Recently new legislation has been passed which brings about changes to most Massachusetts employers, namely Governor Baker’s ‘Grand Bargain Deal’ (signed June 28, 2018) and the non-competition Act (signed August 10th).
The ‘Grand Bargain Deal’ is more formally known as H.4640, an Act relative to minimum wage, paid family/medical leave and the sales tax holiday.
This Deal came together as a compromise measure between businesses, labor, faith, and community groups to forestall ballot measures opposed by business interests. This was also done in an attempt to avoid divisive battles over three potential November ballot questions spanning sales taxes, minimum wage increases, and creating paid leave programs. The signed law will make Massachusetts one of the first states with both a $15/hr minimum wage and a comprehensive paid family/medical leave program, which will impact nearly all employers in the state.
A summary of applicable changes and their impact:
Increased Minimum Wage in Hourly and Service Positions
Massachusetts minimum wage for regular hourly employees will rise in incremental steps from $11.00 (presently) up to $15.00, first rising to $12.00 in January of 2019 and increasing by $0.75 each year until culminating at $15.00 in 2023.
Minimum wage for service or tipped employees will also increase over the next 5 years, from $3.75 presently to $6.75, with an increase of $0.60 each year in January.
The minimum wage hike will not be indexed to inflation.
Premium Pay Change
Also over the next 5 years, premium pay (time-and-a-half, 1.5x hourly rate) for Sunday and holiday work will be phased out at a rate of 10% a year, from 1.5 down to 1.4 in 2019 and down to regular pay on Sundays and holidays by 2023. Work on Sundays and holidays must remain voluntary, as it remains unlawful for employers to discriminate, dismiss, or adversely treat employees who refuse to work on Sundays and/or holidays.
Paid Family and Medical Leave
The new law provides opportunity for employees in Massachusetts to take up to 12 weeks of paid family leave and 20 weeks paid medical/disability leave. Employees on leave will receive a calculated percentage of their average weekly wage to a maximum of $850/week. The act also has a stipulation guaranteeing employees the right to return to their same or equivalent positions and to the same status, pay rate, and employment benefits.
This will apply to nearly all private employers in Massachusetts, although for municipalities and other public employers the law must first be adopted by the relevant legislative or governing bodies to go into effect. Self-employed persons may opt into this program but must cover 100% of the payroll tax contributions.
Massachusetts paid family and medical leave will be supported by the newly-established Family and Employment Security Trust Fund, which will be paid into by a 0.63% payroll tax split between employees and employers of over 25 employees; payroll tax deduction will commence as of July 1, 2019. Proposed regulations for this law are expected for March 31st of 2019. Employees will be able to submit applications for benefits beginning January 1st, 2021 (for medical leave) or July 2021 (for family leave).
The sales tax in Massachusetts will not change and will remain at 6.25%. Instead, Legislators will select (by mid-June of every year) one 2-day weekend each year in August with no sales taxes on ‘tangible personal property’ goods up to $2,500.
In addition to the ‘Grand Bargain Deal’, Governor Baker also signed into law the ‘Act relative to the judicial enforcement of non-competition agreements’.
It limits the ability of private employers to enter into and enforce non-competition agreements with employees, inclusive of independent contractors. It came into effect on October 1st, 2018; employers are encouraged to review their non-competition agreements to ensure they comply with the new Act. We will continue to supply new information as it is provided and to offer guidance and assistance with re-writing company non-compete agreements.
If you’ve any questions on either piece of new legislation, please reach out to us here at The HR Engineers!