Employers should also now begin to take what steps they can to understand how their existing leave polices will interact with these changes on the horizon.
Maryland and Delaware have joined a growing number of states across the country that provide paid family and medical leave benefits and protections to private-sector workers to supplement the protections offered by the Family and Medical Leave Act (FMLA). Employers operating in these and other jurisdictions that offer paid leave programs must ensure they comply with the patchwork of federal and state laws governing employee leaves of absence.
Maryland’s Time to Care Act of 2022
Under Maryland’s new Time to Care Act of 2022 (TTCA), which is effective June 1, 2022, Maryland workers will be able to apply for paid leave benefits from a state fund starting on January 1, 2025. Contributions from employees and employers are not required until October 1, 2023, and covered individuals can submit claims for benefits beginning January 1, 2025.
Coverage
The TTCA creates a Family and Medical Leave Insurance (FAMLI) Fund to provide up to 12 weeks of paid leave (or up to 24 weeks in certain cases) to covered individuals as part of a new FAMLI program. The TTCA covers employers, which are defined as a person or governmental entity that employs at least one individual in Maryland. These paid leave benefits are available to a “covered individual,” which includes an individual who has worked 680 hours over the 12-month period immediately preceding the date on which leave is to begin. A covered individual also includes a self-employed individual who elects to participate in the program by filing a written notice of election with the secretary of labor.
An employer may opt out of Maryland’s TTCA scheme by satisfying the requirements of the TTCA through a private employer plan. This private employer plan may consist of employer-provided benefits, insurance or a combination, but it must meet or exceed the benefits provided by the TTCA and must cover all of the employer’s eligible employees. A private employer plan must be filed with the Maryland Department of Labor for approval. Once the private plan is approved by the Department of Labor, the employer is exempt from contributing to the FAMLI Fund.
Qualifying Reasons for Leave
Under the TTCA, there are five broad categories of leave where a covered individual may obtain paid leave benefits:
- Care for a newborn child or child newly placed for adoption or foster case during the first year following the child’s birth, adoption or placement;
- Care for a family member with a serious health condition;
- Attend to a serious health condition that results in the covered individual being unable to perform the functions of the covered individual’s position;
- Care for a service member with a serious health condition resulting from military service who is the covered individual’s next of kin; or
- Attend to a qualifying exigency arising out of the deployment of a service member who is a family member of the covered individual.
Any leave the employee takes runs concurrently to their FMLA leave entitlement. TTCA benefits are also available to employees taking family or medical leave on an intermittent basis.
Benefits and Payroll Taxes
Individuals receiving TTCA benefits are paid a weekly benefit amount once every two weeks. The amount of weekly benefits received will be determined using a formula that takes into account the state average weekly wage and the individual’s average weekly wage, which is calculated based on total wages paid over the preceding 680 hours the covered individual worked. The amount of an individual’s weekly benefit can range from a floor of $50 to a ceiling of $1,000. The secretary of labor may adjust the ceiling during each succeeding 12-month period beginning on January 1, 2025, and these adjustments are tied to the annual percentage change in the consumer price index for all urban consumers for the Washington, D.C.-Virginia-Maryland-West Virginia metropolitan area.
The paid leave benefits are funded by employer and employee payroll tax contributions. The TTCA does not state the exact amount employers and employees must contribute to the fund starting in 2025 and instead requires the secretary of labor to determine on a biannual basis the appropriate total rate of contribution and the appropriate formula for allocating between employers and employees for their respective share of contributions to the FAMLI Fund. Under one formula, employers would contribute 75 percent of the fund and employees would contribute the remainder, whereas under an alternative formula, employees would contribute 75 percent of the fund and employers would contribute the remainder.
Employer Obligations and Impact on Existing Policies
Beginning in January 2025, employers must provide written notice to each employee of the employee’s rights under the TTCA at the time of hire and annually thereafter. In addition, when an employee requests leave under the TTCA or when an employer knows that an employee’s leave may be for a reason covered by the TTCA, then that employer has five business days to provide the employee with notice of eligibility to take leave where TTCA benefits may be provided.
The TTCA impacts existing paid leave policies as well. Under the TTCA, employees must exhaust all employer-provided leave that is not required under the law before receiving TTCA benefits. However, an employee’s right to benefits may not be diminished by an employer policy, and any agreement to waive an employee’s rights under the TTCA is void as against public policy. Furthermore, an employee’s right to benefits may not be diminished by a collective bargaining agreement.
Similar to the FMLA, the TTCA provides that employees are entitled to reinstatement to their former position upon return from leave. The TTCA also provides that an employee may be terminated only “for cause” while on leave; however, it is unclear what qualifies as “for cause.” It is possible that termination due to a reduction in force or position elimination would qualify as “for cause” termination, which is permissible under the FMLA, or it is possible that “cause” under the TTCA will require some affirmative misconduct by the employee while on leave. If an employee on leave is wrongfully terminated, the employee can recover up to three times the value of lost wages or other compensation as well as reasonable attorney’s fees.
Delaware’s Family and Medical Leave Insurance Program
On May 10, 2022, Delaware Governor John Carney signed into law the Healthy Delaware Families Act, which creates a statewide paid family and medical leave insurance program. Delaware is now the 11th state to pass legislation that guarantees paid family and medical leave to eligible workers who take a qualified leave. Payroll contributions will begin January 1, 2025, and the state will start paying benefits on January 1, 2026.
Coverage
Coverage under the Delaware paid family and medical leave law largely tracks coverage under the FMLA, i.e., an employee must have at least 12 months of employment by a covered employer for at least 1,250 hours of service (or be reasonably expected to meet these requirements). The law pertains to any individual “primarily reporting for work at a worksite” in Delaware and anyone else the employer classifies as a Delaware employee. This is different from the new Maryland law, which covers those with only 680 hours of service within a 12-month period and does not limit the law’s applicability to those primarily reporting for work in Maryland.
Covered individuals who work for covered employers with 10 to 24 employees during the previous 12 months are eligible only for the law’s parental leave benefits, whereas those who work for covered employers with 25 or more employees during the previous 12 months are eligible for all benefits available under the law.
Unlike the Maryland law, this program does not apply to small businesses with fewer than 10 employees, but they may opt in to the program to provide the available benefits to covered individuals. Covered employers may apply to the Delaware Department of Labor to meet the employer’s obligations under this new law through a private plan that provides benefits equal to those under the law and meets various other requirements.
Qualifying Reasons for Leave
The qualifying reasons for benefits under Delaware’s law track the qualifying reasons for leave under the FMLA:
- For the birth and care of the newborn child of the employee;
- For placement with the employee of a child for adoption or foster care;
- To care for an immediate family member (i.e., spouse, child or parent) with a serious health condition;
- To take medical leave when the employee is unable to work because of a serious health condition; and
- Qualifying exigencies.
The law permits intermittent leave, and any leave under the law that also qualifies for FMLA leave must run concurrently with leave taken under the FMLA.
An employer may require an employee to use accrued paid time off before accessing family and medical leave benefits or may count the employee’s use of accrued paid time off toward the total length of leave allowed under the new law. The employer may also require, with written notice to the employee, that payment of benefits under the law coordinate with leave or payment allowed under a collective bargaining agreement or employer policy. An employee may not access the family and medical leave benefits to receive more than 100 percent of the employee’s weekly wages, but the law does not diminish the employer’s obligation to comply with a policy, collective bargaining agreement or other law providing for leave that is more generous.
Benefits and Payroll Taxes
Benefits replace 80 percent of a covered employee’s weekly wages during a qualifying leave, up to $900 per week for a maximum of 12 weeks per year in 2026 and 2027. In each year after 2027, the maximum weekly benefit will increase in proportion to the annual average increase, if any, in the applicable consumer price index for all urban consumers, published by the U.S. Department of Labor.
For 2025 and 2026, the payroll taxes will be 0.8 percent, which includes 0.4 percent for medical benefits, 0.08 percent for family and caregiving leave benefits and 0.32 percent for parental leave benefits. An employer may require its employees to pay up to 50 percent of the payroll taxes required for their employees. The law includes a process for filing a waiver of payroll taxes if the employer does not expect the employee’s work schedule or length of employment to meet the eligibility requirements for family and medical leave benefits.
Employer Obligations and Impact on Existing Policies
An employer must approve or deny an application for benefits under this law within five business days of the employee’s application, notify the employee of the reasons for any denial and notify the Department of Labor of any approved claim within three business days of approval.
Employers must collect and retain information from covered individuals verifying parental leave status, serious health condition or qualifying exigency when a covered individual submits an application for leave under Delaware’s law, including a supporting certification for requests for leave based on serious health conditions. The law contains additional requirements for certification and recertification of serious health conditions forming the basis of a leave request.
The new law also includes the right to job protection and benefits continuance, a prohibition on discriminatory or retaliatory action against an employee who exercises their rights under the law and employer notice and posting requirements, among other requirements. Violations of the law may result in civil penalties between $1,000 and $5,000. An employee may also file a private cause of action to recover lost wages and benefits (or other monetary losses if wages are not lost) and interest. The law also allows an award of liquidated damages, reasonable attorneys’ fees, expert witness fees, costs and equitable relief. Employees may bring action on their own behalf and on behalf of other employees similarly situated.
Next Steps for Employers
Employers in Maryland and Delaware should be on the alert for additional guidance in the form of regulations, proposed notices and/or FAQ from the state Departments of Labor to assist with compliance efforts. Employers should also now begin to take what steps they can to understand how their existing leave polices will interact with these changes on the horizon. Finally, employers should plan to educate supervisors and human resources professionals on the requirements of the new laws and conduct any necessary training well before the changes go into effect.
For More Information
If you have any questions about this Alert, please contact Carla N. Murphy, Natalie F. (Hrubos) Bare, Kiana Givpoor, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.