Seyfarth Synopsis: Yesterday, January 23, 2019, the Massachusetts Executive Office of Labor and Workforce Development (EOLWD) released a draft of the Paid Family and Medical Leave (PFML) regulations still under development for the purpose of early public input.  The EOLWD has scheduled public listening sessions throughout the Commonwealth over the next few weeks to collect feedback on the draft regulations (dates and locations are available on the Commonwealth's website here).  Proposed regulations will then be published for public comment and hearing by March 29, 2019, and final regulations will be promulgated by July 1, 2019.

As previously reported here, here, and here, under the PFML Law, Massachusetts workers will be eligible for up to 12 weeks of paid family leave and up to 20 weeks of paid medical leave, with a maximum of 26 total weeks, in the aggregate, per benefit year.  As we knew, after a 7-day waiting period, workers on paid leave will earn 80% of their wages up to 50% of the state average weekly wage, and then 50% of their wages above that amount, up to an $850/week cap (which may be adjusted annually).  Unlike the federal FMLA, the PFML Law will apply to all employers of one or more employees working in Massachusetts.  Job-protected, paid leave will be available to eligible new employees without any hours worked or service time requirements.  The PFML Law also will apply to certain former employees after separation and self-employed workers.

Although the draft regulations are a work-in-progress, they answer a number of open questions employers have had since the PFML Law was signed last June.  In particular, they shed new light on the contributions (i.e. payroll tax) employers will start paying on July 1, 2019, as well as the benefits claim process for workers, beginning January 1, 2021.  We highlight the key features and other questions answered and unanswered below.

Payroll Tax Contributions To Trust Fund

As previously reported, unless employers receive approval for a private plan (discussed below), the benefit will be paid by the Family and Employment Security Trust Fund, which will be funded by a payroll tax on employers and workers, beginning July 1, 2019.  The initial contribution rate will be 0.63% of the first $128,400 of an individual's annual earnings (this figure may be adjusted annually based on the contribution and base limit established by the federal Social Security Administration for the maximum amount of wages subject to the Social Security tax).

The 0.63% total contribution rate will be allocated between a family leave contribution rate and a medical leave contribution rate, based on the PFML Department's estimate of the anticipated costs of benefits and administration of the program.  On its website, the Department has announced that for employers with 25 or more employees, the initial split of the 0.63% contribution rate will be allocated as a 0.52% payroll deduction for the medical leave contribution and a 0.11% payroll deduction for the family leave contribution.  The Department may change the allocation of rates when it deems it necessary, but no more than once per year.

Although not mentioned in the statute or regulations, the Department's website states that the total contribution rate for employers with less than 25 employees will only be 0.42%.  The initial allocation for such employers will be 0.31% payroll deduction for the medical leave contribution and a 0.11% payroll deduction for the family leave contribution.

The cost may be shared between employer and employee at varying percentages, based on the type of leave and the size of the company.  Employers with less than 25 employees may deduct up to 100% of both family and medical contributions from an employee's wages.  Employers with 25 or more employees may deduct up to 100% of the family leave contribution from an employee's wages, and up to 40% of the medical leave contribution from an employee's wages.  In other words, employers with 25 or more employees must pay at least 60% of each employee's medical leave contribution.  The Department's website provides the following visual breakdown for employers with 25 or more employees here.  

Process For Remitting Contributions

The draft regulations clarify the process by which employers will make contributions to the PFML Trust Fund.  Following the end of each calendar quarter, all Massachusetts employers, self-employed individuals electing coverage, and other covered business entities must file earnings reports through the Massachusetts Department of Revenue's MassTax Connect system.

The quarterly report must contain the following information for each employee: name, social security number, and wages paid or other earnings during the quarter.  The report must contain the following information for each employer, self-employed individual, or covered business entity: the federal employer identification number and the identification number such employer, entity or self-employed individual is required to include on a withholding tax return filed with the Commonwealth.  Additionally, if an employer or covered business entity made payments to individuals for services during the calendar quarter that are required to be reported on IRS Form 1099-MISC (i.e. independent contractors), the report must also include the names and social security numbers of those individuals, and the amounts of such payments made.  Employers and covered business entities that do not have pre-existing accounts on the MassTax Connect system must register and establish an account in order to make required filings and remit the required contributions.

Based on the quarterly report, the Department will calculate the total quarterly contribution amount owed.  Employers, self-employed individuals electing coverage, and covered business entities must remit such contributions owed through the MassTax Connect system within 30 days after the end of the calendar quarter.

An employer or covered business entity who fails or refuses to make required contributions will be assessed 0.63 percent of its total annual payroll for each year it failed to comply, or fraction thereof, in addition to the total amount of benefits paid to covered individuals for whom it failed to make contributions.

Applications for Exemptions for Private Plans

According to the draft regulations, an employer or covered business entity may apply to the Department for approval to pay PFML through a private plan.  Applications for such exemptions from the public plan will be accepted by the Department on a rolling basis and approvals will be effective for one year.  Exemptions may be renewed annually.  An employer or covered business entity may apply for exemptions from medical leave coverage, family leave coverage, or both.

To be approved for an exemption, the private plan must confer all of the same rights, protections and benefits provided to employees under the PFML Law.  If a private plan meets or exceeds the requirements but is denied an exemption due to an apparent error, an employer or covered business entity may re-submit the same plan for supplementary review by the Department.

An employer must notify the Department in writing at least 30 days before implementing any proposed changes to the terms or conditions of an approved private plan.  The Department may withdraw approval for a private plan when the plan's terms or conditions have been changed or violated, including for a failure to pay benefits or a failure to pay such in a timely manner, misuse of private plan trust funds, or failure to comply with the PFML Law or regulations.

An employer or covered business entity who fails or refuses to make required contributions will be assessed 0.63 percent of its total annual payroll for each year it failed to comply, or fraction thereof, in addition to the total amount of benefits paid to covered individuals for whom it failed to make contributions.

Benefits Claim Process

The regulations confirm what the EOLWD recently clarified concerning the starting dates for eligible workers being able to file claims for PFML benefits with the Department, as follows:

  • On January 1, 2021, eligible workers can begin claiming benefits for bonding with a child or newborn; service-member related events; and dealing with the employee's own serious health condition; and
  • On July 1, 2021, eligible workers can begin claiming benefits to care for a family member with a serious health condition.

An individual filing a claim for benefits must provide the individual's employer with: (i) at least 30 days' notice of the anticipated start date of the leave, (ii) the anticipated length of the leave, (iii) the type of leave, and (iv) the expected return date.  If, for reasons beyond the individual's control, the individual cannot provide 30 days' notice, then the individual must provide notice as soon as practicable.

An individual must file a claim for PFML benefits with the Department using forms prescribed by the Department, although these forms have not been released to date.  The regulations provide the minimum information an individual's claim must contain, including without limitation, whether the leave is for family leave or medical leave, the expected leave duration, whether it is continuous or intermittent, the date notice was provided to the employer, any denied, granted, or pending leave requests for a qualifying reason from the employer during the benefit year, evidence of family relationship if the leave involves family leave, and a completed certification form.  If a claim is filed more than 90 calendar days after the start of leave, the covered individual may receive reduced benefits in the discretion of the Director.

The Department will notify the employer, if applicable, within 5 business days after an employee has filed a claim for PFML benefits, and will facilitate the disclosure and exchange of relevant information or records regarding the claim.  The Department's notice to an employer will contain: (i) the employee's name, (ii) the type of leave at issue, (iii) the expected duration of the leave, (iv) whether the request is for continuous or intermittent leave, and (v) any other information relevant to verification of the claim.

All benefits claims must be supported by a certification evidencing that the leave serves a covered purpose.  The draft regulations set forth the minimum information required for each type of leave certification.

Upon request, an employer will have 5 calendar days to provide the Department information or records relevant to a benefits claim, including without limitation, wages/earnings for the prior 12 months, a job description, whether the employee or covered individual currently works a full- or part-time schedule, weekly hours worked, prior requests/approvals for a qualifying reason, amount of PFML already taken during the benefit year, a description of its paid leave policies, and any other relevant information or records.

The Department will notify applicants of their eligibility or ineligibility within 14 calendar days of receiving a claim.  The Department will commence payment of leave benefits within 14 calendar days after the eligibility determination (unless that determination occurs more than 14 days before the onset of eligibility, in which case payment will commence as soon as eligibility begins).  The Department will provide contemporaneous notice to the individual and the employer of the approval or denial of a benefits claim.

Other Noteworthy Terms While On Approved Leave

Nothing in the PFML Law or regulations will limit an employer's or covered business entity's ability to communicate with an employee or covered individual who is approved for leave benefits.

An employee or covered individual who has been approved for leave benefits must still comply with any attendance and call-in procedures of the employer or covered business entity.

An employee or covered individual approved for intermittent leave must work with the employer or covered business entity to make an effort to take leave so as not to unduly disrupt the employer's or entity's operation.

Following an approval, if there is a change in relevant circumstances that would justify an extension, reduction, or other modification of the period of leave or amount of benefits, both the employee and the employer have an affirmative obligation to inform the Department using forms to be prescribed.

Other Questions Answered

The current draft of the regulations does not alter the following provisions of the PFML Law, some of which were being targeted for possible modification:

  • "Serious health condition" remains defined more broadly under the PFML Law and regulations than under the federal FMLA, defined here as an illness, injury, impairment, or physical or mental condition that involves (i) inpatient care in a hospital, hospice, or residential medical facility; or (ii) continuing treatment by a health care provider.
  • The taking of family or medical leave shall not affect an employee's right to accrue vacation time, sick leave, bonuses, advancement, seniority, length of service credit, or other employment benefits, plans or programs.
  • During the duration of leave, the employer shall continue to provide for and contribute to the employee's employer-provided health insurance benefits, if any, at the level and under the conditions coverage would have been provided if the employee had continued working continuously for the duration of such leave.
  • Intermittent leave or reduced schedule leave, paid on a prorated basis, may be taken "when medically necessary" for a medical leave for the worker's own serious health condition, for a family leave to care for a family member with a serious health condition, or for injured service member family leave.  Qualifying exigency family leave may also be taken intermittently or on a reduced schedule.  However, bonding leave for a new baby may not be taken intermittently or on a reduced schedule unless the employee and the employer agree otherwise.
  • An employer must restore an employee who has taken family or medical leave to the employee's previous position or to "an equivalent position" with the same status, pay, employment benefits, length of service credit, and seniority as of the date of leave (except in the event that other employees of equal length of service credit and status in the same or equivalent positions have been laid off due to economic conditions or other changes in operating conditions).
  • The weekly benefit amount shall be reduced by the amount of wages or wage replacement a worker receives for that period under: any government program or law, including workers' compensation (other than for permanent partial disability incurred prior to the leave claim); other state or federal temporary or permanent disability benefits law; or an employer's permanent disability policy or program.  The weekly benefit amount shall not be reduced by the amount of wage replacement received while on leave under an employer's temporary disability policy or program, or an employer's paid family or medical leave policy, unless the aggregate amount an employee would receive would exceed the employee's average weekly wage.
  • The law prohibits retaliation against employees for exercising their rights under this law, and any negative change in status or adverse employment action during a leave or within six months following the leave will create a rebuttable presumption of retaliation, which the employer can rebut only with clear and convincing evidence that such action was not retaliation and was based on an independent justification.
  • The law provides employees a private right of action with a 3-year statute of limitations for violation of the job restoration, benefits accrual and continuation, and anti-retaliation provisions.  A court may award a prevailing employee job reinstatement, benefits reinstatement, injunctive relief, compensation for 3 times any lost wages, benefits and other remuneration and the interest thereon, and reasonable costs and attorneys' fees.

Open Questions Remaining

  • By what date must employers post the required PFML notice?  The statute was amended to remove a July 1, 2019 effective date for this provision, but the new date has not been announced.
  • The draft regulations do not provide any details regarding the application form or specific process for an employer to apply for an exemption for a private plan.
  • If the first quarterly payroll tax is due July 1, 2019, how can employers who intend to apply for a private plan exemption avoid paying the July 1 payroll tax in the interim?
  • Can a new employee who is otherwise eligible for PFML benefits immediately commence an extended leave for a qualifying reason even if only employed for a short period (e.g. after one day of employment)?  This appears to be the case.
  • Must a private plan create a private trust fund into which contributions are made and from which PFML benefits are paid?
  • The draft regulations do not create a mechanism for employers to charge employees their share of the cost for health insurance continuation during leave.
  • While the draft regulations address the reduction of PFML benefits to offset certain alternative wage replacement from other sources, they do not reference or clarify the PFML Law's provision that the weekly benefit amount can be reduced by the amount of wage replacement received under a short-term disability policy to the extent the aggregate amount an employee would receive would exceed the employee's average weekly wage.

The draft regulations and the Department's FAQs can be found here.  We will continue to provide updates as to any significant events that occur with respect to the PFML Law or regulations.

Be on the lookout for an invite for our upcoming webinar on Tuesday, February 5, 2019 at 1:00 p.m. ET on this topic, or you can register here. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.