The Massachusetts Bar Association's Young Lawyers Division is
designed for attorneys in practice for 10 years or fewer (or since
no earlier than 2005). Many of these young lawyers are employed in
solo practices and small firms as a result of their difficulty
finding employment during and after the Great Recession of
2007-2009. Now that the economy is recovering, these young lawyers
have an opportunity to expand their legal practices.
Careful consideration should be paid, however, to the potential
economic cost of expansion, particularly in light of changes in
Massachusetts and federal employment law. Worthy of consideration
are:
Recent increases to the Massachusetts minimum wage.
Leave that certain Massachusettsemployers are now required to
provide.
The Department of Labor's recent proposals to expand overtime
regulations.
These laws in particular stand to impact the bottom line of solo
practices and small firms at which many young lawyers are employed,
and so should be afforded particular consideration prior to any
hiring or other expansion.
The impact of the increasing minimum wage
The first change of note is the increased Massachusetts minimum
wage. On Jan. 1, 2016, Massachusetts' minimum wage rose from $9 per
hour to $10 per hour. The minimum wage will increase again on Jan.
1, 2017, rising to $11 per hour (M.G.L. c.151, §§1, 2, 7).
The increased minimum wage will necessarily result in an
increased cost of labor, which may affect solo practitioners and
small firms disproportionately, as small businesses tend to hire
more minimum wage and near-minimum wage employees than other
businesses. Businesses that pay employees more than the minimum
wage are likely to feel an economic impact as well. According to
the Brookings Institute, raising the minimum wages has a ripple
effect, leading to increased hourly wages for not only minimum wage
earners, but also for near-minimum wage earners. The Massachusetts
Budget and Policy Center estimates that 20 percent of Massachusetts
workers will be directly or indirectly affected when the minimum
wage increases to $11 in 2017.
While larger firms can often offset these increased labor costs
with higher hourly rates or by simply absorbing the economic
impact, this approach may not be feasible for smaller firms. It may
be, however, that increased labor costs will at least be partly
offset for smaller firms by the reduced worker turnover and
increased worker productivity expected to result from the rising
minimum wage.
It is important to note that firms that do not pay minimum wage
or near minimum wage may also be impacted by the rising minimum
wage, as they may indirectly benefit if workers with larger incomes
choose to spend part of their additional wages on legal
services.
The potential effects of Massachusetts' scheduled minimum wage
increases are hotly disputed. Small business owners themselves
disagree on the nature of any impact that raising the minimum wage
will have. While the United States Department of Labor claims that
the majority of small business owners nationwide support increasing
the minimum wage, many small business owners oppose the changes, on
the belief that any benefit derived from the increased minimum wage
will not offset the cost associated with it. While the topic is
disputed, it is clear that small firms in particular should
consider the potential impact the rising minimum wage will have on
any expansion plans, and in particular, any hiring plans.
The impact of recent changes to employee leave
laws
Firms considering expansion and hiring should also consider the
potential impact of changes to employment leave, including leave
provided under the new earned sick time law (M.G.L. c.149, §148C),
the Parental Leave Act (M.G.L. c.149, §105D) and the new Domestic
Violence Leave Act (M.G.L. c.149, §52E).
Under the new earned sick time law, Massachusetts employees
generally earn one hour of sick leave for every 30 hours worked, up
to a total of 40 total accrued hours. Employers with 11 or more
employees must provide paid sick leave, while employers with fewer
than 11 employees may provide either paid or unpaid sick leave.
Under the Parental Leave Act, employers must now generally
provide both male and female employees with eight weeks leave
(either paid or unpaid) following the birth or adoption of a child.
The law formerly only required that female employees be given such
leave.
Under the Domestic Violence Leave Act, employers with 50 or more
employees are now required to provide up to 15 days of leave (paid
or unpaid) in a 12 month period to allow employees to address
issues relating to abusive behavior directed against themselves or
a family member.
The overall impact of these changes has yet to be determined.
Like the rising minimum wage, one direct impact will likely be
increased labor costs. The new earned sick time law alone will cost
Massachusetts businesses approximately $198 million, according to
the Institute for Women's Policy Research (IWPR). This amount
represents a 19 cent per hour increase for employees receiving paid
leave under the law.
Like with the minimum wage, increased labor costs may ultimately
be offset by other factors. For example, the IWPR estimates that
costs resulting from the Earned Sick Leave Act, will be more than
fully offset by reduced turnover, fewer sick days (due to the
decreased spread of illness at the workplace) and higher employee
productivity.
Also of note is the fact that the changes do not apply to all
small businesses. Again, the Domestic Violence Leave Act only
pertains to employers with more than 50 employees, and the Earned
Sick Leave Act only requires paid leave for employers with eleven
or more employees. For firms with fewer employees, the impact may
be more limited.
The potential impact of proposed Department of Labor
regulations
Solo and small firms should also consider proposed changes to
employment laws, including the Department of Labor's (DOL) proposed
changes to overtime regulations issued under the Fair Labor
Standards Act (FLSA).
The FLSA's overtime regulations exempt from overtime pay certain
employees who meet minimum tests related to their primary job
duties (the so-called "primary duties test") and who are paid a
salary over a specified minimum amount. Currently, the standard
salary level required for exemption is $455 per week (or $23,600
per year). The DOL proposes to more than double the standard salary
required for exemption, to $970 per week (or $50,440 per year), and
proposes the adoption of a mechanism which would automatically
update the standard salary for exemption going forward.
Raising the standard salary level for exemption may not be as
impactful for solo and small firms as for other small businesses,
as law firm employees who would be affected under any new
regulations are fairly limited. For example, the DOL has repeatedly
held that paralegals are non-exempt no matter the base salary,
based on their primary duties. Similarly, legal secretaries and
receptionists generally are and would remain non-exempt, again
based on their duties. In contrast, lawyers are specifically
exempted by regulation, no matter their salary (29 C.F.R.
§541.304). These employees are unlikely to be directly affected by
any change in the FLSA regulations.
Some law firm employees will be affected by the proposed
changes, however. Most notably, it is expected that law clerks,
summer associates and legal interns who have not already obtained a
law degree, and who make less than $970 per week (or $50,440 per
year) would be entitled to overtime under the proposed changes.
A bright future for young lawyers
The future looks bright for young lawyers. Using the same
entrepreneurial skills and innovative approaches they used in
job-hunting immediately after the Great Recession, young lawyers
are growing their firms and expanding their opportunities in the
recovering economy. To ensure the continued success of this growth,
young lawyers, and specifically solo practitioners and those
employed in small firms, should take particular care to consider
the impact of the ever-developing world of employment law.