BOSTON — Beacon Hill leaders have a deal to increase the minimum wage, establish paid family and medical leave, and institute a permanent sales tax holiday in exchange for dropping a proposal from retailers to cut the state's sales tax.

The so-called “grand bargain,” which was approved by the House of Representatives on Wednesday, would hike the minimum wage from $11 to $15 per hour over the next five years, increase the sub-minimum wage for workers who receive tips from $3.75 to $6.75 an hour, and create a paid leave program for low-wage workers.

It would also require an annual two-day sales tax holiday in August and phase out a law requiring retailers to pay workers time-and-a-half on Sundays.

All but the retail wage were the subject of referendums proposed for this November’s ballot.

In exchange, retailers say they will back away from a proposed ballot question asking voters to cut the sales tax from 6.25 to 5 percent.

The compromise comes on the heels of a ruling by the state’s Supreme Judicial Court on Monday that knocked a proposed "millionaires tax" question off the ballot. Many viewed the 4 percent levy on the state's highest earners as a way to offset a $1.2 billion hit to state coffers from cutting the sales tax.

"It was a tough decision," Jon Hurst, president of the Retailers Association of Massachusetts, said of pulling back on the ballot question to cut the sales tax. "But ultimately we felt it was best to try to mitigate those costs (by negotiating the deal approved by lawmakers Wednesday), as opposed to something more costly and possibly unbeatable."

Recent polls have shown strong support among voters to increase the minimum wage and require paid leave. Legislative leaders and Gov. Charlie Baker had advocated the "grand bargain" talks as a way to avoid a costly campaign on the ballot questions ahead of the November elections.

Representatives of labor unions, religious organizations and social justice groups have have met with business leaders and retailers behind closed doors over the past few months in an attempt to reach compromise.

Those talks had stalled last week. But the court’s ruling raised fears the state would face deep cuts in programs and services if a sales tax cut was approved by voters with no clear way to pay for it.

Raise Up Massachusetts, a coalition advocating for the minimum wage increase and paid leave, called the deal a "victory for Massachusetts workers."

"Most importantly, it’s a victory for all people who want a strong economy that works for all of us, not just those at the top," the group said in a statement.

But the group, which is expected to make a decision on the ballot questions in the next week, said it’s "troubled" by provisions to phase out Sunday pay for retail workers and increase the sub-minimum wage for tipped workers to $6.75, which is less than the $9 per hour it had proposed.

"Over the next several days, we will continue having conversations among our coalition and expect to reach a decision on whether to take our minimum wage question to the ballot early next week," it said.

The new paid leave proposal is similar to the ballot initiative, but it would be funded through a new payroll tax. It also reduces the maximum weekly benefit and the amount of time off workers could take, in a concession to business groups that opposed the referendum.

Under the new proposal, workers would be able to take time off to care for a seriously ill or injured family member, or a new baby, for up to 12 weeks. Those seeking medical leave could take up to 20 weeks. Workers would get 80 percent of their average weekly wages, with a maximum weekly benefit of $850.

Workers recovering from injuries or illnesses could receive up to 26 weeks of paid medical leave.

Republicans mostly voted against the compromise, which was approved 126 to 25, saying they couldn't support it without additional relief for small businesses.

Rep. Jim Lyons, R-Andover, who voted against the measure, offered an amendment cutting the sales tax to 5 percent. Rep. Brad Hill, R-Ipswich, who also voted against the compromise, sought to set an $11 per hour minimum wage for workers under age 18.

"Our young people who used to be hired for part-time and summer jobs are not being hired because of the cost of the minimum wage,” Hill told other lawmakers. "Many of our mom-and-pop stores cannot afford to hire those people."

But both proposals were rejected by the Democratic majority.

Democratic lawmakers say they were also concerned about the impact of the ballot questions on small business owners, among other issues.

"By working with the business community and advocacy groups, we were able phase in responsible policies that will generate business growth, help small businesses retain good workers, and allow workers to contribute to a fund that allows them to be with their family in time of great need," said Rep. Linda Campbell, a Methuen Democrat who voted for the legislation.

The agreement now moves to the Senate, which began debate on it Wednesday afternoon.

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at

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