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Massachusetts Employers Face New Minimum Wage And Paid Leave Mandates

On June 28, 2018, Massachusetts Governor Charlie Baker signed a bill that will have significant implications for Massachusetts employers. Most notably, the new legislation will increase the state minimum wage to $15.00 per hour by 2023 and require employers throughout the Commonwealth to offer paid family and medical leave to their employees beginning in 2021.

As detailed in a previous article, Massachusetts voters were set to vote on these same general proposals as part of separate ballot initiatives in the upcoming November election. In exchange for the passage of the new legislation, however, the sponsors of the ballot initiatives agreed to withdraw the initiatives from the 2018 ballot. As part of this deal, the Commonwealth was able to negotiate some minor concessions that make these laws slightly more palatable to employers.

Increases In Minimum Wage

Under the new law, the state minimum wage in Massachusetts - which currently sits at $11.00/hour - will increase to $15.00/hour by 2023. The first increase, slated for January 1, 2019, will raise the minimum wage to $12.00/hour. The state minimum wage will then increase by an additional 75 cents each year until it reaches $15.00/hour on January 1, 2023.

This rate of increase is a bit slower than what was proposed in the ballot initiative, under which the minimum wage would have reached $15.00/hour by January 1, 2022. Additionally, the new law omitted a provision of the ballot initiative that would have implemented further minimum wage increases automatically based on the inflation rate.

The new statute will also increase the minimum wage for tipped employees - currently $3.75/hour - to $6.75/hour by 2023, through incremental increases of 60 cents each year. (The ballot initiative would have raised this rate to $9.00/hour by 2022.)

Certain retail employers actually stand to benefit from one provision of the new law, which will gradually eliminate the requirement that these establishments pay non-exempt employees time-and-a-half for all hours worked on Sundays and certain legal holidays. This premium-pay obligation will gradually be reduced, until it is eliminated altogether as of January 1, 2023. However, covered employees will still have a right to refuse to work on Sundays or the enumerated legal holidays, without fear of adverse employment consequence.

Paid Family And Medical Leave

Starting in 2021, most Massachusetts employees will be eligible annually for up to 12 weeks of paid, job-protected family leave, and up to 20 weeks of paid, job-protected medical leave.

Some notable aspects of these new leave entitlements include the following:

  • Covered employees will be permitted to take up to 12 weeks of paid leave annually to: (1) care for a child after the child's birth, adoption, or placement for foster care; (2) care for a seriously ill family member; or (3) address needs arising from a family member's active duty military service.
  • Even more liberally, covered employees will have a right to take up to 20 weeks of paid leave annually to address their own serious medical conditions, through inpatient, hospice, or at-home care, or continuing treatment by a health-care provider.
  • An employer may cap an employee's combined use of family and medical leave at 26 weeks within any year.
  • An employee will be required to give at least 30 days' notice before commencing and returning from leave, or to provide notice as soon as practicable if the need for leave is not foreseeable.
  • Benefit payments during family or medical leave will be calculated as a percentage of the employee's weekly wage, subject to a cap of $850 per week (with future adjustments to that cap indexed to the state's average weekly wage).
  • Employers will not be responsible for directly paying employees their family and medical leave benefits. Instead, benefits will be financed through an increase in the state payroll tax, in an amount corresponding to 0.63% of the employee's annual wages. This payroll tax increase will be borne equally by employers and employees, except that employers with fewer than 25 employees may pass the full cost on to their employees. The payroll tax increase will go into effect July 1, 2019.
  • In order to receive benefits, an employee will be required to file a claim with the to-be-created Department of Family and Medical Leave.
  • Employers will be subject to certain posting and notification requirements.

What Employers Should Do

We recommend that Massachusetts employers review the new law and, in consultation with employment counsel, consider how their operations will be affected. In particular, employers with hourly employees may want to begin planning for the annual increases in the state minimum wage that will begin as of January 1, 2019.

Employers should also watch for official guidance from the Commonwealth as to how the new law will be implemented, including the collection of the additional payroll taxes beginning on July 1, 2019.

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If you have questions about the new Massachusetts statute or any other employee compensation or leave issues, please feel free to contact one of our experienced employment lawyers.