Latest PFML Developments
Following calls by state-wide chambers of commerce, industry associations and even employee advocacy groups, legislators on Beacon Hill are considering whether to delay the upcoming July 1, 2019 deadline for Massachusetts employers to begin making payroll deductions under the new Massachusetts Paid Family and Medical Leave ("PFML") law. (For overall summaries of the PFML law, see here and here.)
As of now, however, no such delay has been implemented, and with less than four weeks remaining until this deadline, many important questions under the new law have yet to be answered.
While we wait for resolution on the issue of a potential delay in the contribution date, and for final regulations under the PFML statute to be released by July 1, below are answers to some of the questions we have received from employers trying to plan for the upcoming employee notice and contribution deadlines.
1. The Department of Paid Family and Medical Leave's website says employee contributions are not due until October 2019 - has the implementation been postponed already?
Not yet. Employers currently are required to begin withholding employee contributions on July 1, 2019, but are not required to actually submit the withheld contributions from July, August and September until October 31, 2019. We will send another e-alert if the July 1 contribution withholding start date is postponed.
2. How do I count temporary, part-time or seasonal workers to determine whether I have 25 or more employees?
Employers are to use a straight average method to calculate whether they meet the 25-employee threshold. This is done by summing the total number of employees paid in each pay period during the preceding twelve months, and dividing that number by the number of pay periods.
3. Do independent contractors count toward my number of employees?
Yes, but only if Form 1099-MISC independent contractors make up more than 50% of your workforce. To determine this, calculate your number of Form W-2 employees using the straight average method. Then perform the same calculation for your Form 1099-MISC independent contractors (total independent contractors paid in each pay period over the past twelve months, divided by the number of pay periods). If your average number of Form 1099-MISC independent contractors is less than your average number of W-2 employees, you do not have to count Form 1099-MISC independent contractors toward your number of employees.
4. Do I have to provide written notices about the PFML statute to all of my Form 1099-MISC independent contractors?
Yes, but only if Form 1099-MISC independent contractors make up more than 50% of your workforce.
5. Do all entities to which I provide a Form 1099-MISC count for purposes of the PFML notice and contribution requirements?
No. The draft regulations limit the PFML's application to "self-employed individuals" with whom the employer "contracted for services" and was "required to report the payment for such services on IRS Form 1099-MISC." This language is far from clear. At public hearings on May 23 and May 24, 2019, many questions were raised regarding which types of Form 1099-MISC recipients will qualify as "self-employed individuals" for purposes of the PFML. We expect more guidance to be released on this point in the final regulations.
It is important to note that not all payments to contractors are required to be reported on a Form 1099-MISC. Businesses sometimes issue Forms 1099-MISC to vendors and other entities for which the forms are not legally required, such as many corporations and LLCs. Consult the IRS Form 1099-MISC instructions or your tax accountant for more detailed information on the types of contractor payments which must be reported on a Form 1099-MISC.
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For additional information regarding the PMFL statute, and the upcoming notice and withholding deadlines, please consult one of our experienced employment counsel.