As you toast the successes of 2019 and ring in 2020, don’t forget that there are a number of changes in the wage and hour laws that will affect you at the start of the next decade.
Increase in Minimum Wage Rate In 2018, Governor Charlie Baker signed into law the so-called “Grand Bargain” legislation which provided sweeping changes to certain wage laws. As part of the “Grand Bargain,” the Commonwealth’s minimum wage rate was set to gradually increase up to $15 per hour by 2023. Effective January 1, 2020, the minimum wage will accordingly increase to $12.75 per hour. The service rate for tipped employees who make more than $20 a month in tips will similarly increase to $4.95 per hour. Decrease in Sunday Premium Rate Also, as part of the “Grand Bargain,” the premium rates that must be paid to non-exempt employees who work for retail employers on Sunday will decrease to 1.3 times the regular rate of pay. Although this sounds like a “bargain,” in practice, for retail employees who receive commissions or bonuses because the change in the Sunday premium rate does not change the standard overtime rate, the calculation of Sunday pay at a rate that is different from the standard overtime rate of 1.5 times the regular rate of pay may be more complicated than employers expect. Retail employers should confirm that they are properly calculating the regular rate of pay on which they are basing Sunday premium pay.
Increase in Exempt Employee Salary Basis Pursuant to the Fair Labor Standards Act, certain executive, administrative, professional, and outside sales employees are exempt from minimum wage and overtime requirements. However, in order to qualify as “exempt,” the employee must (a) be paid on a salary basis and (b) meet certain tests with respect to their job duties and/or job qualifications.
In September 2019, the Department of Labor issued a “Final Rule” updating the regulations governing these exemptions. Starting January 1, 2020, the salary basis which an employee must be paid in order to qualify as “exempt” will increase from at least $455 a week to at least $684 a week ($35,568 on an annual basis). The FLSA permits employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary basis and to make a “catch-up” payment within one pay period after the end of a 52-week period if an employee did not earn enough in a given year to meet the required weekly salary basis level. If a “catch-up” payment is used to calculate the employee’s salary basis for the prior year, it cannot also be used to calculate the salary basis for the year in which it is actually paid.
The final rule did not change the duties tests applicable to the exemptions. The job duties and/or job qualifications which must be met to qualify as “exempt” are available from the US Department of Labor at https://www.dol.gov/whd/overtime/fs17a_overview.pdf.
Increase in Salary Threshold for Highly Compensated Employees The Final Rule also increased the salary level for “highly compensated employees” (HCE). Effective January 1, 2020, the salary threshold will increase from $100,000 to at least$107,432. Employers cannot meet the salary requirement of this test by paying an employee a $10,000 salary and $100,000 year-end bonus. In order to meet this exemption, the HCE must receive at least $684 per week on a salary or fee basis, without regard to the payment of non-discretionary bonuses or incentive payments. Conclusion Employers should take care to consider these wage and hour changes, since violations of the Massachusetts Wage Act may result in triple damages and attorneys’ fees award to employees who have not been paid the wages, including overtime where applicable, they are owed. Similarly, an employee who has been improperly classified as “exempt” may be entitled to overtime, and thus may also be entitled to remedies under the Massachusetts Wage Act.