By Mary O’Neal, Esq.,
I have been hearing a great deal about a fairly new Massachusetts law providing paid leave to employees who take leave for illness or family needs. What can you tell me about this law and what are my obligations as an employer?
As most employers are aware, Massachusetts enacted a paid family and medical leave act (“Act”) that requires contributions by both the employer and all employees, the benefits under which will go into effect gradually. By way of background, the Act was enacted last June. It provides that nearly all employees will be eligible for up to 20 weeks of job protected paid medical leave and 12 weeks of job protected paid family leave per year starting in 2021. The Act is being managed and overseen by the newly formed state agency known as the Department of Family and Medical Leave (“Department”). The benefits will be paid from a trust funded by employees and, depending upon employer size, employers as well, and employees’ contributions will be withheld from their pay. Though the benefits will not be available to qualifying employees until 2021, at the earliest, employers and employees are obligated to take certain actions now.
Required Contributions. The required contribution rate for large employers, defined below, is presently 0.75% of eligible wages. Contributions must be collected beginning on October 1, 2019 and must be remitted to the Department by January 31, 2020, and quarterly thereafter. Of the 0.75% to be collected, 0.62% is allocated to the medical leave contribution and 0.13% is allocated to the family leave contribution. Of the medical leave contribution (being 0.62%), large employers must cover 60% of the amount (and more if they wish), but the most employees are responsible for is 40%. Of the family leave contribution (being 0.13%), up to 100% of the family leave contribution can be withheld from a covered individual’s wages (0.13% of eligible wages), and the employer is not obligated to contribute, but may do so if it wishes.
The required contribution rate for small employers, defined below, is presently 0.378% of eligible wages. This contribution rate is less because small employers are not required to pay the employer share of the medical leave contribution, reducing the total contribution amount. Contributions must be collected beginning on October 1, 2019 and must be remitted to the Department by January 31, 2020, and quarterly thereafter. Small employers are under no obligation to contribute themselves. However, they may elect to cover some or all of the covered individuals’ share.
Employers. Large employers are those with 25 or more covered individuals. Employers with fewer than 25 covered individuals are considered small employers, and though they are not required to pay the employer’s share of contributions, they must still remit payment on behalf of their covered individuals.
Limit on Eligible Wages. Wages on which contributions are calculated are capped by the Social Security income limit, which is currently set at $132,900.
Covered Individuals. A covered individual, for whom contributions must be deducted, collected and paid to the Department, include W-2 employees and independent contractors. Specifically, covered individuals include:
- Massachusetts W-2 employees (full-time, part-time, or seasonal). Generally, the Department follows the same eligibility criteria as the unemployment insurance program in Massachusetts. If an employer is required to report a W-2 employee’s wages to the Department of Unemployment Assistance (DUA), those employees should be counted. These employees do not need to reside in Massachusetts to be covered.
- Massachusetts 1099-MISC contractors. Generally, an MA 1099-MISC contractor is an individual or sole proprietor who resides and performs services in Massachusetts for whom the entity contracting for the services is required to report payment for services on IRS Form 1099-MISC. These individuals must be performing services in the trade or business of the entity contracting for the services or be regularly engaged to perform services for the entity contracting for the services.
The inclusion of independent contractors as covered individuals has cause a great deal of confusion. In order for a 1099-MISC contractor to be considered part of the entity’s MA workforce count, they must:
- Perform services as an individual entity
- Live in Massachusetts
- Perform services in Massachusetts
If a contractor meets these criteria, the entity contracting for the services should count them as a member of the entity’s MA workforce.
It is also important to note that MA 1099-MISC contractors count toward an entity’s total number of covered individuals only if they make up more than 50% of the entity’s total MA workforce (MA W-2 employees and MA 1099-MISC contractors combined).
Notice to Employees. Employers are required to provide written notice to employees of the rights and benefits available under the Act by September 30, 2019. A form of notice is available for employers’ use on the Department’s website. Employers are also required to collect signed acknowledgments of receipt of the notice from Massachusetts W-2 employees and Massachusetts 1099-MISC contractors
Poster. Employers must display the Paid Family and Medical Leave workplace poster in a highly-visible location. This, too, is available on the Department’s website.
Interplay Between Act and Other MA and Federal Laws. The Act is a stand alone law that apples regardless of whether an employer is also covered by the federal law known as the Family and Medical Leave Act (“FMLA”), which applies to employers with more than 50 employees. The Act provides greater benefits (in terms of leave duration) to many more individuals (such as an employee’s parent-in-law) than does the FMLA. It is important for employers who are covered by both to understand the differences. In addition, the Act does not supplant other Massachusetts laws such as the paid sick leave law that went into effect in July of 2015. This law provides that employees are entitled to earn paid or unpaid sick leave at the rate of one hour for each 30 hours worked. Employers of 11 or more employees must pay its employees for the sick leave earned. The Act provides that benefits are not available to covered individuals until after a 7 day elimination period. As a result, an employee may be permitted to use her earned paid sick leave under the sick leave law, and be paid for the 7 day elimination period, and then receive benefits under the Act. The interplay is complicated and employers are advised to consult with knowledgeable counsel to assist them in fully understanding the complicated vagaries of the many different laws that apply.
Mary O’Neal, Esq., is a partner in the Boston law firm of Conn, Kavanaugh, Rosenthal, Peisch & Ford LLP. Send questions to firstname.lastname@example.org.