New Year Brings Uncertainty for Employers
December 31, 2016
By Russ Sullivan
As Massachusetts employers prepare for a new federal administration, the only certainty is uncertainty.
Employers who have spent valuable time in recent years educating employees, engaging consultants and altering business processes to meet regulations developed under the Obama administration now face the prospect that some of these rules may be delayed, overhauled or repealed under the incoming Trump administration and the Republican Congress.
Nothing represents this uncertainty more than the November court injunction of the US Department of Labor’s final regulations increasing the salary threshold for employers seeking to exempt employees from overtime.
The regulations, finalized in May 2016 with a December 1 effective date, more than doubled the minimum annual salary for employees exempt from overtime from $23,660 to $47,778. The higher threshold affected many exempt employees, particularly front-line supervisors, assistant managers and recent college graduates.
Employers responded by increasing the pay for some employers; reclassifying others as non-exempt and eligible for overtime; instituting new time-reporting procedures; limiting after-hours work from home; and purchasing time-reporting software and hardware. Just one week before the regulations were to take effect, and well after many employers had incurred costs, a federal district court judge in Texas issued an injunction indefinitely delaying the effective date. As a result, employers who in good faith committed to compliance now find themselves unable to undo salary changes and financial commitments that may affect their ability to compete with those employers who either delayed or ignored compliance.
The Affordable Care Act, commonly referred to as ObamaCare, has been defined by uncertainty since the day it passed Congress (and when then-House Speaker Nancy Pelosi famously stated that it was now time to read the bill to find out what is in it). Since that date, the Obama administration has issued, modified and delayed regulations on multiple occasions. Employers found themselves in a constant game of hurry up and wait. As recently as November 2016, health-care reporting regulations were delayed from January 31, 2017 to March 1, 2017.
The incoming Republican Congress has identified repeal of ObamaCare as a priority. President-elect Trump has signaled a willingness to retain certain provisions of ObamaCare, including the prohibition on exclusions for pre-existing conditions and the ability to retain coverage for dependents to age 26.
Massachusetts political leaders have signaled an intent to address potential gaps in health-care access and affordability should the federal government repeal ObamaCare in whole or in part. Massachusetts employers who have invested significant hours and expense to comply first with Massachusetts Health Care Reform and then ObamaCare, may have to comply with yet another slate of health care regulations.
On the state level, Governor Baker in August signed into law the Massachusetts Pay Equity Act providing equal pay for employees performing comparable work. The act moves equal pay analysis from the comparison of employees in the same position to employees performing comparable work, regardless of their job title. Comparable work is defined as work requiring the same skill, effort, responsibilities and performed under the same working conditions. There are also provisions prohibiting adverse actions against employees who share or inquire into wage information.
The law is not effective until July 1, 2018. Many employers, however, will find that they are challenged to complete all the necessary compliance tasks in time. AIM recommends that employers start now by doing the following:
- Remove all references to salary history from employment applications.
- Train all hiring personnel to immediately stop inquiries into an applicant’s pay history.
- Review all policies and handbooks to ensure that there are no prohibitions regarding employee sharing of wage information.
- Conduct a preliminary comparable-pay analysis to uncover pay differentials between men and women performing comparable work.
- Take a deeper look at the positions that you have identified as comparable to ensure that the grouped positions share the same skills, effort and responsibilities and are performed under the same working conditions.
- Write and implement job descriptions to reflect the skill, effort, responsibilities and working conditions for each position.
- Develop and implement a strategy to eliminate pay inequities.
- Watch for guidance from the Attorney General’s office clarifying how to demonstrate proper self-evaluation, identification of pay inequities and appropriate progress towards elimination of pay differences.
January 1 also marked the third and final annual increase to the Massachusetts minimum wage.
Effective with the New Year, the minimum wage in Massachusetts for non-tipped employees is $11 per hour. Most employers anticipate little impact on their current pay practices. But groups including the Massachusetts Communities Action Network and the Raise Up Massachusetts coalition plan to push lawmakers to adopt a $15-an-hour minimum wage in the upcoming legislative session and, if unsuccessful, seek a 2018 ballot referendum question.
Finally, the November 2016 ballot referendum legalizing recreational marijuana in Massachusetts has employers reevaluating their drug-free workplace and pre-employment testing policies. AIM has advised employers to update these policies while maintaining a strict “no tolerance” approach to reporting to work under the influence.
Employers should adopt a wait-and-see attitude towards longer range compliance issues such as the Cadillac Tax on health plans. This tax on health plans with premiums above certain thresholds is scheduled to take effect in 2020. However, opposition exists on both sides of the aisle, with Democrats fearing the tax will lead to the trimming of health care benefits and Republicans opposing any tax on businesses. Perhaps there is room for agreement and the possibility for a little certainty after all.