The Massachusetts Department of Family and Medical Leave (Department) continues to issue guidance on the Massachusetts Paid Family and Medical Leave Act (PFML), which takes effect on July 1, 2019. Holland & Knight previously provided an overview of the law and addressed common questions regarding the PFML. (See Holland & Knight alerts, "Massachusetts and New Jersey Make Changes to Paid Leave Laws," Feb. 28, 2019, and "Questions and Answers on the New Massachusetts Paid Family and Medical Leave Law," April 8, 2019.)
This Holland & Knight alert provides an update on developments concerning the PFML and newly released information from the Department.
When Must an Employer Provide Its Workforce with Written Notice of PFML?
The Department recently extended its workforce notification deadline to June 30, 2019 (an extension from the prior deadline of May 31, 2019).
To comply with this requirement, an employer must provide its workforce with a written notice of their rights under the PFML. An employer may distribute this notice electronically. The Department has stated that a "read receipt" is not sufficient to constitute a written acknowledgment of receipt by the worker. An employer must obtain a written acknowledgment of receipt from each worker or a written statement indicating that the worker declines to acknowledge receipt of the information. The Department has indicated that it will consider an employer to have fulfilled its notice obligation if the employer can establish that it provided each member of its workforce with notice and the opportunity to acknowledge or decline to acknowledge receipt.Employers are required provide written notice of PFML to all employees.
An employer must provide written notice to all 1099-MISC contractors if those contractors make up more than 50 percent of the employer's workforce. If the number of contractors does not meet this threshold, an employer is not required to provide them with written notice. Nevertheless, the Department recommends that all employers provide 1099-MISC contractors with written notice of PFML so that those contractors can decide whether they want to opt into the program, regardless of whether the employer meets the threshold.
An employer may elect to distribute the template notice to employees and a template notice to self-employed individuals published by the Department. If an employer creates its own notice, that notice must include the following information:
- 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 and mailing address
- the federal employer identification number (FEIN) assigned by the Department
- instructions on how to file a claim for family and medical leave benefits
- the mailing address, email address and telephone number of the Department
When Must an Employer Display the Workplace Poster?
While the Department extended the deadline for an employer to provide written notice to its workforce, it did not expressly extend the deadline for an employer to display the workplace poster. The Department has not expressed an opinion on whether the PFML poster must be displayed by the original May 31, 2019, deadline. Consequently, employers are encouraged to display the poster as soon as possible. Employers are required to display the poster where other workplace posters are displayed, in English and each language that is the primary language of five or more members of the workforce.
Employers may access the workplace poster published by the Department, "Notice of Benefits Available Under M.G.L. Chapter 175M Paid Family and Medical Leave," in English and translated in other languages.
When Must an Employer Apply for a Private Plan Exemption?
The Department also recently extended its deadline for employers to apply for a private plan exemption to Sept. 20, 2019 (an extension from the prior deadline of June 30, 2019). This extension only impacts an employer's contribution requirements if the exemption request is approved. If the Department denies the request, the employer will be required to remit the full contribution amount, based on what it would have owed starting July 1, 2019, when PFML contributions begin.
Can an Employer Apply for a Partial Exemption?
Yes. The Department has clarified that an employer may apply for a private plan exemption from the PFML's Family Leave Program and Medical Leave Program or both. The Department considers an employer's application for a private plan exemption based on the employer's FEIN. Accordingly, in order for an employer's private plan to be approved, it must apply equally to all covered individuals in the employer's workforce, including employees in other business locations, and not be limited to certain groups of employees.
What Must an Employer Do to Obtain a Private Plan Exemption?
To receive a private plan exemption, the benefits offered by an employer's private plan must be greater than or equal to the benefits provided by PFML. This means an employer's private plan must provide workers with the same or greater paid leave benefits as provided under the law, as well as job protection while the worker is on leave, continued employer contributions to employment-related health insurance benefits, and the ability to take leave intermittently or on a reduced leave schedule, for a prorated benefit amount. Further, according to the Department's guidance, the employer's private plan must specifically state that "all presumptions shall be made in favor of the availability of leave and the payment of leave benefits."
In addition to these benefit requirements, an employer's private plan must be covered by a bond, valued based on the size of the employer's workforce. For every 25 covered individuals, an employer is required to post a surety bond valued at:
- $19,000 for qualifying family leave plans
- $51,000 for qualifying medical leave plans, or
- $70,000 for qualifying plans for both family and medical
An employer considering private plan exemptions should review the list of questions employers will be asked during the application process, which the Department recently published. The Department will continue to accept applications for private plan exemptions on a rolling basis, but applications must be approved in the quarter prior to the quarter in which the exemptions go into effect. Once an application is submitted, the Department anticipates issuing a determination within one to two business days.
How Will Employers Estimate PFML Contributions?
To help employers estimate the amount of their required contributions, which may aid in determining whether a private plan exemption is more cost-effective, the Department released a Paid Family and Medical Leave Contribution Calculator.
Are Payroll Deductions Made on a Pre-Tax or Post-Tax Basis?
The tax treatment for both employer and employee PFML contributions is governed by federal tax law. The Department has requested guidance from the Internal Revenue Service (IRS) regarding the tax implications of PFML payroll deductions, but recommends that employers consult with their tax advisors until the IRS provides guidance. The Department has stated that based on its review of federal rules and following consultation with the Massachusetts Department of Revenue, it anticipates that the IRS will conclude that employee contributions should be withheld from after-tax wages.
What Is the Status of the Final Regulations?
The Department has held public hearings and the public comment period has ended. The Department anticipates publishing the final regulations in advance of the July 1, 2019, deadline, when the regulations will take effect. Holland & Knight will issue an update once the final regulations are published.
What Is the Current Timeline for Implementation?
Based on the updates provided by the Department, here is an overview of key upcoming dates:
- Now: Display the "Notice of Benefits Available Under M.G.L. Chapter 175M Paid Family and Medical Leave" poster in a conspicuous location where other workplace posters are located.
- June 30, 2019: Distribute written notices to employees and 1099-MISC contractors, and obtain written acknowledgments from those workers recognizing their receipt (or a statement indicating the individual's refusal to sign such acknowledgment).
- July 1, 2019: Payroll deductions begin; the Department will issue final regulations before July 1.
- Sept. 20, 2019: Deadline for employers to apply for private plan exemptions for the Family Leave Program and the Medical Leave Program or both.
- Oct. 31, 2019: Deadline for employers to submit contributions from July to September and complete quarterly reports through MassTaxConnect based on its Massachusetts workforce (including all employees and all 1099-MISC contractors, even if they make up less than 50 percent of the workforce). In the quarterly report, employers must disclose the workers' names, social security numbers and all wages and/or compensation paid. The Department has indicated that it will release more specific reporting and documentation guidelines prior to July 1.
- Jan. 1, 2021: Paid family leave benefits available for bonding with a new child, service member-related leave and for serious personal health conditions.
- July 1, 2021: Paid family leave benefits available for a family member's serious health condition.