On March 29, 2019, the Massachusetts Executive Office of Labor and Workforce Development (EOLWD) released an updated version of the proposed Massachusetts Paid Family and Medical Leave (PFML) regulations, offering further clarification to one of the most generous paid family and medical leave programs in the nation. As previously reported, the PFML creates an insurance program administered by the Massachusetts Department of Family and Medical Leave (Department) and funded by payroll contributions from employers and covered individuals. Beginning, January 1, 2021, the PFML will require employers to provide eligible employees, and in some cases, independent contractors and self-employed individuals, with up to 26 weeks of paid, job-protected family and medical leaves of absence.
The most noteworthy provisions of the updated regulations are as follows:
Beginning July 1, 2019, all Massachusetts employers will be required to start making financial contributions to support the paid leave program, at an initial rate of 0.63% of each employee’s wages on the first $132,900 of an individual’s annual gross earnings. The gross earnings threshold may be adjusted annually. The 0.63% contribution rate is split between contributions of 0.52% for medical leave and 0.11% for family leave. The PFML allows employers to deduct up to 100% of the 0.11% family leave contribution and up to 40% of the 0.52% medical leave contribution from compensation paid to employees and covered contractors. Employers with fewer than 25 covered workers in Massachusetts do not have to pay the employer share of the medical leave contribution to the Trust Fund. While the PFML allows employers to deduct a portion of the required contribution from each worker through the implementation of a payroll tax, the employer is ultimately responsible for remitting the full 0.63% contribution to the state Trust Fund on behalf of its workers.
The Department published a toolkit for employers, including a calculator for employers to estimate contributions. The toolkit can be found here.
The first quarterly contribution to the Trust Fund will be due on October 31, 2019 through the Massachusetts Department of Revenue’s MassTaxConnect.
Private Plan Exemption
Employers already providing paid leave benefits to their employees can apply for an annual exemption through the MassTaxConnect portal beginning April 29, 2019. (Our ASAP discussing the requirements for an exemption can be found here). To qualify for the exemption, the employer’s private plan must be as generous as the benefits provided by the PFML law and, as clarified in the updated regulations, cannot require a greater employee contribution than allowed under the PFML. Applications will be reviewed and acceptances conveyed on a rolling basis, will be effective for one year, and may be renewed annually. If an application for exemption is denied, the employer may re-submit the same plan for supplementary review by the Department.
Mandatory Quarterly Reporting
Employers are required to provide the first quarterly report through MassTaxConnect in October 2019. An employer or covered business entity is required to include employees, 1099 workers and self-employed individuals if more than 50% of the employer’s workforce consists of self-employed individuals. Employers are expected to provide information that includes the name, social security number, and wages paid or other earnings for each employee and contracted service provider. Based on the quarterly report, the Department will calculate the total quarterly contribution owed by the employer, which must be remitted within 30 days after the end of the quarter. An employer that fails or refuses to make the required contributions will be assessed a fine of 0.63% of its total annual payroll for each year it failed to comply, in addition to the total amount of the benefits paid to covered individuals for whom the employer failed to make contributions.
Fitness for Duty
Unlike the initial draft of the regulations, the revised regulations contain a Fitness for Duty provision that largely mirrors the requirement under the federal Family Medical Leave Act (FMLA). Specifically, an employer may require employees and covered individuals who take leave for a condition to obtain a certification from a healthcare provider that the employee or covered individual is able to return to work. Significantly, within five days of receiving notice of PFML-designated leave, the employer must provide an employee or covered individual with a list of the essential functions of their job. The letter to the employee must address the employee or covered individual’s ability to perform those essential functions. If the employer has done this, the employee's healthcare provider must certify that the employee or covered individual can perform the identified essential functions of their job before returning to work.
Notification to Workers
Prior to July 1, 2019, employers must notify employees and independent contractors of their PFML benefits by:
- displaying the mandatory workplace poster provided by the Department at each of their Massachusetts locations (the mandatory workplace poster is available here);
- providing written notice to current employees (full-time, part-time, seasonal), contractors, and new employees within 30 days of hiring; and
- collecting signed acknowledgements from employees and independent workers.
Although the Department has not provided a template for the notice, the notice must include: an explanation of the availability of family and medical leave benefits; the employee’s contribution amount and obligations; the employer’s contribution amount and obligations; the employer’s name, mailing address and employer identification number assigned by the Department; instructions on how to file a claim for benefits; and the contact information of the Department. Employers that fail to provide the required notice can face a fine of $50 per individual for a first violation, and $300 per individual for a subsequent violation.
FMLA, Short-Term Disability and Other Leaves
The PFML provides broader coverage than does the federal Family and Medical Leave Act (FMLA). Unlike FMLA, all workers will be eligible for paid family or medical leave under the PFML, regardless of length of service with the employer or hours worked. In addition, under PFML, a "family member" for whom the worker may take family leave also includes a domestic partner, grandchildren, grandparents, siblings, as well as the parents of a spouse or domestic partner.
The revised regulations provide that employees or covered individuals can use accrued paid leave provided by their employer rather than file a claim for PFML benefits. However, use of the employer-provided leave will run concurrently with the PFML leave period even though the employee or covered individuals will not be compensated with PFML paid benefits for this period. The revised regulations also clarify that workers utilizing PFML will not continue to accrue benefits while on leave, which mirrors the existing rule under federal FMLA. Lastly, unless the aggregate amount a covered individual receives would exceed the covered individual’s average weekly wage, the weekly PFML benefit amount ($850/week maximum) will not be reduced by the amount of the wage replacement from short-term disability for that period.
Covered Business Entities and Covered Contract Workers
The revised regulations provide coverage guidance for companies that have self-employed workers and contractors. The calculation is based on whether more than 50% of its Massachusetts workforce were self-employed 1099-MISC contractors based on each pay period of the previous calendar year.
What Employers Should Do Now
Although the PFML regulations are not yet finalized, all Massachusetts employers should familiarize themselves with the PFML program requirements and options in advance of the July 1, 2019 effective date. We recommend employers prioritize the following:
- Set up a MassTaxConnect account for submission of the quarterly reports and the required contributions.
- Consider whether to apply for a private plan exemption. Employers that already have a generous leave or disability plan may wish to opt out of the state program and administer a voluntary family and/or medical leave plan. Employers are encouraged to apply when the portal becomes available on April 29, to allow for sufficient time for follow-up review should the application be denied.
- Prepare the payroll department to begin deducting employee premiums by July 1, 2019. The Department’s website offers interactive calculators to help employers estimate the required contributions, including the amounts for both the employer's and the covered individual's share.
- Provide written notice and obtain signed acknowledgments from both W2 employees and 1099-MISC contractors concerning the rights and benefits under the PFML program. With payroll deduction beginning on July 1, it is critical to communicate this information in a timely fashion. In addition, the PFML mandatory workplace poster must be placed in a conspicuous location at the worksite.
- Revise employee handbooks or leave policies to have updated policies in place when leave under the program becomes available in January 2021.