One of the most challenging aspects of Human Resources is dealing with changes to laws and regulations. And while Federal laws like the Americans with Disabilities Act or Title VII, which prohibits discrimination on the basis of race, religion, sex, and national origin immediately come to mind, those laws change rarely and slowly. The real challenge for Human Resources is dealing with changes to state laws. And right now, there’s no better example than the Massachusetts Grand Bargain.
The Grand Bargain changes the state’s minimum wage, affects how overtime is paid for hours worked on Sunday and holidays, creates a paid leave program funded (in part) by a change in payroll taxes, and makes a sales tax holiday permanent. The law was signed by Governor Baker as a way to simplify and lessen the changes that would be brought about by voter referendum. The Grand Bargain seeks to reform employment laws in Massachusetts gradually, over the next five years and by makes concessions to both employers and employees. By changing the laws over time, the Grand Bargain hopes to limit the difficulties that come with such fundamental changes by giving employers the chance to adjust slowly. The Grand Bargain was envisioned as a way to make employees happy while giving employers time to implement the law and change their HR and Payroll practices.
Changes to the Minimum Wage Laws
The current minimum wage is $11 an hour. As of January 1, 2019, the state minimum wage will go up to $12 an hour and will continue to rise each year until the state minimum wage reaches $15 an hour in 2023. At the same time, the minimum wage for tipped servers will increase from $3.75 to $6.75 It seems simple and direct enough for your payroll administrator to handle, right?
Well, if the stepped changes to state minimum wage was the only change businesses had to contend with, the Grand Bargain would be simple. But it’s not that direct. Keep reading for more details.
Changes to Sunday and Holiday Overtime
Currently, in Massachusetts, retail workers are paid time-and-a-half for hours worked on Sunday and on holidays. Under the Grand Bargain, Sunday and holiday overtime will also be gradually eliminated, and will no longer be paid by 2023.
In 2018, Sunday and holiday overtime is paid out at a rate of 1.50 times the hourly wage. In 2019, the rate will be 1.40 times the hourly wage and will continue to decrease by .10 a year until 2023. Federal overtime will not be affected, and hours worked over 40 each week by non-exempt employees will still be paid at time-and-half.
Okay, so the calculation of Sunday and Holiday overtime is going to become a bit of a headache in Massachusetts. But anyone with a payroll calculator can sort it out, right? Well, not really. You see, currently, under the Fair Labor Standards Act, state and employer overtime is credited toward Federal overtime so long as it’s paid out at a rate of 1.50 times the standard rate of pay. For example, a non-exempt employee in Cambridge works a total of 43 hours in a week. 35 of these hours are worked Monday through Friday, and 8 hours are worked on Sunday. The employee will be paid 35 regular hours and 8 overtime hours that will be paid out at a rate of 1.50 times their regular rate of pay because of current state law. The employee doesn’t also get paid 3 hours of overtime pay because of Federal law. The Massachusetts overtime is credited to overtime that would normally be owed under Federal law. Sunday and holiday overtime are considered to have satisfied the Federal requirement because state overtime is currently compensated at a rate that matches Federal overtime. But as of 2019, Sunday overtime pay will no longer meet this requirement. So in the above example, the associate will be paid a total of 40 regular hours PLUS 8 hours at 1.40 times their regular rate of pay to meet state law, PLUS 3 hours at 1.50 times their regular rate of pay to satisfy Federal law. In 2020, the Sunday overtime rate will be 1.30 times the regular rate of pay and will continue to decline until 2023.
Even if you’re not worried about the changes in Sunday and holiday pay now, your payroll manager is almost certainly losing sleep over this. A good employee time tracking application will help you keep up with the hours worked, and a good payroll system will automate changes in Sunday and holiday compensation. If you can get both functions in the same software package, like iSolved Payroll, these changes will be made with much less stress.
Family and Medical Leave
Under the Family Medical Leave Act or FMLA, employees who meet certain criteria may take up to twelve weeks of unpaid leave for either their own serious illness or the serious illness of a close family member. This law applies to any employer with more than 50 employees within 75 miles.
The Grand Bargain won’t change FMLA. But it does expand the definition of who is entitled to leave. Under the Grand Bargain, all employees will be eligible for leave, regardless of hours worked or length of service, and the definition of “immediate family” has been expanded to include domestic partners, parents-in-law, grandparents, grandchildren, and siblings. Also, under the new state law, eligible employees can take 12 weeks for a family member’s illness AND 20 weeks for their own illness. The total leave time is not to exceed 26 weeks in a year. Leave taken under the Massachusetts leave program will run concurrently with FMLA. When compared to the Family Medical Leave Act, these changes are huge. But they pale in comparison to the biggest change brought about by the Grand Bargain, and that’s the creation of Paid Family Leave.
Paid Family Leave
The Grand Bargain calls for the creation of the Department of Family and Medical Leave, within the Department of Labor and Workforce Development. The new department will be responsible for administering the paid leave program.
Beginning on July 1, 2019, all employers with more than 25 employees must begin contributing .63% of each employee’s earnings to the paid leave trust fund. When an employee goes on medical leave for their own illness, the employer may deduct 40% of their contributions. If an employee takes leave for a family member, the employer may deduct 100% of their contribution to the fund. Please note that the amounts of contribution are subject to change.
Employers should be aware of another aspect of the Grand Bargain’s changes to leave laws: Beginning on July 1, 2019, employers are required by law to post a notice about the protections and benefits of Massachusetts leave laws. Employers are also required to provide a written notice about taking paid leave within 30 days of the start of their employment. Employees who do not fill these requirements will face substantial fines.
The Grand Bargain tries to address a lot of changes at the same time. Most of the changes go into effect over a period of time, beginning next January. Now is the time for employers to review their HR and Payroll Software to make sure that they will be in compliance with the laws
For more information on how Commonwealth Payroll & HR can work with you on your strategic human resources planning, call us today at 877-245-1159