What Employers Need to Know About the Massachusetts Paid Family and Medical Leave Program

In June of 2018, the Massachusetts legislature established a paid family and medical leave program with the adoption of Massachusetts General Laws Chapter 175M. This new employee benefit will be funded entirely by a tax levied on employers and employees. Employees will pay their share through a payroll deduction. The tax revenues (called “contributions” in the statute and regulations) will be deposited in the Family and Employment Security Trust Fund (“Trust Fund”). Funds deposited in the Trust Fund will be kept separate from the Commonwealth’s general fund and will be used solely to pay for (i) employee family and medical leave benefits, and (ii) costs of administering the leave program through the Department.

Chapter 175M is very detailed about the substance of the family and medical leave program. The draft regulations fill in the procedures for program implementation. The Executive Office of Labor and Workforce Development has scheduled public “listening sessions” around the state to gather oral and written comments on the draft regulations. Information about these sessions is available on the Department’s website, found here.

Collection of employer and employee contributions from employers and employee wages will begin on July 1, 2019. Family and medical leave benefits will be available to employees beginning January 1, 2021.

Paid Family and Medical Leave Program

All Non-Government Employers Must Offer the Benefit. All non-government employers with one (1) or more employees must participate in the public benefit program and submit contributions to the Trust Fund unless they offer a “private plan” as discussed below. Businesses with fewer than 25 employees get a break and are not required to pay the employer contribution. Businesses with fewer than 25 employees must, however, collect and forward employee contributions to the Trust Fund.

Government Employers. Employees of state or federal government are covered. Employees of cities, towns, other government employers are covered only if their governmental employer opts-in.

Contributions by Employers and Employees. For 2019 (7/1/19—12/31/19), the combined employer and employee contributions paid into the Trust Fund for each employee will be .63 percent of the employee’s salary up to a maximum salary cap of $128,400. The salary cap will be reviewed each year and will equal the employee salary cap established annually by the Social Security Administration for contributions to the Social Security Trust Fund.

Minimum contribution levels will be allocated between employers and employees in 2019 as follows:

Medical: 52 percent of payroll (85.2 percent of total contribution)

Employer/employee breakdown: 60 percent employer (minimum) 40 percent employee (maximum)

Family: One percent of payroll (14.8 percent of total contribution)

Employer/employee breakdown: Zero percent employer (minimum) 100 percent employee (maximum)

Employers may contribute amounts above the minimum, which would reduce the employee contribution level.

The .63 percent contribution level will be reviewed and adjusted annually for subsequent calendar years to a level that ensures continued financial viability of the family and medical leave program. The allocation of contribution collections between medical and family benefits will be determined each year based upon projected benefit costs in that year for each benefit category.

Determining the Number of Employees. All types of workers count toward determining whether a business meets the 25-employee threshold: seasonal, part-time, temporary, full-time, and 1099-MISC individual consultants, regardless of length of service or number of hours worked. However, a business is not required to collect employee contributions for paid family and medical leave benefits from 1099-MISC individual consultants unless that business issues 1099-MISC forms to more than 50 percent of its workforce. A business that issues 1099-MISC forms to more than 50 percent of its workforce is called a “covered business entity.” To calculate the number of employees, employers and covered business entities must determine their average number of employees by counting the number of employees during each pay period and dividing by the number of pay periods. The employer and covered business entity must use the workforce count for the previous calendar year when making this calculation.

Self-Employed Individuals. Self-employed individuals are exempt from the paid family and medical leave program unless they either (i) choose to opt-in, or (ii) are employed by a covered business entity. If the self-employed individual chooses to opt-in, the individual must pay the entire contribution amount (.63 percent of salary up to a cap of $128,400 in 2019) to the Trust Fund and enroll initially for a minimum of three years. The individual must file a Self-Employed Notice of Election, and thereafter register and begin making contributions to the Department. The individual must remit the required contributions for at least two out of four completed calendar quarters to qualify for benefits. If the self-employed individual is employed by a covered business entity, the covered business entity will deduct employee paid family and medical leave contributions from payments to the individual.

Employer Quarterly Reports and Payment of Contributions. The proposed regulations require all employers, self-employed individuals electing coverage, and covered business entities to file quarterly reports through the Department of Revenue’s MassTaxConnect system. The quarterly reports include identifying information about the filing entity/person and wage information about each employee. The Department will calculate the total quarterly contribution owed by the employer/self-employed individual/covered business entity based on the quarterly filing. Contributions owed must be remitted within 30 days of the end of the calendar quarter.

Private Plans. Employers have the option of establishing a “private plan” that provides at a minimum the same employee rights, benefits, and protections as the state administered public plan at a cost to employees no greater than employee costs under the public plan. Employers seeking to exercise this option must apply annually for exemption from making contributions to the public plan by offering a conforming private plan. If an employer offers a private plan, the company’s employees are not covered by the public plan and those employees must look to the private plan for benefits. Employees have the same legal rights under a private plan as they would under the public plan, including the right to appeal a denial of benefits. An employer may split its obligations so that family leave is under a private plan and medical leave under the public plan, or vice versa. The Department may audit private plans to determine compliance with state law and withdraw approval of the private plan if the plan terms have changed or been violated.

Employee Eligibility for Benefits. An employee must have approximately 15 weeks or more of earnings and have earned at least $4700 in the twelve months immediately prior to application for leave.

Unemployed Former Employees’ Eligibility for Benefits. Unemployed former employees who left employment within the past 26 weeks may be eligible for benefits if they had 15 weeks or more of earnings and earned at least $4700 in the twelve months immediately prior to application for leave. An unemployed former employee cannot collect unemployment benefits and paid family and medical leave benefits at the same time.

Employee Reasons for Taking a Leave. To receive paid family or medical leave benefits, an employee must file a claim with the Department. The Department will contact the employer for salary and related information and issue a decision approving or denying the claim for benefits. Employees are eligible for paid family or medical leave for the following reasons:

• To care for a family member (as defined in the law) who has a serious health condition;
• To bond with the employee’s child during the first 12 months after the child’s birth or the first 12 months after placement of the child with the employee for adoption or foster care;
• Because of any qualifying exigency arising out of the fact that a family member is on active duty or has been notified of an impending call or order to active duty in the Armed Forces; or
• To care for a family member who is a covered service member with a serious injury or illness incurred or aggravated in the line of duty.

Employees may also take paid medical leave for their own serious health conditions.

Employees must provide verification of the basis for the leave, including, for example, certification from a health care provider of illness, birth certificate of a child, certificate of adoption, or a copy of a family member’s active duty order.Other forms of acceptable verification are listed in the draft regulations.The leave can be continuous or, in certain circumstances, intermittent (e.g., two days per week).

Length of Leave. The employee must specify a proposed length of leave in a claim for benefits.

• Paid medical leave capped 20 weeks per benefit year.
• Paid family leave capped at 12 weeks per benefit year.
• Combination of paid medical and family leave capped at 26 weeks per benefit year.
• Paid family leave arising from a covered service member’s call to active duty capped at 26 weeks (instead of 12 weeks) per benefit year.
• Weekly benefit amount will be calculated as a percentage of employee earnings. The initial maximum weekly benefit will be $850 (subject to review each year based on statewide average weekly wages using a formula set forth in the statute and regulations).

A “benefit year” is a period of 52 consecutive weeks beginning the Sunday preceding the first day upon which the employee begins a paid family and medical leave. Employers will be required to track the amount of leave their employees take in each benefit year.

Employee Appeal Rights. Employees may appeal the denial of a claim for benefits to the Department, including the denial of a claim under a private plan. The Department will hold a hearing if the employee requests one with the appeal filing. The Department will issue a decision affirming, modifying or revoking the initial denial. The employee may then appeal the Department’s decision to the Massachusetts district court in the county where the employee lives or was last employed.

Employee Job Protection. Employers must restore an employee returning from an approved family or medical leave to the employee’s previous position or an equivalent position, with the same status, pay, benefits, and seniority as of the date of leave. Employee rights to accrue vacation, bonuses, sick leave, or other employee benefits, plans or programs shall not be affected by a leave. The employer must continue to provide for and contribute to the employee’s employment-related health benefits, if any, at the level that would have been provided if the employee had continued working instead of taking a leave.

No Employer Discrimination or Retaliation. Employers may not discriminate against or retaliate against an employee for claiming family or medical leave benefits. An employee may file a court action against an employer who commits retaliation or discrimination for claiming benefits or because the employee engaged in other activities protected under Chapter 175M. In addition to all common law remedies that may be available to the employee, the following statutory remedies are available: (i) injunctive relief to restrain continued violations; (ii) reinstatement to the same or an equivalent position; (iii) reinstatement of full fringe benefits and seniority; (iv) compensation at three times the lost wages, benefits, and other remuneration and the interest thereon; (v) payment by employer of employee’s reasonable costs and attorney’s fees.

Employer Penalties. If an employer fails or refuses to make a contribution, the Executive Office of Labor and Workforce Development may impose a penalty equal to .63 percent of the employer’s total payroll for the year in addition to collecting the total amount of benefits paid to covered individuals for whom the employer failed to make a contribution.

Next Step for Employers. Employers should begin to prepare for implementation of the paid medical and family leave program on July 1, 2019, including the payroll changes that will go into effect on that date.