On April 9, 2022, the Maryland Legislature voted to override Governor Hogan’s veto to pass the Time to Care Act of 2022 (Act). The Act establishes a state-administered paid family and medical leave program (PFML Program) that is funded by both employee and employer contributions.
Mandatory contributions will begin on October 1, 2023, and eligible employees can begin receiving benefits on January 1, 2025.
The Maryland Department of Labor (DOL) is charged with adopting implementing regulations for the PFML Program. Below we discuss what we know so far about the Program.
Maryland PFML Program
The Program will provide temporary wage-replacement and job/benefits protection to eligible employees.
Covered Employers: Employers that employ at least 1 individual in Maryland are subject to the Act.
Eligible Employees: Employees are eligible if they work at least 680 hours in the 12-months preceding the commencement of the leave. Self-employed individuals can also receive benefits if they elect and pay contributions to the PFML Program.
Reasons for Leave: Eligible employees can take leave from employment for any of the following reasons:
- To care for a child within the 1st year after birth or after the placement of the child through foster care, kinship care, or adoption;
- For the employee’s own serious health condition;
- To care for a family member with a serious health condition;
- To care for a service member who is the employee’s next of kin; or
- For qualifying exigencies related to a family member’s military service.
Duration of Leave: Eligible employees can receive up to 12 weeks of paid leave in a 12-month period (the 12-month period begins the day an employee files an application for benefits). Certain employees can be eligible for up to 24 weeks of paid leave if they take 12 weeks off to care for a child and then become eligible to take 12 weeks for their own serious health condition (or vice versa).
It is important to note that employees will be required to exhaust all employer-provided leave (not required to be provided under the Act) before receiving benefits under the PFML Program.
Further, Maryland PFML leave will run concurrently with federal FMLA leave.
Wage Replacement: Eligible employees can receive up to 90% of their average weekly wage (AWW), up to $1,000 per week (this maximum will be adjusted every two years). AWW is calculated as the total wages received by the covered employee over the last 680 hours of work for which the employee was paid, divided by the number of weeks worked.
Job Protection and Benefits Continuation: Employees who take PFML are entitled to job restoration once they return from the leave (except under specific circumstances where the reinstatement would cause substantial and grievous economic injury to the employer’s operation and only when the employer provides proper notice). In addition, employers must continue to provide employees the same health benefits (in the same manner), as required under the FMLA.
Funding the Program
Employees, self-employed individuals who opt into the PFML Program, and employers with 15 or more employees will be required to contribute to the Program beginning on October 1, 2023. At this point, it is unclear whether employers with 15 Maryland employees or employers with 15 employees worldwide will be subject to the contribution requirement.
The contributions are to be set by the Maryland DOL and have yet to be determined.
Private Plan Exception
Employers may satisfy the requirements of the Act if they provide private employer benefits, insurance, or a combination of both that provide eligible employees with the same or better rights, benefits, and protections than under the state Program. Employers must submit the plan and obtain an approval from the Maryland DOL to obtain the exemption.
Employers must provide a written notice to Maryland employees informing them of their entitlement to PFML at the time of hire and annually thereafter. In addition, when employees request leave under the Act (or an employer knows that an employee’s leave may be for a reason under the Act), the employer must notify the employee of their eligibility for PFML benefits within 5 business days. The state will develop model notices that employers can use for this requirement.
If leave is foreseeable, employers may require a covered employee taking Maryland PFML to provide the employer with a written notice of the covered employee’s intention to take leave at least 30 days prior to commencing the leave.
If leave is not foreseeable, employees must provide notice to the employer as soon as practicable and must generally comply with the employer’s notice requirements for requesting other leave (if those requirements do not interfere with the employee’s ability to use PFML leave).
Penalties for Non-Compliance
If an employer fails to pay contributions, the Maryland DOL may order the employer to pay the contributions plus interest, impose a penalty of up to two times the contributions withheld, and order an audit of the employer for the following year to determine compliance with the Act.
Employees can file a written complaint of non-compliance with the DOL and, within 90 days, the DOL will conduct an investigation and attempt to solve the matter through mediation. If mediation is unsuccessful, the DOL can order the employer to pay lost wages, salary, employment benefits, and other compensation lost, order reinstatement of the employee, and assess a penalty of up to $1,000 for each violation.
Employers should be on the lookout for implementing regulations from the Maryland DOL. In the meantime, employers with Maryland employees should prepare to take payroll deductions (and make contributions, if applicable) beginning in October 2023. Further, employers should look out for the model notices so they can begin notifying Maryland employees of their PFML rights, as required under the new law.
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2022 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved