper implementation of the new paid sick leave requirements and the interaction between those requirements and existing federal and state laws. Employers should consider consulting experienced employment counsel before amending their policies and practices to address these new laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Christopher B. Kaczmarek
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