Sometimes a budget is significant more for what it omits than what it includes.
That’s the case with the $34 billion spending blueprint approved Thursday by the Massachusetts Senate, which wisely chose to pass its budget without a proposal to allow the Department of Revenue to hire outside tax auditors and pay them a portion of what they recover.
The budget proposal also replaces two existing health care assessments with a new Employer Responsibility levy and does way with the Health Insurance Responsibility Disclosure (HIRD) form as Massachusetts prepares to replace its 2006 health care reform with the federal Affordable Care Act.
A conference committee will now hammer out differences between Senate and House versions of the budget for the Fiscal Year that begins July 1.
Senators adopted an amendment from Senator Michael Rodrigues, D-Westport, that struck the so-called “contingent contracts” provision that had been added to the budget in an outside section. Rodrigues noted on the Senate floor that the National Conference of State Legislators, the Securities and Exchange Commission and and the American Institute of Certified Public Accountants all reject the use of contingent contracts.
The AIM Taxation Committee had urged the Senate to reject the provision.
“The proposal was bad public policy,” said John Regan, Executive Vice President of Government Affairs at AIM.
“An auditor should have no financial stake in the outcome of an audit. The conflict of interest is readily apparent and should trouble policy makers concerned about tax fairness and Massachusetts reputation for its tax climate.”
The Senate budget represents a 4.2 percent spending increase over the current fiscal year. The document anticipates using between $500 million and $800 million in new taxes for transportation currently pending before a separate Beacon Hill conference Committee.
AIM has maintained throughout the debate that lawmakers should fund transportation improvements with transportation-specific sources of revenue rather than business taxes such as those proposed for computer software. The association nevertheless believes that the legislation passed by the House and Senate takes positive steps toward fixing the transportation system without crippling increases to the income tax or other broad-based levies.
The Senate budget includes a $50 per employee medical assistance assessment on employers that was filed by Governor Patrick and included in the House budget. The new fee replaces the $67.20 Medical Security Trust Fund assessment. The Senate did not support an AIM amendment to require legislative approval for any increases to the assessment and gives the authority to increase the fee up to 5 percent per year to a rate review board.
As part of the package for this new assessment, the Senate budget eliminates the fair-share contribution and the requirement that employee Health Insurance Responsibility Disclosure forms be collected and retained by employers.
Senators followed suit with the House in voting to postpone implementation of the so-called FAS 109 deduction instead of eliminating it as the administration proposed. FAS 109 is an accounting standard that requires that financial statements reflect the tax consequences of all book/tax differences. The deduction was adopted as part of the 2008 debate over adoption of combined tax reporting in Massachusetts.
Having trouble finding qualified applicants for job openings?
It's not just you – and it's going to get worse.
Eighty-one percent of Massachusetts jobs are currently classified as middle-skill or high-skill, and within this decade 70 percent will require postsecondary education. Yet only half of Massachusetts adults today have some postsecondary qualification, and the next generation (relying on guidance from peers, parents and teachers) does not fully understand the demands and opportunities of the world in which they will pursue their careers.
That was the sobering message at the Future Ready Summit at Worcester's DCU Center on Monday.
Future Ready Massachusetts is a public communication campaign promoting college and career programs that exist across the state. It is a collaborative project of the Massachusetts Business Alliance for Education (MBAE), the Massachusetts Department of Elementary and Secondary Education (DESE), the Massachusetts Department of Higher Education (DHE) in partnership with Achieve Inc., a national nonprofit education reform organization.
Among the more than 500 attendees at the summit, there was only a scattering of business people.
Organizers of the Future Ready campaign say students must acquire the knowledge, skills and attitudes needed to complete education and training that will provide access to careers of choice. The campaign's key messages are:
- Start Now: It's never too early (or too late) to begin planning.
- Aim High: Students who challenge themselves through a rigorous course of study usually go the farthest.
- Look Beyond: Look outside the classroom for learning opportunities that support career readiness.
The employer role falls largely under the third heading, but the others are also important. Although we often focus on high school, panelist Kathleen Finn of IBM pointed out, there are age-appropriate ways to get younger students to start thinking about careers. Finn also noted that while small companies do not have the resources of large ones like hers, they represent in aggregate a huge reservoir of talent in every community that can engage with schools and students locally.
The employer community has a vital stake in the success of education in Massachusetts. The small turnout of business people at the Worcester summit was hardly surprising – but the effort will fail without their substantial engagement at the local level.
"The unemployment rate is based on a monthly sample of households," the state's Executive Office of Labor and Workforce Development reminds each month. "The job estimates are derived from a monthly sample survey of employers. As a result, the two statistics may exhibit different monthly trends."
That's certainly true of the employment report for April released today.
The headline numbers, showing that Massachusetts' total unemployment rate remained unchanged at 6.4 percent and the Commonwealth lost 1,400 jobs in April, seem perfectly consistent; 1,400 jobs on a base of 3.5 million isn't enough to move the needle. But look more closely and the coherence disappears.
Where the employer survey shows a loss of 1,400 jobs last month, the household survey finds that 2,900 more residents were employed. The annual trends, however, are reversed: since last April, Massachusetts has added 46,200 jobs according to the employer survey, but just 5,000 according to the household survey.
The month-to-month variations, which are products of small sample size and similar issues, are not of great concern. We may over-react to a minor fluctuation – for example, that 1,400-job decline in the April preliminary estimates is more than offset by a concurrent revision that added 1,700 to March's total – but the timeframe is short and the numbers are small; the differences will come out in the wash. If, on the other hand, we don't know whether the state added 5,000 jobs over the past year, or 46,200, we really don't know what's going on in our economy.
The basic problem is that in fact not much is going on. For almost three years, the economy has been re-establishing stability and rebuilding strength, but not generating sustained, robust growth. The up-and-down pattern is plainly visible in the course of AIM's Business Confidence Index, which now seems stuck in the neutral range. The current consensus among economists is that the US economy will continue to grow slowly well into the third quarter before picking up late in the year.
Here in Massachusetts we are feeling negative effects from federal spending cuts and from recession in Europe (which affects us more than the nation as a whole). That we're holding our own in the face of these external forces, and perhaps even moving forward little by little, is evidence that there has been a recovery and that we still have significant competitive strengths.
Governor Deval Patrick invoked the community response to the Boston Marathon tragedy today to urge business leaders to support his vision of creating economic opportunity through a $1.9 billion tax and reform package for transportation and education
“I think you know that my vision for Massachusetts is of a unified community, where we work together to build a better future for everyone,” the governor told 550 people at the 2013 AIM Annual Meeting in Waltham.
“In some ways, I think we got a glimpse of that in the past couple of weeks. So many lives were suddenly, viciously and profoundly affected by the bombings on Marathon Monday. And yet out of the dust of that tragedy emerged a strong sense of community, the notion of common stake and common cause. The bravery of first responders, the supreme professionalism of the medical teams, the acts of kindness and generosity by ordinary citizens – in these ways and others the strength of our community was on display for the world and, most of all, for each other. “
Patrick said he hears daily from people concerned about finding or keeping jobs, paying for college, the quality of their children’s education and the reliability of the MBTA – and suggested that business people hear the same concerns. He said the commonwealth must simultaneously grow jobs and be prepared to make the investments needed for that growth.
“I am not running for anything else. I have no agenda other than to make our commonwealth stronger, to leave it better than I found it. We have a rare chance right now to do some lasting good in transportation and education, in growth and opportunity, for our time and the generation to come. If that’s what you’re interested in, I look forward to working with you,” he said.
The governor also emphasized that his administration has made hard choices about making state government more efficient.
“We have eliminated over 6,000 positions in state government, consolidated agencies, shut down the Turnpike Authority, reformed the pension system, asked employees to pay a greater share of their health care benefits, and much more. We have, with your help, undertaken a comprehensive review of regulations and cut the time for state approvals to a fraction of what it once was.
“Of course we are not done. But it’s a fact that this administration has not only saved taxpayers billions of dollars and made state government vastly more efficient, but we have accomplished more of AIM’s agenda than any administration in 20 years.”
The Massachusetts House and Senate both passed much smaller tax packages focused exclusively on transportation. Patrick said today he will monitor the final bill that emerges from a conference committee to ensure that it provides revenue that is both reliable and timely.
“I am here to ask you to join us in that work. Because the work of building the platform for growth is vital to the business community. Some of that will involve taxes. Some will involve reforms. They are not mutually exclusive, but two sides of the same coin,” he said.
The governor’s speech was part of an Annual Meeting that also saw AIM honor several companies and organizations for outstanding achievements.
- Massachusetts Business Alliance for Education (MBAE) received the 2013 Legacy of Leadership Award
- The Manufacturing Advancement Center Workforce Innovation Collaborative (MACWIC) won the 16th Annual Gould Education & Workforce Development Award
- EMD Milipore, Billerica; Kinefac Corporation, Worcester; and Lenox, East Longmeadow all received Global Trade Awards
Associated Industries of Massachusetts has joined Procter & Gamble, 3M and other companies in challenging a proposed insurance-company acquisition that could leave scores of Bay State businesses exposed to so-called long-tail asbestos and environmental liabilities.
The companies and AIM last week filed a petition to intervene in the Pennsylvania Insurance Department review of Trebuchet US Holdings Inc.'s proposed $2.2 billion purchase of OneBeacon Insurance Co. and Potomac Insurance Co. Trebuchet, a subsidiary of the Bermuda-based Armour Group Holdings Ltd., filed its application to acquire the two companies in February.
AIM and the other petitioners fear the proposed transaction would impede the ability of thousands of companies to get claims paid under environmental insurance coverage purchased from a predecessor to One Beacon, the Commercial Union Insurance Companies.
“Under the proposed transaction, those legacy policies, and the claims-paying obligations that are part of their core promise, will be jettisoned by (One Beacon) and shunted over to a runoff operation with a suspect capital structure and limited resources for satisfying valid claims under hundreds, if not thousands, of legacy policies issued by predecessor entities…” the petition said.
The document indicates that AIM and the other petitioners “are concerned that the conversion of the Acquired Companies into a runoff vehicle, operating with a significantly reduced policyholder surplus and decoupled from (One Beacon’s) ongoing business operations and pooled reserve and reinsurance structure, may impair the financial viability of the Acquired Companies and compromise their ability to pay valid claims arising under the legacy Commercial Union policies.”
The policies that the companies bought were in effect from the 1930s until the 1980s and provided "broad protection" against claims and lawsuits brought by third parties seeking compensation for personal injuries or property damage that allegedly occurred during the relevant policy period. The policyholders were covered even if the lawsuits or claims filed against them occurred many years after the alleged acts were committed and even if the injuries or damage weren't apparent during the coverage periods.
The companies seeking to intervene with Pennsylvania authorities say they had received "substantial numbers" of asbestos, environmental, toxic tort and other claims seeking financial recovery for "latent bodily injury and property damage that allegedly developed over the course of many years." The list of petitioners includes the Pennsylvania Manufacturers Association, ITT Corporation, Pentair Ltd. of Mansfield, Invensys of Foxboro, Belden Inc. and The William Powell Company.
Robert Rio, Senior Vice President of Government Affairs at AIM, said the association cannot estimate the number of Massachusetts manufacturing companies with liability policies that could be affected by the OneBeacon acquisition. He noted, however, that Commercial Union was a large writer of property/casualty policies in Massachusetts for decades.
“The broad coverage provided by these legacy policies is both valuable and irreplaceable, as policies providing comparable protection are no longer available at any price in the current insurance markets,” Rio said.
The petition to intervene in the case also raises concerns about the fact that most of the exhibits submitted by Trebuchet - including financial statements, business plans for the acquired runoff entities, and reinsurance arrangements – are classified as “confidential,” “proprietary” and “trade secret.”
The companies maintain that the “pervasive non-disclosure of these materials appears designed to render the Proposed Transaction as opaque as possible, and to deprive policyholders whose rights may be impaired by the Proposed Transaction of any meaningful opportunity to assess its financial impact on the security of their policies.”
It appears increasingly likely that employers will not have to post notices in the workplace informing employees of their right to join a union.
The United States Court of Appeals for the District of Columbia Circuit on Tuesday vacated the controversial National Labor Relations Board (NLRB) rule requiring six million private sector employers in the United States to post a notice of employee labor rights. The decision, rendered in a case brought by the National Association of Manufacturers (NAM), comes 13 months after the courts temporarily blocked implementation of the rule pending resolution of legal questions.
The three-judge appeals court panel ruled that the posting requirement compels employers to speak about employees' labor law rights in violation of a provision of the National Labor Relations Act (NLRA) that protects employers' rights to free speech about union issues.
The court writes that the NLRB rule violates the NLRA “because it makes an employer’s failure to post the Board’s notice an unfair labor practice, and because it treats such a failure as evidence of anti-union animus in cases involving, for example, unlawfully motivated firings or refusals to hire—in other words, because it treats such a failure as evidence of an unfair labor practice.”
AIM and other employer groups have opposed the rule as an unfair government effort to promote union organizing. The regulation is part of an ongoing effort by an activist NLRB to tilt the labor-relations playing field toward organized labor during the past three years.
“The courts have stated unequivocally that the NLRB overstepped its authority with the union-rights posting requirement,” said Michael Rudman, a labor-relations expert for AIM.
The union notice rule requires employers to post an 11-by-17-inch notice in a prominent location explaining the right of workers to join a union and bargain collectively to improve wages and working conditions. The posters also explain that workers have a right not to join a union and that it is illegal for union officials to coerce employees into unionizing.
“Stopping the NLRB’s burdensome agenda of placing itself into manufacturers’ day-to-day business operations is essential to preventing further government-inflicted damage to employee relations in the United States,” said Jay Timmons, President of NAM.
It is unclear whether the NLRB will appeal the decision to the U.S. Supreme Court.
The decision marked the latest in a series of judicial setbacks for the government agency charged with enforcing laws governing labor-management relations.
The Court of Appeals ruled in January that President Barack Obama did not have the power to make recess appointments to the National Labor Relations Board in January 2012. NLRB is appealing that decision, which could invalidate rulings, determinations and rulemaking by the NLRB over the past year.
"The economy as a whole, and business confidence in Massachusetts along with it, is basically treading water."
Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA) was talking about the latest Associated Industries of Massachusetts Business Confidence Index, which edged up four-tenths of a point in April to 50.5, but remained 6.6 points below its level of last April.
Employer confidence, according to Torto, reflects an economy doing well on measures of resilience and stability but struggling in dynamic areas such as consumer spending, job creation and exports. He notes that while economic growth was apparently greater in the first quarter of 2013 than in the prior quarter both nationally (2.5 percent annualized) and in Massachusetts (3.9 percent), its strong start has been fading.
"We're not going under, but we're not making much forward progress either.” Torto said.
Ambivalence is the watchword throughout the April Business Confidence Index, as employers remain mildly optimistic about the economy, but far less so than a year ago.
The Current Index, which assesses overall business conditions at the time of the survey, rose by a modest six-tenths to 49.2, and the Future Index, measuring expectations for six months out, crept up two-tenths to 51.8. The Company Index, reflecting survey respondents' assessments of conditions for their own operations, was unchanged in April at 54.2, and the Sales Index held steady at 55.3.
"The Employment Index did see a small gain, adding eight-tenths to 52.1," said BEA member Sara L. Johnson, Senior Research Director of Global Economics at IHS Global Insight, "but employers are not planning much hiring at this point. For the past six months 30 percent of respondents have reported adding staff while 22 percent reduced, and for the next period 20 percent plan to add personnel and 15 percent foresee reductions, with 64 percent expecting to stand pat."
Richard C. Lord, President and Chief Executive Officer of AIM, said the employment number remain a matter of concern.
"The hiring numbers are positive, but less than robust," he said, "and the same can be said of recent state employment reports. Massachusetts is adding jobs, and employers tell us they are again raising wages above inflation, but unemployment remains unacceptably high, with particularly adverse effects on less skilled and less experienced jobseekers."
"There is no magic here. We need better business conditions that bring sustained growth, workers with the skills to be productive in our 21st-century economy, and firm steps to resolve deterrents to hiring such as the uncertain cost impacts of implementing the Affordable Care Act.”
The AIM Index, which has appeared since July 1991, is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.
Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, food services and drinking places, retail trade, and health care.
This is the opening paragraph of the government’s April employment report – called the Employment Situation news release for April - issued this morning. Initial media reaction was tepid (“hardly impressive” – CNN) but the markets are up – and they’re right. This is an encouraging report.
A gain of 165,000 jobs in April is respectable, and beats expectations. Revisions to the February and March figures add 114,000 jobs to the year’s total. (March’s revised 138,000 looks a lot better than the 88,000 initially reported.) The headline unemployment rate is down a tenth, which if nothing else will help consumer confidence. We are chipping away at the numbers of long-term unemployed and discouraged workers.
Additionally, most of the sectors gaining jobs – professional and business services, food services and drinking places, retail trade – are those that tend to do well in a growing economy. Expansion in these areas reflects, to a considerable extent, increases in discretionary spending by businesses and households.
The news could be better, of course. We would like to see more job creation; sustained gains of the order of February’s (revised) 332,000 would bring unemployment down rapidly. A large number of people who want full-time jobs are working part-time, pointing to severely restricted opportunities for the less skilled. But the good signs predominate.
We know that the economy has cooled somewhat after starting 2013 strong, and that employers facing business uncertainties, productivity concerns, and rising nonwage employment costs (notably those arising from the Affordable Care Act) have been careful about adding personnel. The April employment report suggests, however, that the slowdown is less serious than many had feared.
Small employers in Massachusetts are well advised to keep their eyes on the numbers 1, 6, 15, 20 and 50. No, it’s not the winning combination for this week’s Powerball, but rather the numbers game for complying with the multiple employment laws that kick in when a company grows its work force to certain levels.
AIM regularly updates and publishes its reference guide on small business compliance to help small employers cope with an increasingly complex maze of laws and regulations. So here are a few of the more important numbers, taken from the new edition of the small-business reference guide due to be published later this month:
Many laws apply to an employer as soon as the company hires one employee. Among them: workers compensation, unemployment insurance, immigration and the federal and state wage and hour laws.
Massachusetts employers with six or more employees are subject to the state’s anti-discrimination laws and the jurisdiction of the Massachusetts Commission against Discrimination (MCAD). That includes the requirement to have a sexual harassment policy issued to all new employees at the time of hire and to all employees annually.
All employers with 15 or more employees are subject to the federal Civil Rights Act and the Americans with Disabilities Act (ADA). The civil rights act is similar to the Massachusetts anti-discrimination law, providing legal protections to individuals based on their protected-class status, which includes categories such as race, sex, religion, and national origin. The ADA prohibits discrimination against employees and applicants based on disability, perceived disability and having a record of disability.
Two key federal laws kick-in when an employer has 20 or more employees. The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires an employer to offer each separating employee who is on its health insurance the opportunity to continue coverage at the employee’s expense for up to 18 months. The other law, the Age Discrimination in Employment Act offers legal protections to all employees 40 years old and older.
Several key laws cover all employers with 50 or more employees. The federal Family and Medical Leave Act (FMLA) offers job-protected leaves of absence to eligible employees in certain circumstances. The Massachusetts Small Necessities Leave Act (SNLA) provides eligible employees up to three days of leave to participate in a variety of family related activities.
Fifty employees will also be the magic number for many companies under federal health care reform.
Employers with 50 or more full-time or full-time equivalent (FTE) employees that do not offer affordable health insurance that provides a minimum level of coverage to their full-time employees may be subject to a shared responsibility payment if at least one of their full-time employees receives a premium tax credit in an Affordable Insurance Exchange, or Marketplace. For the purposes of these provisions, a full-time employee is one who is employed an average of at least 30 hours per week.
And those are just a few of the federal and state laws that may impact your business. Many come with significant penalties for non-compliance so it is vital that you remain abreast of new developments. You otherwise risk forgetting to post a required poster, to issue a required policy or to follow a prescribed practice.
If you would like more details about the small business reference guide and the myriad of other applicable laws, please contact AIM through our website or at 1-617-262-1180.
The following guest blog was written by Martha J. Zackin, Esq., Of Counsel to the law firm Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
A recent Massachusetts court decision upheld efforts by staffing companies and workers compensation insurers to close a loophole that allowed staffing-firm employees injured at a client company both to collect workers compensation benefits and to sue the company where they were hurt.
The Superior Court for the Commonwealth of Massachusetts, Suffolk County, held that by virtue of an alternate employer endorsement naming a staffing company’s client as an insured under the staffing company’s workers’ compensation policy, the client company is entitled to the same immunities as the staffing company under the Workers Compensation Ac (the Act).
Massachusetts employers since 1911 have been required by law to carry workers’ compensation insurance covering their employees, or to qualify as a self-insured under the Act. An employee injured in the course of working for a covered employer is almost always entitled to monetary benefits, medical care, and rehabilitation services, regardless of fault or negligence. In exchange for near-guaranteed benefits, covered employers are generally not subject to civil liability or suit by injured workers or their families. This concept is described as the “exclusivity provision” of the Act or “immunity” under the Act.
In Massachusetts and elsewhere, staffing is a growth industry. Staffing agencies lease employees to their clients to perform work that is part of the routine operations of the client’s business, typically side-by-side with and doing the same work as the client’s employees. Effective use of temporary labor helps the 90 percent of U.S. companies that use staffing agencies to ramp up and down, as production needs fluctuate, without incurring the costs associated with managing employment processes.
With the growth of the staffing industry and the increasing use of temporary workers, an anomalous situation has developed whereby employees of staffing companies injured while performing services for their “direct” employers’ clients have been able to receive workers’ compensation benefits from their staffing company employers and sue the staffing clients for damages. Stated differently, an injured employee of a staffing company would have the right to sue the client company for common law damages, but an injured employee of the client company, working side-by side with and doing the same work as the client employee, would not.
To address this problem, workers’ compensation insurance carriers began selling alternate employer endorsements to provide primary workers’ compensation and employers’ liability coverage to staffing agencies’ clients so that client companies would be insured under the staffing companies’ policies and entitled to the same immunities associated therewith. Until now, however, no Massachusetts court has directly addressed whether immunity under the Act extends to clients of staffing companies, to protect those clients when staffing company employees are injured during the course of providing services to the client.
In a case of first impression, the Superior Court for the Commonwealth of Massachusetts answered the question in the affirmative. Specifically, in Molina v. State Garden, Inc., the Court held that the alternate employer endorsement entitles the client company to the same immunities as the staffing company under the Act.
This case is important for a couple of reasons. First, it protects staffing companies from having to indemnify clients against claims arising out of workplace injuries – or fighting with clients about responsibility for such claims – the costs of which are almost never factored into the fees charged by staffing companies to their clients. Second, insurance companies may rest easier, knowing that at least one Massachusetts court has validated the need for, and practicality of, alternate employer endorsements.
The Molina decision underscores the importance for staffing companies to obtain alternate employer endorsements that specifically name clients as additional insured. The decision also underscores the importance for workers’ compensation carriers to educate staffing clients about the use of alternate employment endorsements.