Employers will now have extra time to comply with the Paid Family Medical Leave Act, G. L. c. 175M (“Act”), and more clarity on how to do so, thanks to delays implemented by state leaders and regulations issued by the Department of Family and Medical Leave (“Department”). On June 13, Massachusetts Governor Charlie Baker signed a bill to delay the collection of contributions under the Act by three months, from July 1 to October 1. The bill also adopts amendments to the Act proposed by advocacy groups. The next day, the Department extended various deadlines for complying with the Act. Additionally, on June 18, the Department issued its final regulations, which includes an increase in the initial contribution rate from 0.63% to 0.75% of wages.
Delay for Collecting Contributions and Amendments to Act
The delay was announced on June 11, but had not yet been signed into law. The announcement came after advocacy groups sent a letter to state leaders on May 20 requesting the delay and proposing five amendments to the Act. The groups sought to clarify certain provisions of the Act so that it more closely aligned with the federal Family and Medical Leave Act (“FMLA”), which currently provides for unpaid leave. The amendments, now law, specify that: (1) leave taken on an intermittent basis reduces the amount of remaining leave available to an employee; and (2) eligibility for leave for an employee’s own serious health condition arises when the condition makes the employee unable to perform the functions of his or her job. The language of the amendments tracks the language of the FMLA.
The bill also clarifies that the penalty for failing to make the required contributions will be based on the then-current annual contribution rate, rather than the initial rate of 0.63%. The penalty will be calculated by multiplying the then-current rate by the employer’s total annual payroll, or the fraction thereof for which it failed to comply, plus the total amount of benefits paid to employees for whom it failed to contribute.
Final Regulations
We have analyzed the final regulations and note the following significant changes from the draft regulations issued for public comment on March 29, 2019:
- Contribution Rate. The initial contribution rate has been increased from 0.63% to 0.75% of wages. An employer may choose to deduct differing percentages from the wages of different groups of employees, but it may not deduct more than the maximum percentages allowed.
- Duty to Retain Records. Employers with approved private plans “must retain all reports, information, and records related to the approved plan, including those related to all claims for benefits made under the plan, for three years, and must furnish same to the Department upon request.” Failure to retain these records or respond to a request for information from the Department may result in withdrawal of approval of the plan. The same penalty for failing to pay the required contributions may be imposed for failure to maintain a plan as approved by the Department.
- Duty to Notify of Non-Renewal of Private Plan. Employers with approved private plans that choose not to renew their applications for an exemption must notify employees and the Department no later than 30 days prior to the effective date of termination of the exemption.
- Duty to Maintain Benefits. Benefits and benefit eligibility must be maintained until the effective date of termination of a private plan exemption. An employer that does not renew an approved plan “must continue to provide paid leave benefits under the same terms and conditions of the private plan for the entire duration of the leave for a claim that began prior to the effective date of termination.”
- Short-Term Employees. An employer shall not be required to restore an employee to their position “who was hired for a specific term or only to perform work on a discrete project, if the employment term or project is over and the employer would not otherwise have continued to employ the employee.”
- Intermittent Leave. An employer may require that intermittent leave be taken in increments not smaller than a designated minimum time period. The minimum period may not exceed four consecutive hours.
- Other Clarifications Regarding Private Plans. Exemptions will be effective no earlier than the next quarter following the date of approval. An employer can only submit one application for an exemption for a private plan once per quarter. Adverse changes to the financial condition or licensure status of the employer, insurer, or surety company may result in withdrawal of approval of a plan.
The regulations will be effective July 1.
Deadline Extensions
In response to the delay, the Department has extended several other deadlines for complying with the Act. The deadline for providing written notice to employees of the rights and benefits available under the Act has been extended to September 30. The Department has issued guidance on this notice, which we covered. The deadline for submitting applications for an exemption from the Act for a private plan for the first quarter, October 1 to December 31, has also been extended to December 20. Contributions, which now must be collected beginning on October 1 per the delay, must be remitted to the Department by January 31, 2020.
These obligations are part of a larger scheme rolling out paid family and medical leave in Massachusetts in the coming months, as explained in our prior posts.
The Act has been the subject of frequent updates and guidance from the Department, which we will continue to monitor. Check back for further updates on this important development in Massachusetts.
