February 26, 2020

Law at Work: Changes in Employment Laws

By Kathleen R. O'Toole
Originally published by Cape & Plymouth Business Magazine on February 26, 2020.
View on Cape & Plymouth Business website here.

Keeping an eye on changes and trends in employment law is an excellent way for businesses to mitigate risk. Benjamin Franklin famously said, “An ounce of prevention is worth a pound of cure.” This adage rings especially true in the frequently changing area of employment law, where simply tracking and complying with changes to the law can significantly reduce the risk of litigation later.

In the spirit of Mr. Franklin, here is a roundup of some hot topics in employment law in 2020.

Paid Family And Medical Leave

At the end of 2019, the National Defense Authorization Act (NDAA) was passed by Congress and signed by the president. Included in this NDAA was a provision that offers 12 weeks of paid parental leave for civilian federal employees to use for the birth, adoption, or foster placement of a child occurring on or after Oct. 1, 2020.

The passage of paid parental leave for federal employees reflects a growing trend in both states and the private sector. Paid family leave policies at large companies, especially in the technology sector (e.g., Spotify, Amazon, Google), have trended upward sharply in recent years. Eight states (California, Connecticut, Massachusetts, Oregon, New Jersey, New York, Rhode Island, and Washington) and the District of Columbia have already passed some form of paid family and medical leave legislation. As more and more U.S. workers gain access to these benefits and the labor market stays tight, employees are more likely to look for competitive leave policies from their employers.

In Massachusetts, employers of all sizes will be impacted by the recent passage of the Commonwealth’s Paid Family and Medical Leave (PFML) program, which will be managed by the newly established Department of Family and Medical Leave (DFML). PFML is ramping up in 2020, with most benefits being made available to employees beginning on Jan. 1, 2021. At that time, most workers in Massachusetts will be eligible to receive up to 12 weeks of paid family leave and up to 20 weeks of paid medical leave through premiums paid by employees, employers, and the self-employed. Payment withholdings began on Oct. 1, 2019, and those contributions were due to be remitted to the Commonwealth on Jan. 31, 2020.

Only businesses who employed 25 or more covered individuals in their workforces in the previous calendar year are responsible for making employer contributions for those covered individuals. However, even businesses with less than 25 covered individuals are required to remit the covered individuals’ contributions to the state on their behalf. This means that any business in the Commonwealth with employees is impacted by the PFML.

New Insurance Products

Businesses seeking alternatives to participating in the Commonwealth’s system of withholding and remitting payments may offer their own plans, and apply for an exemption. To qualify for an exemption, an employer must have an approved private plan with paid leave benefits that are equal to or more generous than those provided under the PFML program. For businesses that elect to obtain a private plan, the DFML accepts applications for exemption on a rolling basis. Applications must be approved in the quarter prior to the quarter in which the exemption go into effect. Employers will need to submit an application annually to qualify for a private plan exemption.

Helpfully, in recent months, insurance companies doing business in Massachusetts have rolled out private plans that meet the PFML’s minimum requirements. These insurance policies are generally being offered by insurers who already offer short-term and long-term disability insurance products. On an ongoing basis, the Division of Insurance (DOI) is compiling a list of those insurance companies that are able to provide a PFML Declaration of Insurance that meets DFML standards. As of Jan. 15, 2020, the list includes 18 insurers. This may be a cost-effective option for many companies, and certainly worth a telephone call to your insurance broker.

When employees are able to use their leave benefits in 2021, navigating the interaction of PFML with other state and federal leave laws, such as the Family and Medical Leave Act (FMLA), the Massachusetts Earned Sick Time Law, and the Massachusetts Parental Leave Act (MPLA), as well as coordinating the leave with short-term and long-term disability policies, will likely generate confusion for employers and employees alike. As an example, PFML runs concurrently with leave taken under the MPLA and the FMLA if the leave is for a qualified reason under those laws. But, is it also possible for an individual to take PFML leave that would not be covered by another leave law, and take leave under another law at a different time in the year.

While employers cannot prepare for every possible scenario, employers can take concrete steps such as carefully tracking their employees’ family and medical leave, communicating clear policies in their handbooks, and ensuring the company is up-to-date with all required contributions to the DFML.

New overtime threshold

An increased salary threshold under the FLSA that went into effect on Jan. 1, 2020 means that employees earning between $455/week (i.e., $23,660 annually) and $684/week (i.e., $35,568 annually) may be newly eligible for overtime.

Employers should look to the FLSA to determine if they need to pay their employees overtime – i.e., time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. When writing job positions or evaluating existing staff, prudent employers should start with the presumption that a role is overtime-eligible, and then consult the FLSA guidance to determine whether any exemptions to overtime apply. Generally, exemptions are available for certain “white collar” workers, while “blue collar” workers are almost always overtime eligible. Employees who are entitled to overtime are known as “non-exempt,” while ineligible employees are known as “exempt.”

White collar employees are only exempt from overtime requirements if (1) they are paid on a salary basis in an amount that exceeds the statutory threshold (“salary test”); and (2) their job duties fall within the classifications of the applicable exemptions (“duties test”). The most common exemptions are for executive, administrative, professional, computer, and outside sales employees. Importantly, both the salary test and the duties test need to be satisfied for an employee to qualify as exempt from overtime.

Between 2004 and 2019, any employees who earned less than $455/week (or $23,660 annually) did not meet the salary test and, thus, were entitled to overtime, regardless of their job duties. As noted above, this salary threshold increased by nearly 50 percent beginning on Jan. 1, 2020. Now, all employees who earn less than $684/week (or $35,568 annually) do not meet the salary test and are entitled to overtime. In light of this substantial increase in the salary threshold, employers are well-advised to review their workforce to ensure that all of their employees are properly classified. Employers who fail to properly pay overtime violate the FLSA, as well as Massachusetts wage laws.

State minimum wage increases

As of Jan. 1, 2020, the minimum wage in Massachusetts increased from $12 to $12.75 per hour. The minimum wage for service employees or food service workers who customarily and regularly receive more than $20 per month in tips has also increased from $4.35/hour to $4.95/hour.

Ultimately, by Jan. 1, 2023, the standard minimum wage will increase to $15/hour, and the tipped minimum wage will increase to $6.75/hour.

Phasing Out of Sunday Premium Pay

Certain retailers in Massachusetts are required to pay employees a premium rate for work performed on Sundays per M.G.L. c. 136, § 6(50). For many years, that premium rate was 1.5 times an employee’s regular rate of pay, but as of Jan. 1, 2020, it will be only 1.3 times an employee’s regular rate. The rate will decrease by one tenth on each successive January 1st, until it disappears completely on Jan. 1, 2023.

Decisions from state courts are still shaping the analysis of whether a retailer is subject to premium pay requirements. For example, a recent decision out of Suffolk Superior Court (Galloway v. SimpliSafe, Inc., Docket No. 1784CV03796-BLS1, Dec. 18, 2019) found that customer service representatives working in a call center for a company that sells Internet-based home security systems are entitled to Sunday premium pay.

This is a noteworthy decision because the company was not operating a traditional “brick-and-mortar” retail store. The court’s expansive view of what constitutes a “store or shop” under the Sunday pay law may take business owners by surprise, though it is not especially unusual for the courts to interpret state wage and hour laws to protect workers. In light of decisions like this one, as well as the limited window of time that Sunday premium pay will be available to employees under Massachusetts law, retail businesses that conduct business on Sundays should ensure they are meeting their wage obligations.

Separate from the Sunday premium pay requirement for certain retailers, the law also contains a requirement that such retailers cannot require their employees to work on Sundays and cannot penalize any employees who refuse to do so. The gradual annual reductions in the premium Sunday rate has no bearing on this voluntariness requirement, which remains in full effect.

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Happy retirement to Beth O'Neal!

My talented and dedicated colleague, Beth O’Neal, who wrote “Law At Work” for many years, announced her retirement at the end of 2019. Beth is an exceptional lawyer, and utilized this space to offer comprehensive and expert legal updates to the Cape & Plymouth Business Magazine readership.

Cheers to my wonderful friend, mentor, and fellow Cape Codder, Beth, as she embarks on her post-law life. I am privileged to pick up where she left off, but will dearly miss having her by my side each day.

- Kate