Owning and managing a business is an incredibly rewarding endeavor, but it also comes with its fair share of challenges. Beyond the day-to-day operations, there are numerous aspects to consider, especially when it comes to human resources and compliance. As an employer in Massachusetts, it’s crucial to navigate both state regulations and federal laws to ensure your business stays in compliance. In this article, we will dive into what is required of a Massachusetts employer.
At Paper Trails, we understand the importance of keeping business owners informed about their obligations to federal and state agencies. That’s why we’ve put together this article! By the time you finish reading, you’ll have a thorough understanding of the compliance landscape and the specific laws that your business needs to adhere to.
Our main goal is to empower business owners like you by providing valuable insights and guidance on current and forthcoming compliance challenges. We believe that staying informed is the key to success in today’s ever-changing business environment. So, let’s dive in and explore the high-level details of the laws that affect your business in Massachusetts. Get ready to navigate the complexities with confidence!
Federal requirements of employers
Before getting into the intricacies of business requirements in Massachusetts, it is crucial to first grasp the fundamental obligations at the federal level that are applicable to all employers, regardless of their operational state. By familiarizing ourselves with these overarching regulations, we can establish a strong foundation for understanding the specific obligations that businesses in Massachusetts must adhere to.
Payroll taxes
The first things employers must be aware of is their payroll tax responsibilities. There are two things employers must do in terms of taxes.
- deduct a portion of employees pay to pay the tax liability on their behalf. This includes:
- federal and state income tax based on your employees W4 form.
- the employee portion of social security and Medicare taxes.
- pay the company share of payroll taxes on each employee. This includes:
Employee classifications and overtime
Next, employers must have a solid understanding of how to accurately classify their employees. It is vital to determine whether an employee falls under the W-2 category or the 1099 independent contractor category. This classification plays a significant role in defining the employment status and obligations of the individuals involved. Once the classification is established, employers then face the decision of whether the employees should be considered non-exempt or exempt. The distinction between these two types of employees is essential to ensure compliance with labor regulations.
To explain the differences between W-2 employees and independent contractors, let’s explore their unique characteristics. A W-2 employee is typically someone who works under the direct control and supervision of their employer. They follow a set schedule, receive training, and are provided with the necessary tools and resources to carry out their tasks. On the other hand, a 1099 independent contractor operates with a higher level of autonomy. They are often hired for specific projects or services and have more control over how and when they complete their work. They also provide their own tools and equipment.
Now, let’s focus on the non-exempt and exempt classification for W-2 employees. Non-exempt employees are paid hourly and are entitled to certain labor protections, including overtime pay. According to federal requirements, if a non-exempt employee works more than 40 hours in a workweek, they must be compensated at a rate of 1.5 times their regular pay rate for the additional hours worked. Additionally, employers must be mindful of employees who hold multiple positions with varying pay rates. In such cases, the blended overtime method must be implemented. This approach considers the different pay rates for each position and calculates overtime pay accordingly. Exempt employees are paid a salary and are not eligible to receive overtime pay. They are paid the same amount no matter the number of hours worked. To be consider exempt, employees must work certain positions and perform certain duties.
Federal labor laws
There are certain federal labor laws that must be followed depending on the size of an organization. Labor law posters must be displayed in the workplace in an area visible to employees. These laws include:
Employers with 1+ employee
- Fair Labor Standards Act (FLSA)
- Immigration Reform and Control Act (IRCA)
- Equal Pay Act
- Civil Right Act & Title VI
- Employment Retirement Income Security Act (ERISA)
- Occupational Safety and Health Act (OSHA)
- Health Insurance Portability and Accountability Act (HIPAA)
- Uniformed Services Employment and Reemployment Right Act (USERRA)
- National Labor Relations Act (NLRA)
- Employee Polygraph Protection Act (EPPA)
15+ employees
20+ employees
50+ employees
100+ employees
- Worker Adjustment Retraining Notification Act (WARN)
- EEO-1 Survey Filing (Title VII, Civil Rights Act)
What is required of a Massachusetts employer?
In addition to the above federal regulations, Massachusetts has additional labor requirements that businesses must follow.
Minimum wage
For 2024, non-exempt employees must be paid a minimum of $15.00 per hour in Massachusetts. Additionally, it is important to note that tipped workers must earn at least $6.75 per hour.
For exempt or salaried employees, the requirements are slightly different. In Massachusetts, they must earn a minimum of $684 per week, or $35,568 per year, adhering to the federal standard. However, to be eligible for exemption, there are specific duties tests that must be met. These tests ensure that exempt employees truly hold managerial or executive positions that justify their exemption from certain labor laws.
Workers’ compensation
All employers operating in Massachusetts are required to carry workers’ compensation insurance for their employees and themselves if they are an employee of their company. The requirement applies no matter the number of hours worked or the number of employees. The only exception is for domestic employees who must work at least 16 hours a week to be covered under a workers’ compensation policy.
Generally, benefits received from workers’ compensation insurance are not taxable. Only a portion of benefits may be taxed if employees are also receiving Social Security Disability Insurance (SSDI) benefits. From a business standpoint, employers may deduct insurance premiums on their tax returns. The insurance is used to cover things like:
- Lost wages
- Medical bills
- Rehabilitation
- Job retraining
- Disability benefits
- Funeral services
Each business pays a different premium for workers compensation insurance. The final amount is based on the business’ gross paid wages and employee job classification codes.
Mass labor laws
Just like federal labor laws, Massachusetts has laws that businesses of certain sized must adhere to.
Employers of all sizes
- Pay frequency laws require nonexempt employees be paid weekly or biweekly. Exempt employees may be paid biweekly or semimonthly, unless the employee elects to be paid monthly.
- Final wages are due to employees as follows:
- An employee who resigns must be paid in full by the following regular payday or, in the absence of a regular payday, by the following Saturday.
- A terminated (fired or laid off) employee must be paid all wages due and owing on the day of termination.
Upon separation from employment, employees must be compensated for unused vacation time that they have earned.
- Under the Massachusetts health care continuation law, group health policies issued to employers with two to 19 employees must include continuation coverage. Continuation coverage must be extended to employees and their covered dependents who experience a loss of coverage as a result of a qualifying event. Massachusetts law mirrors the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) with regard to qualifying events and timelines. Employers with more than 20 employees fall under federal COBRA guidelines.
- All employers must partake in Massachusetts paid family and medical leave (PFML). This allows employees that are eligible to take up to 26 weeks of family and medical leave per year. PFML benefits are paid for by a combination of employer and employee contributions. Employers with over 25 employees must pay into the PFML fund. Those with under 25 employees only withhold and remit the employee portion of this tax. PFML may be taken for the following reasons:
- Family leave for:
- Bonding with a newborn child, newly adopted child or newly placed foster child;
- A qualifying exigency related to a family member’s active duty or impending call or order to active duty in the Armed Forces;
- Caring for a family member who is a covered servicemember; and
- The serious health condition of a family member; and
- Medical leave for the covered individual’s own serious health condition.
- Family leave for:
Employers with 5+ employees
- The Massachusetts Pregnant Workers Fairness Act (MPWFA) requires an employer with six or more employees to provide reasonable accommodations for an employee’s pregnancy or pregnancy-related condition. A reasonable accommodation includes, but is not limited to:
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- Rest breaks;
- Time off;
- Equipment or seating;
- Job restructuring;
- Light duty;
- Assistance with manual labor; and
- Modified work schedule.
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- Massachusetts Ban the Box laws requires employers with six or more employees is prohibited from inquiring about a job applicant’s criminal history on its initial written application form. An employer may inquire about criminal history later in the application process (e.g., in an interview). Employers that are statutorily prohibited from hiring ex-offenders are exempt from this provision.
- The Massachusetts Parental Leave Act (MPLA) applies to employers with six or more employees. It provides for up to eight weeks of unpaid leave for:
- The birth of a child;
- The adoption of a child under the age of 18;
- The adoption of a child under the age of 23 who is mentally or physically disabled; or
- The placement of a child with the employee under a court order.
- Employees are eligible for the leave if they:
- Are employed full-time; and
- Have completed the initial probationary period set by the employer (not to exceed three months) or, if the employer does not have a probationary period, have been employed for at least three consecutive months.
10+ employees
- Under the Massachusetts Earned Sick Time Law (MESTL), an employer with 11 or more employees must provide paid leave to eligible employees. Smaller employer must provide unpaid leave to eligible employees. Eligible employees may take sick and safe leave for the following reasons:
- Diagnosis, care or treatment of the employee’s or a covered family member’s illness, injury or medical condition;
- Preventive care or routine medical appointments for the employee or a covered family member; and
- To address the effects of domestic violence against the employee or the employee’s child.
An employee is eligible for sick and safe leave if his or her primary place of work is in Massachusetts, regardless of where the employer is located.
50+ employees
- Small necessities leave
- Domestic violence leave
- Any employer closing a facility (i.e., a plant, factory or other business location with 50 or more employees located within Massachusetts) must promptly report the impending closure to the director of the Massachusetts Department of Labor and Workforce Development.
Conclusion
That’s a lot of labor laws to worry about as an employer. Hopefully this article has helped. You should now have a path forward and know which labor laws affect your business based on your employee count. If you need assistance navigating these challenges, we are happy to help! You can download our HR Compliance Guide here or contact our sales team here today to learn more.