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Update: Massachusetts “Grand Bargain” Includes New PFML Law, but Program Implementation Might be Delayed

Compliance
Article
06/13/2019
  • Massachusetts has passed legislation to provide paid family and medical leave and make changes to state wage and hour provisions.
  • The new law – known as the “Grand Bargain” legislation will be implemented in phases over the next five years beginning with a change in the calculation of tipped employees’ wages, a decrease in holiday premium pay and an increase in the minimum wage to $12 per hour all effective Jan. 1, 2019.
  • Paid Family and Medical Leave benefits will be funded through employer and employee contributions, with benefits coming available to eligible workers in 2021. 
  • Update: Gov. Charlie Baker and lawmakers in the state house and senate announced an agreement weeks before certain deadlines were scheduled to be met for PFML to delay the implementation of the program by three months. The bill also calls for a change in the percentage of the total premium that must be collected and remitted to ensure the trust is properly funded. 

State lawmakers in Massachusetts passed “An Act Relative to Minimum Wage, Paid Family Medical Leave, and the Sales Tax Holiday” — referred to as the “Grand Bargain” legislation.

Here is a breakdown of provisions found in the new law:

Paid Family and Medical Leave

Massachusetts becomes one of only a handful of states in the nation to pass paid family and medical leave (PFML) legislation. Under the new law, covered employers include those who employ one or more individuals. Effective Jan. 1, 2021, covered individuals — including current employees, and certain former employees and independent contractors who meet standards under the law — will be eligible to begin claiming benefits for bonding with a child or newborn, service-member related events, and dealing with the employee's own serious health condition. Effective July 1, 2021, eligible individuals may begin claiming benefits to care for a family member with a serious health condition. Covered individuals will be eligible to take up to 12 weeks of job protected family leave and up to 20 weeks of job protected medical leave.

Paid family leave arising from a covered service member’s call to active duty is capped at 26 weeks per benefit year. Employees are capped at 26 combined weeks of leave in a single year (52 consecutive weeks).

Under the law, paid family leave may be used to care for a seriously ill family member, to bond with the employee’s new child in the first 12 months following birth, or during the first 12 months after placement of the child for adoption or foster care, or qualified military exigency leave. Paid medical leave is available for individuals who need to address their own serious medical condition.

During a qualified leave under the new legislation, employers must continue to contribute to the individual’s health insurance benefits, as if the individual had not taken the leave. A current employee on leave must be able to accrue vacation time, sick leave, bonuses, length-of service credit, and other benefits for which they would have been eligible had they not taken leave.

Massachusetts Paid Family and Medical Leave benefits will be paid from the creation of a Family and Employment Security Trust Fund, which will be financed through a variety of resources including a mandatory payroll tax of 0.75 percent of the first $129,000 as of 2019 of an individual's annual earnings (adjusted annually) split between the employers and employees. 

The percentage of mandatory payroll tax is predicted to change based on the possible delay of implementation and to ensure the trust is properly funded.  

Employers must inform current employees of their rights by Sept. 30, 2019. Employers will be required to post a notice of benefits and issue written information to employees. For new hires, employers are required to provide notification within 30 days of their first day of employment. Independent contractors must be notified when the business enters a contract for services. Failure to comply with notice requirements may result in civil penalties of $50 per employee for a first violation, escalating to $300 per employee for subsequent violations.

Paychex conducted a survey in 2018 in which more than half of the business owners that responded supported paid family leave. Additionally, employers might qualify for certain tax credits for offering paid leave under Tax Reform implemented in 2018.

State wage and hour changes

Under the legislation, the state minimum wage in Massachusetts will gradually rise to $15 by 2023, with an initial increase to $12 effective Jan. 1, 2019. The minimum wage for tipped employees will also see an increase during the same five-year period to $6.75 by 2023.

The new law also will eliminate a portion of the Massachusetts blue laws by gradually reducing premium pay for Sundays and holidays for workers in the retail industry beginning Jan. 1, 2019. And employers with tipped employees must begin calculating tipped employee wages at the end of each shift rather than at the end of each workweek, effective Jan. 1, 2019.

What employers need to know

The Massachusetts Department of Family and Medical Leave published draft regulations for the recently enacted Massachusetts Paid Family and Medical Leave Law. In addition, the Massachusetts Department of Family and Medical Leave has scheduled a number of public listening sessions on the draft regulations throughout the state. Final regulations are expected to be adopted by July 2019. For additional information, go to the Massachusetts Department of Family and Medical Leave issued guidance.

Additional information and guidance regarding wage and hour changes discussed in the article can be found on the Massachusetts Attorney General’s Office website.

Paychex will offer applicable updates to this article following the release of additional guidance from the state.

This article was originally published Jan. 24, 2019.

Laurie Savage is a compliance professional and subject matter expert on the Affordable Care Act (ACA) for Paychex Inc. specializing in Health Care Reform.
This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.