On September 2 and September 15, 2008, the New Jersey Department of Labor and Workforce Development (NJDOL) issued proposed regulations aimed at implementing New Jersey’s Paid Family Leave legislation, the controversial new law signed by Governor John Corzine on May 2, 2008. The new law (click here for summary) gives all employees up to six weeks of paid leave to care for a newborn, a newly adopted child or a sick relative. Benefits under the law will be provided through the State Disability Fund or private insurance plans. (Workers will begin making contributions to the Fund on January 1, 2009, and will be able to receive payment under the new law starting July 1, 2009.)
The proposed regulations (1) raise the maximum weekly benefit for State Disability Benefits; (2) address whether family leave payments received by employees are considered “remuneration” for purposes of determining eligibility for unemployment compensation; and (3) address whether family leave benefits received by employees should be considered taxable wages under New Jersey’s Unemployment Compensation law and the State Disability Fund.
The proposed regulations raise the maximum weekly benefit for State Disability Benefits to $546 per week (from $524 per week). In addition, they raise the taxable wage base for purposes of employer contributions under the Unemployment Compensation law (and Temporary Disability Benefits law) from the first $27,700 of an employee’s annual wages to the first $28,900. Both of these changes are based upon increases in the state minimum wage.
With regard to the effect on employee eligibility for unemployment compensation under New Jersey’s Unemployment Compensation law, the proposed regulations consider family leave law benefits payments as one example of “remuneration” (i.e., earnings). This means that, like wages and other forms of more traditional compensation, paid family leave benefits also will be used to determine whether an individual is eligible for unemployment compensation as well as the amount of unemployment compensation payments to which the individual may be eligible.
With regard to the taxability of family leave payments, the proposed regulations make clear that family leave law benefits paid under the state plan, by an insurance carrier under an approved private plan, or by either a union or employer under an approved self-insured private plan are considered “benefits,” and therefore would be non-taxable.
The proposed regulations further provide that family leave law benefits paid to employees under an approved private plan (as opposed to those paid under the state plan) are considered taxable remuneration if the payments are for a period of seven or less consecutive days following the first day that the individual establishes a claim, but are then considered non-taxable following the seventh consecutive day. However, if the leave extends to 22 consecutive days, or the employee is eligible for at least one day of family leave law benefits in three separate subsequent weeks, the initial seven-day period will be considered non-taxable remuneration.
The proposed regulations also state that any voluntary payments made by an employer to an employee taking family leave would be considered wages within the meaning of the Unemployment Compensation and Temporary Disability Benefits laws, for both tax and benefit entitlement purposes. Likewise, an employer’s payment to an employee of the difference between family leave law benefits paid under the state plan (or an approved private plan), and the employee’s full salary, also would be considered wages within the meaning of the Unemployment Compensation and Temporary Disability Benefits laws, for both tax and benefit entitlement purposes, in accordance with the proposed regulations.
The proposed regulations are set for a public hearing on October 6, 2008, and written comments may be submitted to the NJDOL by November 14, 2008. Ogletree Deakins attorneys are available to discuss these important proposed regulations in greater detail in advance of the public hearing and at the conclusion of the comment period.