Two important extended deadlines were recently announced, on May 1, by the Massachusetts Department of Family and Medical Leave (DFML) relating to the Massachusetts Paid Family and Medical Leave law (PFML). The deadline for employers to distribute notice of the PFML was pushed back from May 31, 2019 to June 30, 2019 and the deadline for employers to apply for a private plan exemption for Quarter 1 from June 30, 2019 to September 20, 2019. In light of the deadline extensions, now is a great time for employers to conduct a comprehensive review of the law to ensure their company is fully prepared for its implementation.
Overview of the Law
The PFML is a critical piece of legislation which provides paid family and medical leave to eligible employees. Starting January 1, 2021, eligible employees will be able to take paid family and medical leave. Eligibility under the law extends to several categories of employees to include: (1) employees who work in Massachusetts; (2) 1099-MISC contractors who work for an employer that issues 1099-MISC tax form to more than half of its workforce; (3) self-employed workers who opt in; and (4) a former employee who has not been separated from employment for more than 26 weeks prior to the start of paid family and medical leave. However, there is an earning eligibility requirement which requires all categories of workers to have 15 weeks or more of earnings accumulating to a minimum of $4,700 in the 12 month period prior to seeking benefits under PFML.
Under the PFML, eligible employees may be entitled to 12 weeks of family leave for the birth, adoption, or foster care placement of a child or to care for a family member who has a serious health condition, 12 weeks of family leave for a qualifying exigency in connection to a family member is on active duty or has been notified of an impending call to active duty, and 20 weeks of medical leave for the employee’s own medical issues. All categories of paid family and medical leave can be combined for a total of 26 weeks per benefit year. Additionally, employees, with family members who are covered service members, may be eligible for up to 26 weeks of paid family leave to care for the service member who is undergoing medical treatment or addressing issues of a serious health condition resulting from the family member’s military service. Eligible employees taking family leave to care for a family member will not be eligible to take leave for that particular purpose until July 1, 2021.
Additionally, there are other key benefits and critical protections afforded to employees under the PFML. The monetary benefit eligible employees receive is based on their salary, with $850 being the maximum amount allotted per week, which will be adjusted on an annual basis. The weekly benefit amount is calculated by the DFML. The weekly benefit amount is the portion of the individual’s average weekly wage that is equal to or less than 50% of the state average weekly wage replaced at a rate of 80%, and the portion of the employee’s average weekly wage that is more than 50% of the state weekly wage replaced at a rate of 50%. The PFML also provides for job protection which requires employers to reinstate an employee returning from paid family and medical leave to their previous position or to an equivalent position. Employment benefits, seniority, pay and status is also protected. The DFML’s draft regulations also state that taking paid family or medical leave will not affect an employee’s right to accrue vacation time, sick leave, bonuses, advancement, seniority, or other employment benefits upon the employee’s reinstatement. Employers must also continue to pay the employer’s portion of the employee’s health insurance while the employee is out on paid family and medical leave. However, the employee is also required to pay their share of health insurance premium while on leave.
The DFML’s draft regulations state that paid family and medical leave runs concurrently with other applicable state and federal leave laws to include, but not limited to, the federal Family and Medical Leave Act, the Commonwealth’s Parental Leave Act, and the Commonwealth’s Earned Sick Time Act when the leave is for a qualified reason under those acts. However, it is important to note that this section of the DFML’s draft regulations may be regarded as inconsistent with the statute which states that an employer cannot force their employees to exhaust their rights to any sick, vacation, or personal vacation time before or while taking paid family and sick leave.
Furthermore, employers are strictly prohibited from retaliating or discriminating against any employee for taking paid family and medical leave. Employers are also prohibited from interfering with employees exercising their rights under the PFML. Employers must also be mindful of the presumption of retaliation against the employer for any adverse employment action taken against the employee while on leave or within 6 months from returning from leave.
There are several steps and requirements for both the employee and employer to take prior to starting leave. First, eligible employees must file a claim using the forms proscribed by the DFML. These forms will be made available by the DFML prior to January 1, 2021. Employees must give employers 30 days’ notice if the leave is foreseeable. If the need for leave is not foreseeable, the employee must give the employer as much notice as is practicable. When filing a claim, the employee must also provide a certificate demonstrating that the medical leave is for a qualifying reason.
Once the employee files a claim for benefit with the DFML, the DFML will send notice to the employer within five business days regarding relevant information about the requested leave, to include type of leave and expected duration. Employers can be required to provide relevant information regarding the employee seeking leave, including the employee’s earning within the past year, amount of leave taken during the current benefit year, and weekly hours worked to the DFML within five business days of the request. Applications should be approved or denied within 14 calendar days after receiving an application for benefits. Approved applicants will receive payment of leave benefits no later than 14 calendar days after approval. The process for applying for benefits will continued to be further refined by the DFML as the January 1, 2021 implementation date approaches.
Under the PFML, employers are responsible for providing their employees with notification of the PFML, making adequate contributions and deductions, applying for exemptions, and satisfying reporting and documentation requirements.
Under the PFML, employers are required to inform their employees about the law’s benefits, protections, and contributions by posting a workplace poster and providing written notice prior to June 30, 2019. Employers must display an approved workplace poster in a conspicuous place explaining the benefits of the PFML. In addition to displaying an English version of the poster, a translated version for each language which is the primary language of 5 or more employees. The DFML has already constructed a PFML poster which is available here. Translated versions are also available on their site.
Employers must also provide written notice to their employees regarding the availability of benefits, contribution requirements for the employee and the employer, instruction on how to file a claim for family and medical leave, protections, and other provisions highlighted under the PFML. Written notice must be provided to both Massachusetts W-2 employees and Massachusetts 1099-MISC contractors. Notice must be provided in the employee’s primary language. For new employees, written notice must be provided no more than 30 days from the beginning date of the employee’s employment. Although notice may be provided electronically, the employer must obtain written acknowledge of the receipt of information or decline to acknowledge receipt of the information contained within the notice from the employee.
In the course of future litigation, employers bear the burden of demonstrating compliance with the notice requirement under the PFML. Failure to provide notice will result in a $50 fine per W-2 employee or 1099-MISC contractor for the first offense and $300 fine for subsequent violations. In order to aid employers, the DFML has provided a model written notice for both W-2 employees, available here, and 1099-MISC contractors available here. Employees opting to use the DFML’s model written notice will need to fill in additional information into the notice to include the employer’s ID number, the percentage of the medical leave that will be covered by the employer and the employee, and if the employer provides leave benefits through a private plan. Therefore, it is important for employers to start providing notice and receiving acknowledgements back from their employees within the coming weeks.
Contributions and Deduction Requirements
In order to fund the paid family and medical leave, all Massachusetts employers are required to contribute to Family and Employment Security Trust Fund (Trust). Employers, who are not opting to file for a private plan exemption, will comply with the PFML’s contribution and deduction requirements. Employer’s contribution will depend on the size of their workforce, to include Massachusetts W-2 employees and Massachusetts 1099-MISC contractors. Covered individuals under the PFML include all Massachusetts W-2 employees and Massachusetts 1099-MISC contractors if they make up over half of the employer’s total workforce.
Under the PFML, the total contribution to the Trust amounts to a 0.63% payroll deduction on the first $132,900 of an individual’s annual gross earnings, which is the current social security wage base established by the Federal Social Security Administration on an annual basis. All employers, regardless of the number of employees, are required to remit contributions on behalf on their employees. Payroll deductions begin on July 1, 2019. Employers are required to remit contributions through the Department of Revenue’s MassTaxConnect starting on October 31, 2019.
Employers with 25 or more covered individuals are required to both contribute their own share to the DFML while also remitting the employee’s share. The employer will be required to pay 60% of the medical leave share, which is .52% of a covered individuals’ gross pay and 0% of the family leave contribution, which is .11% of a covered individuals’ gross pay. The employer can deduct the rest of the remitted contribution from the covered individual’s wage. Below is a visual breakdown of contribution rate split for employers with 25 or more covered individuals provided by the DFML.
Employers, with fewer than 25 covered individuals located in Massachusetts, are not required to make any contribution for the employer’s share of the medical leave contribution. Additionally, up to 40 percent of the medical leave contribution and up to a 100% of the family leave contribution can be deducted from the employee’s wages. Therefore, employers, with fewer than 25 employees located in Massachusetts, are only responsible for remitting the covered individual’s share. Below is a visual breakdown of contribution rate split for employers with less than 25 qualified individuals provided by the DFML.
Employers who are providing paid leave benefits which are greater or equal to the benefits provided by the PFML may be exempted from collecting, remitting, and paying PFML contributions. Although the deadline for filing a private plan exemption for Quarter 1 has been pushed back to September 20, 2019, going forward, exemptions for private plans must be approved by the DFML in the quarter prior to the quarter that the plan goes into effect. Applications for exemptions are accepted on a rolling basis through MassTaxConnect site, available here. Questions that the employer will be asked in their exemption application are available here.
After submitting the applications, employers should receive an email within one to two business days indicating that a determination has been made. Employers can then log onto the MassTaxConnect site to review the DFML’s determination to see if the exemption was approved or denied. Even if the exemption is granted, those employees are still entitled to job protection during leave, protection against retaliation, and the right to appeal if their request for benefits was denied. In addition to satisfying the exemption requirements, self-insured plans must be covered by a required bond amount which varies depending on the workforce size.
One important caveat to the exemption is that the contribution requirements are only impacted if the exemption if approved. Therefore, exemptions applications that are denied will result in the affected company being forced to remit their full contribution amount from July 1, 2019 forward.
Reporting and Documentation Requirements
Starting in October 2019, employers will be required to file quarterly reports through MassTaxConnect. The quarterly reports are projected to request information regarding the employer’s workforce to include Massachusetts W-2 employees’ and Massachusetts 1099-MISC contractors’ name, social security number, and payment wages or other payment of services information. Employers are also expected to provide their Federal Employer Identification Number in the report. Additional reporting and documentation guidelines will be announced prior to July 1, 2019.
The DFML recently held a hearing regarding the draft regulations on May 24, 2019. At the hearing, several representatives of the potentially impacted employers raised concerns about the implementation of the PFML. The following issues/requests were raised during the hearing:
- Although some employers may issue a 1099-MISC, another entity may pay the independent contractor. Therefore, the employer cannot remit any contribution since they do not touch the independent contractor’s pay.
- It is unknown if it is permissible for an employer to change the amount of contribution based on the category of the employee.
- Under the current law, some argue that there is a potential for overuse of the leave which will ultimately drive up future contribution rates. For example, two siblings may both be entitled to take leave to care for the same sick parent.
- It is unknown if an employer is permitted to keep non-union employees on a private plan and place union employees on the Commonwealth’s plan.
- One speaker argued that employers should be entitled to relief if their current collective bargaining agreement prohibits the employer from seeking contribution from their employees.
- It is unknown if private plans must cover former employees.
- It was recommended that employers be permitted to change an employee’s position while they were on intermittent leave.
- The term “base of operations” found in the regulations needs to be further defined.
- It is still debatable if an employer is permitted to require the use of paid sick leave if the leave is taken for a qualifying reason.
Despite the recent extended deadlines, employers need to prepare themselves for the evitable full force implementation of the PFML. The final regulations are expected to be promulgated by July 1, 2019. However, there is still the lingering issue of whether the Internal Revenue Service (IRS) will take the position that an employee’s PFML contribution should be withheld from after-tax wages. The DFML will issue a definitive rule regarding proper tax treatment of contributions once the IRS issues their guidance.
Now is the time to take proactive steps in ensuring your company is compliant with the requirements of the PFML. For more information about this matter, please feel free to contact Jeffrey Rosin or Jennawe Hughes in our Boston office: firstname.lastname@example.org or email@example.com.