Client Alert: Massachusetts Employment Law Update

CLIENT ALERT

Massachusetts Employment Law Update

By Attorneys Karen Whitley and Jane Pyatt

October was a busy month for employment law in Massachusetts. Although the federal government shutdown brought proceedings at the EEOC and Department of Labor to a halt, there were several employment law developments of note at the state level.

New PFML Tax Obligations for Employers Begin in 2026

In October, employers received new guidance from the Massachusetts Department of Paid Family and Medical Leave (“DFML”) about the tax treatment of Paid Family and Medical Leave (“PFML”) benefits. The DFML’s guidance followed long-awaited IRS Revenue Ruling 2025-4 (“IRS Ruling”), issued in early 2025. The IRS Ruling clarified that employers participating in a state-administered PFML program must remit federal employment taxes on certain leave benefits and report these benefits on an employee’s Form W-2. Under the IRS Ruling, whether benefits are subject to federal employment taxes depends on the type of leave taken as well as whether the benefit constitutes a required contribution by an employer.

In Massachusetts, employees must contribute to the state PFML program through wage deductions which are allocated to “medical leave” benefits and “family leave” benefits. Employers with fewer than 25 employees collect those contributions and send them to the DFML (unless they use a private plan). Employers with 25 or more Massachusetts employees, however, must both collect employee contributions and pay an employer contribution of approximately 60% of the total required contribution attributable to medical leave benefits.

Starting on January 1, 2026, the amount of any medical leave benefits received by an employee which are attributable to the required employer contribution will be subject to federal and state income tax and employment taxes. The employer must report these medical leave payments on an employee’s Form W-2. However, the IRS Ruling did not change the tax treatment or reporting of family leave benefits, which are includable in gross income, though not wages; as a result, those benefit amounts are subject to federal and state income taxes, but are not federal employment taxes. DFML will continue to report family leave benefits paid to an employee on Form 1099-G.

To prepare for the implementation of the new tax requirements, employers should ensure they have access to the DFML’s Employer Portal, where the taxable portion of employees’ PFML benefits will be reported. Employers should also consult with tax professionals, payroll providers, and legal counsel to determine whether they will be affected by the IRS Ruling and to ensure preparedness.

PFML Maximum Weekly Benefit Amount and Contribution Rates for 2026

The DFML also released its annual update to PFML contribution rates and the maximum weekly benefit amount available to employees.

Beginning on January 1, 2026, the maximum weekly PFML benefit an employee may receive will be $1,230.39. Employers should ensure they update PFML notices to align with the new maximum benefit amount.

While the maximum weekly leave benefit will increase in 2026, the contribution rates owed by employees and larger employers will remain unchanged.

Pay Transparency Act Disclosure Requirements Began on October 29, 2025

Enacted in 2024, An Act Relative to Salary Range Transparency (“Pay Transparency Act”) was designed to increase pay equity in the Commonwealth by introducing pay range disclosure and filing requirements for covered employers.

As of October 29, 2025, the Pay Transparency Act requires covered employers to disclose pay ranges for employment positions in Massachusetts in three ways:

• in job postings;
• to a current employee who is offered a promotion or transfer; and
• to current employees upon request.

In making these disclosures, the employer may give a range that extends from the lowest to the highest annual salary or hourly wage the employer reasonably and in good faith believes at the time of the posting it would pay for the advertised job, promotion, or transfer opportunity.

Employers with 25 or more employees who have a primary place of work in Massachusetts are required to comply with the disclosure requirements.  Importantly, this includes employers based in other states who have employees working in Massachusetts.

SJC Rules Retention Bonuses Are Not Wages

In Nunez v. Syncsort, the Massachusetts Supreme Judicial Court (“SJC”) held that retention bonus payments are not “wages” under the Massachusetts Wage Act (“Wage Act”).

Whether compensation falls within the definition of wages under the Wage Act has important implications for employers. The Wage Act outlines specific requirements for the timing of wage payments and requires that wages be paid out to an employee upon termination. In addition, employers who violate the Wage Act are subject to treble damages.  However, not every form of compensation paid to an employee falls under the Wage Act’s definition of wages. For example, accrued and unused sick time is not considered wages while accrued and unused vacation time does constitute wages.

In Nunez v. Syncsort, the SJC further clarified the distinction between wages and non-wage payments. The case involved Syncsort Inc. (“Syncsort”), a data management software company, and Carlos Nunez (“Nunez”), Syncsort’s Senior Director of Finance. To incentivize Nunez’s continued employment, the parties entered into an agreement whereby Nunez would receive a retention bonus if he was still employed with Syncsort on the agreed upon retention dates. In January 2021, Nunez was notified that he would be terminated due to a reduction in force. His termination date, however, was one of the agreed-upon retention dates, meaning that Syncsort owed him the retention bonus. While Syncsort did pay Nunez the retention bonus, it sent the payment eight days after Nunez’s termination date. Nunez argued the retention bonus constituted wages, meaning that the late payment violated the Wage Act’s requirement that a discharged employee be paid all wages in full on the day of termination.

The SJC decided that because a retention bonus payment is not made solely in exchange for an employee’s labor or services, and instead, is contingent upon an employee’s continued employment, such payments are not wages and the late payment did not violate the Wage Act.

As the government shutdown comes to an end, we can expect a busy fall, both at the state and federal level. Stay tuned!

Attorneys in our Labor & Employment group are available to assist employers in understanding and complying with the obligations arising from each of the developments above. 

This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice.