With business reported on the rise in Massachusetts, it is important to review your employment policies and procedures to ensure compliance with both state and federal law.
With the increased business and the associated opportunities, it is important not to overlook essential functions in the recruitment, employment and deployment of your company’s employees. It would be worthwhile to revisit what’s legally required of your company as an employer when ramping up staff and hiring new employees.
Handy checklist
Here is a handy checklist of matters to review:

Appropriate I-9 documentation and verification;

Appropriate and timely execution of “W-4” forms;

Appropriate deductions for federal and state taxes, as well as unemployment benefits and workers compensation;

Completed and signed agreements, such as confidentiality agreements, CORI checks, drug testing, deferred benefit plans, and medical insurance;

Keep track of population for ERISA/U.S. census reporting;

Gender, race and ethnicity tracking for potential state and federal credits;

Reexamination of application, update of sexual harassment policies and periodic review and testing for compliance with benefit and compensation plans.
Remember, employee FICA withholding “restarted” on Jan. 1, as well as recertification of many insurance policies, contracts, employee benefits years, and the like.
Now is also a good time to determine if there is an advantage to terminating pending employment claims after the first of the year.

Health Care Reform Law
The Massachusetts Health Care Reform Law of 2006 imposes new mandates on Massachusetts employers. Originally filed to preserve $400 million in federal funding, the law requires all individuals to obtain healthcare coverage and imposes additional requirements on all Massachusetts employers as well.
Although the law takes effect on July 1, it is prudent to review the proposed requirements in comparison to your existing employee healthcare plans so that you can plan accordingly.
The law applies to all employers with 10 or more “full time equivalent employees” (defined as employees who work 35 hours or more a week). Employers that do not make a “fair and reasonable premium contribution” for their full-time employees healthcare costs are subject to a penalty.
There are two tests to determine if an employer’s contribution is fair and reasonable: (1) 25 percent of all employees participate in the employer’s healthcare coverage (primary test); and (2) the employer contributes at least 33 percent of the healthcare coverage costs (secondary test). The penalty for failing to meet either of these tests would be the lower of (1) $295 per employee (all employees, not just full time); or (2) the sum of the fair share contribution and the per employee cost of unreimbursed physician care.
The second formula is very complex and unpredictable to assess a value. Most experts believe the lower of the two penalties would be $295 per full-time equivalent. This assessment will be pro-rated for part-time employees working less than 2,000 hours per year.
This new health care law has been extremely confusing. As an employer, you need to determine whether you already meet either of the primary or secondary tests. If you meet either of these tests, you need not do anything more at this time. However, you should periodically evaluate your plan so that you remain in compliance throughout the entire year (it is possible, as employees leave the payroll, you may fall under the 25 percent participation requirement).
If you fail either of these tests, you need to evaluate your approximate exposure and the costs of complying with the law. As with all new legislation, there are many issues that remain unresolved and certainly subject to change, especially with the new administration.
There are other aspects of the health care law that may add to employer costs. One is a surcharge on employers if their employees receive state-funded health services that equal at least $50,000. The exact amount of that surcharge would be determined by assigning a percentage of responsibility to the employer based on the total number of admissions and visits the employees had during that fiscal year.
This surcharge could be totally bypassed by employers if they implement and offer a Section 125 plan to all of its employees. The Section 125 plan must be in place by July 1.
Every Massachusetts employer with more than 10 employees is required to file a report detailing their employees’ health insurance status. The report is known as the “Health Insurance Responsibility Disclosure” (HIRD).
This form essentially requires employers to report on whether they comply with the statutory provision requiring employers to adopt and maintain a Section 125 Plan. Any employee that declines this plan will be required to complete an “Employee Health Insurance Responsibility Disclosure” form.
The effective dates of these requirements under this legislation are Oct. 1, 2006, which marks the commencement of the computation of the employer’s fair share contribution period and July 1, for the adoption of Section 125 Plan.
This law is certain to be reviewed in the current legislative session. The legislation as it now appears is subject to change, as new bills are filed, new regulations proposed, new requirements mandated and these issues are debated in hearings next spring. It is extremely important to keep abreast of the proposed changes and the final legislation and regulations that finally evolve by July 1.
Kenneth P. Reisman is an attorney with offices in Boston and Newton, Mass. He focuses on employment law, corporate law, plan and policy review and business litigation, as well as real estate transactions, and estate planning. Ken is a director of the New England Corporate Counsel Association (NECCA), and has been an active member of NECCA since 1979. He can be reached at [email protected] or (617) 965-3535.
NECCA was founded by a small group of Route 128-area attorneys to allow in-house counsel representing a variety of companies to meet and discuss common issues. NECCA meets the first Wednesday of each month from September through June at the Best Western Hotel in Waltham, Mass. for a seminar and networking lunch. For more information about NECCA, please call Diane Pruente at (617) 965-0003 or visit www.necca.com.