When the New York Paid Family Leave Benefits Law (“PFLBL”) takes effect on January 1, 2018, it will be the most generous paid employee leave benefit in the nation, guaranteeing eligible employees up to 12 weeks of job-protected paid family leave when its requirements are fully implemented in 2021. The New York Workers’ Compensation Board (“WCB”) recently issued its final regulations implementing the PFLBL. This Alert provides an overview of the PFLBL’s requirements and the steps that employers should take to comply with them.
Virtually all private employers with at least one employee will be required to provide paid family leave benefits to their eligible employees. Public employers are exempt from having to provide paid family leave benefits, but may opt into the benefit program.
Coverage of Full- and Part-Time Employees
Both full-time employees (those scheduled to work 20 or more hours per week) and part-time employees (those scheduled to work fewer than 20 hours per week) are eligible for benefits. Full-time employees are eligible after working for 26 consecutive weeks. Parttime employees are eligible after working 175 days in a 52-consecutive-week period. Vacation, personal, sick or other time away from work, during which the employee is still considered to be an employee, counts toward the accrual period as long as the employee contribution has been paid. However, periods of temporary disability may not be counted for eligibility purposes. Certain employees are excluded from receiving paid family leave benefits, including employees working in a professional or teaching capacity for a religious, charitable or educational institution, as well as farm laborers, but an employer can voluntarily choose to provide them with paid family leave benefits upon approval from the WCB. An employer that voluntarily provides disability benefits to any of its employees must notify such employees and the WCB before December 1, 2017, whether it will or will not provide them with paid family leave benefits.
Employees will be entitled to take paid family leave to (i) bond with a newborn, foster or adopted child in the first 12 months after birth or placement; (ii) care for a relative with a serious health condition (including physical care and emotional support); or (iii) because of a qualifying exigency arising out of the fact that the employee’s spouse, domestic partner, child or parent is on active duty (or has been notified of an impending call or order to active duty) in the armed forces of the United States. Relatives for whom leave may be taken to provide care include a spouse, domestic partner, child, grandchild, parent, parent-in-law, stepparent, grandparent, legal guardian or other person who stood in loco parentis to the employee when the employee was a child. Paid family leave may not be taken for an employee’s own illness.
As of January 1, 2018, eligible employees may take up to eight weeks of paid family leave in any consecutive 52-week period computed retroactively with respect to each day for which benefits are claimed. The amount of available leave will increase to 10 weeks in 2019 and to 12 weeks in 2021. Employees may not receive paid family leave and disability benefits at the same time. Paid family leave may only be taken in full-day increments.
Starting on January 1, 2018, the maximum paid family leave benefit will be 50 percent of an employee’s average weekly wage (“AWW”), which will increase to 55 percent in 2019, 60 percent in 2020 and 67 percent in 2021. However, the benefit amount will be capped at the then applicable percentage of the AWW. Based on the current AWW of $1,305.92, the current maximum weekly benefit would be $652.96.
Employee Payroll Deductions
The paid family leave benefit is fully funded by employee contributions deducted from employees’ paychecks. The amount of the employee contribution is determined by the New York Superintendent of Financial Services and has been initially set at 0.126 percent of an employee’s weekly wage, not to exceed 0.126 percent of New York’s current AWW of $1,305.92. Based on these figures, the initial maximum weekly employee contribution is $1.65 per week. Employers have been allowed to make payroll deductions since July 1, 2017, if desired.
Obtaining Coverage for Paid Family Leave Benefits
Employers obtain coverage through a rider to their New York State disability insurance policy or by purchasing a separate paid family leave policy. Employers may also self-insure for benefits.
Employees are responsible for providing at least 30 days’ notice if leave is foreseeable. If the leave is unforeseeable, notice must be provided as soon as practicable. An employee need not expressly request paid family leave benefits or mention the PFLBL. Rather, an employee need only make the employer aware of the qualifying event. Once the employee does so, the employer must complete the employer section of the Request for Paid Family Leave form, which will be issued by the WCB, and return it to the employee within three business days. The employee will then be required to complete the form and submit it to the insurance carrier with any required certifications. The insurance carrier will review the application and approve or deny it within 18 days of receipt.
Employers must maintain the health insurance benefits of employees receiving paid family leave benefits on the same terms as while they were working. Employees must be returned to their previous position or a similar position when their leave ends and cannot be discriminated or retaliated against for using paid family leave benefits.
Handbook and Posting Requirements
Employers must post, and maintain in a conspicuous place accessible to employees, a paid family leave notice to be issued by the WCB. If an employer maintains any written guidance for employees concerning employee benefits or leave rights, such as an employee handbook or policy guide, information about an employee’s rights and obligations under the PFLBL, including how to file a claim for paid family leave, must be included in the handbook or guide. If an employer does not have any written employee guidance, the employer must still provide a separate written notice to each employee containing such information.
Waivers for Ineligible Employees
Employees who are ineligible for paid family leave benefits because they are not scheduled to work for at least 26 consecutive weeks, or will not work 175 days in a 52-consecutive-week period, may sign a waiver opting out of paid family leave benefits. Employers must offer the waiver to such ineligible employees. A waiver is automatically deemed revoked within eight weeks of any change to an employee’s regular work schedule that requires the employee to continue working for 26 consecutive weeks or 175 days in a 52-consecutive-week period. In such an event, the employee must begin making premium contributions and pay any retroactive premiums from the date of hire as soon as the employee is notified of such obligation. An ineligible employee who does not sign a waiver must make premium contributions.
Coordination with Paid Time Off
Under the PFLBL, an employer may allow, but cannot require, an employee to charge all or part of the employee’s family leave time to unused accrued vacation or other paid time off to receive the employee’s full salary while on leave. If an employee elects to do so, the employer may request reimbursement out of any paid family leave benefits due to the employee.
Coordination with FMLA Leave
Leaves covered by both the PFLBL and Family and Medical Leave Act (“FMLA”) run concurrently, as long as the employer (i) notifies the employee upon the start of the leave that the time off is designated as leave under both the PFLBL and the FMLA, and (ii) provides the employee with the required FMLA notice and certification forms. Failure to do so will result in the employer waiving the right to have paid family leave run concurrently with FMLA leave. If an employer designates leave as FMLA leave and notifies an employee that such leave also qualifies for paid family leave benefits, but the employee declines to apply for paid family leave benefits, then the time off may nonetheless be counted against the employee’s paid family leave benefits. An employer that designates paid family leave and FMLA leave as running concurrently may change the employee’s paid time off as permitted by the FMLA. (This is an exception to the PFLBL’s prohibition against requiring employees to substitute paid time off.)
Although paid family leave may only be taken in fullday increments, employers may track hours taken for intermittent FMLA leave that also are for a paid family leave reason where the employee works part of a day, and deduct one day of paid family leave from the employee’s annual paid family leave benefit when such hours reach that of the employee’s usual work day. The FMLA allows employers to choose one of four measurement periods for determining an employee’s FMLA leave eligibility (a calendar year, any fixed 12-month period, the 12-month period measured forward from the date the employee first uses FMLA leave, or the 12-month period measured backward from the date the employee first uses FMLA leave).
However, paid family leave requires that the consecutive 52 weeks used to determine paid family leave eligibility be computed retroactively with respect to each day for which benefits are claimed, which is equivalent to the 12-month period measured backward under the FMLA.
Tax Treatment of Benefits
The New York State Department of Taxation and Finance, after reviewing the PFLBL, WCB regulations, applicable laws, case law and federal guidance, and after consulting with the Internal Revenue Service, recently issued the following guidance about the tax treatment of paid family benefits:
1. Paid family leave premiums will be deducted from employees’ after-tax wages.
2. Paid family leave benefits paid to employees will be taxable, non-wage income that must be included in federal gross income.
3. Taxes will not automatically be withheld from benefits. Employees wishing to avoid tax liability for receipt of benefits can request voluntary tax withholding from such benefits.
4. Employers should report employee contributions on Form W-2 using Box 14 – State disability insurance tax withheld.
5. Paid family leave benefits should be reported by the State Insurance Fund on Form 1099-G and by all other payers (either private carriers or self-insured employers) on Form 1099-MISC.
To be ready to comply with the PFLBL, employers should:
- Consult with their disability insurance carrier about obtaining the required PFLBL coverage or take the necessary steps to self-insure for benefits;
- Obtain and post the required paid family leave notice to be issued by the WCB;
- Prepare their payroll operation to begin making employee payroll deductions before January 1, 2018, to ensure there is adequate funding to pay the required premiums when due;
- Prepare new handbook policies or guidance for implementation and distribution before January 1, 2018, informing employees of their rights and obligations under the PFLBL;
- Amend current leave policies to interact with the PFLBL as appropriate; and
- Consult with their labor and employment counsel for guidance in preparing and amending their leave policies to ensure compliance with their leave obligations under the PFLBL, FMLA and other leave laws.