Recent DFML Guidance On Paid Family And Medical Leave Compliance Questions
Through both formal guidance and informal statements by its Director, the Massachusetts Department of Family and Medical Leave (“DFML”) has addressed some important questions raised by Massachusetts employers about their obligations under the state’s recently enacted Paid Family and Medical Leave (“PFML”) law.
Most notably, in response to numerous questions by employers regarding the process for obtaining an exemption allowing PFML to be provided through a private plan rather than the new state system, the DFML recently provided additional information regarding application requirements, the application approval process, and the anticipated release of a standardized private plan template.
The DFML has also provided guidance on a number of other important issues under the statute.
Overview Of PFML Law
Under the PFML law, Massachusetts employers will soon be required to offer paid family and medical leave to employees and, in some cases, independent contractors. Leave benefits will be financed through payroll contributions by employers and employees.
To comply with their requirements under the new statute, employers should have already taken steps to ensure that (i) the official PFML informational poster is displayed in the workplace; (ii) covered individuals have been provided with written notice of PFML benefits, contribution rates, job protections, and other matters; and (iii) they have begun making payroll deductions for PFML benefits, unless an employer has applied for, or plans to apply for, a private plan exemption. (As detailed below, employers that wish to apply for an exemption for the current fiscal quarter must do so by December 20, 2019.)
Beginning in 2021, covered individuals will be eligible to take up to 26 total weeks of PFML in a benefit year, as follows:
• Up to 12 weeks of family leave for the birth, adoption, or foster care placement of a child; to care for a family member with a serious health condition; or because of a qualifying exigency arising out of a family member's active military duty orders.
• Up to 20 weeks of medical leave for the individual's own serious health condition.
• Up to 26 weeks of family leave to care for a family member with a serious injury or illness incurred or aggravated in the line of military duty.
The statute provides that PFML may be taken intermittently for any covered purpose, except for bonding with a child following birth, adoption, or foster care placement.
Private Plan Exemptions
On October 1, 2019, the DFML announced that it is collaborating with the Massachusetts Division of Insurance (“DOI”) to develop a standardized private insurance plan template that will satisfy the requirements of the PFML law. The DFML indicated that this template would be made available to employers in November 2019, and that, in the interim, the DFML would consider a carrier-issued Declaration of Insurance as proof of adequate PFML coverage.
The DFML also released a list of insurance carriers that are able to provide a DFML-approved PFML Declaration of Insurance. (The list can be found here.) Employers that intend to apply for an exemption (or have been provisionally approved for an exemption) should consult with their insurance carriers to obtain the required Declaration of Insurance to add to the application file.
The DFML and DOI are also working with insurance carriers to develop a more efficient exemption application approval process. As part of the anticipated modified approval process, after an application has been submitted, the DFML will provisionally approve the application, while it conducts a thorough review of the proposed plan to ensure it meets all the prescribed requirements for an exemption. The DFML may request additional information from an employer, if necessary, to ensure that the employer’s private plan exemption application is complete by the current filing deadline of December 20, 2019.
Other Key Issues Under Review
Massachusetts Unemployment Benefits Statute.
The PFML statute and regulations reference the Massachusetts unemployment benefits statute, M.G.L. c. 151A, in several places. Accordingly, the DFML recommends that employers look to that statute for clarification regarding many of the terms used in the PFML, such as “employer,” “employment,” “employee,” and “wages.” In particular, employers that are exempt from coverage under c. 151A are also exempt from the requirements of the PFML statute.
The DFML has stated that, in conjunction with the Massachusetts Department of Unemployment Assistance (“DUA”), it intends to audit employers to determine whether employees are being misclassified as independent contractors. While it is not clear exactly how such audits will be carried out, employers would be wise to carefully review their operations to ensure that workers are not improperly being treated as independent contractors rather than employees.
Section 9(c) of the PFML states that any change in seniority, status, employment benefits, pay, or other terms or conditions of employment that occurs during an employee’s PFML or the six months following such leave will be presumed to be unlawful retaliation. This provision has raised numerous questions, including when the six-month period will be deemed to begin – i.e., when the employee requests leave, or when he or she actually starts leave. While the DFML has not taken a definitive position on this question, it has indicated that the six-month period will likely begin on the date the employee actually goes out on leave.
Tax Treatment Of PFML Contributions And Benefits.
Many questions have been raised regarding the tax treatment of the payroll contributions that will finance the PFML program. In particular, employers have asked whether PFML contributions should be deducted from employees’ pre-tax or post-tax wages.
Since the tax treatment of PFML contributions implicates federal law, the Commonwealth has requested guidance from the Internal Revenue Service (“IRS”) on this question and other tax-related issues arising under the new law. Provisionally, however, the DFML has stated that it anticipates that the IRS will conclude that employee contributions should be withheld from post-tax wages.
The DFML is also considering whether severance payments to former employees should be subject to payroll contributions under the new statute. Although it has not yet issued a formal determination, the agency has indicated that it anticipates that severance payments will be exempted from coverage. The DFML is also considering creating a similar exemption for payouts of accrued paid time off (e.g., vacation time) upon termination of employment.
Massachusetts employers that intend to apply for a private plan exemption should contact their insurance carrier, or one of the carriers approved by the state, to obtain the required Declaration of Insurance to include with their exemption application. Again, December 20, 2019 is the deadline for applying for an exemption from remitting contributions for the October 1-December 31, 2019 fiscal quarter. Applications filed after this deadline will be considered for an exemption beginning in the next quarter.
Employers should also stay alert for further announcements and developments on the PFML issues outlined above.
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We are following these developments closely and will provide further updates as we are able to. In the meantime, please feel free to contact any of our experienced employment attorneys if you have questions about your organization’s obligations under the new PFML law.