Massachusetts Legislative Update

On June 28th, 2018, Massachusetts Governor Charlie Baker signed legislation that makes three key changes to Massachusetts law. While some of the laws will become effective in the coming years, we have outlined the key details to the laws below.

Minimum Wage Increase

Over the next five years, minimum wage will increase to $15 an hour. Beginning January 1, 2019, the increase will be $2 then $0.75 thereafter until 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 an hour to $6.75 an hour, at a rate of $0.60 an hour every year.

Elimination of Sunday Premium Pay 

Following the same time frame but with decreases instead of increases, the Governor signed a law that will eliminate Sunday premium pay and premium pay on certain holidays. 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.

Family and Medical Leave Program

Effective January 1, 2021, all private employers within the state of Massachusetts are required to provide covered employees paid family and medical leave. Below details the requirements of the law.

Covered Employees

• A current employee of a Massachusetts employer;
• A self-employed individual who has elected coverage under the Act and reported self- employment earnings; and
• 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

Approved Uses

• To provide care for a family member because of the family member’s serious health condition;
• 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
• 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.

Payment is subject to a seven day waiting period during which no benefits are payable. Eligible employees may use other paid leave, such as sick leave or vacation, during this period. Intermittent leave may be available.

The Department of Family and Medical Leave, will 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.

The agency 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 agency will further notify the employer within 5 business days of a claim being filed. The Act also calls for the agency to establish an administrative appeals process that will adjudicate claims within 30 days of the notice of decision.

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This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.