In October, the Maryland Department of Labor (MDDOL) issued proposed regulations to implement Maryland’s new Family and Medical Leave Insurance (FAMLI) Program. As many readers of this publication may be aware, this was a long awaited step towards implementing the program which has been delayed twice.

It is important to note that at this stage these regulations are still only proposed, meaning there may be more changes to them before they go into effect. That said, they provide helpful insights into how the MDDOL intends to implement and administer this new program and what employers and employees might to expect.

Unlike neighboring District of Columbia, which was one of the first jurisdictions in the country to implement a government-administered paid family leave program, the MDDOL has had the benefit of having watched more than a dozen jurisdictions implement these programs, showing the MDDOL what has, and has not, worked elsewhere.

Background on the TCA

Taking things back to the baseline, the FAMLI Program is an outgrowth of the Time to Care Act of 2022 (“TCA”), which was enacted during a special session of the Maryland General Assembly to override then-Governor Larry Hogan’s veto. Contributions to the program originally were set to begin October 1, 2023, with benefits starting January 1, 2025.

In June of 2023, the General Assembly passed a package of amendments modifying certain elements of the program and bumping the start dates for contributions and benefits out a year (to October 1, 2024 and January 1, 2026 respectively). These dates were pushed back again earlier this year, and contributions are now scheduled to start July 1, 2025, with benefits starting July 1, 2026.

As amended, under the TCA, qualifying employees will be eligible for up to 12 months of paid leave in a 12-month period for any of the following reasons:

  • The birth, adoption, or foster care placement of a child (within the first year);
  • To care for a family member with a serious health condition;
  • To address their own serious health condition that prevents them from performing their job;
  • To care for a next kin with a serious health condition resulting from military service; and
  • To attend to “qualifying exigencies” arising out of a family member’s deployment to military service.

In the event that an employee has both a birth, adoption or foster placement and a serious health condition in the same 12-month period, the employee will be eligible for up to 24 months of paid leave. Maryland paid family leave will run concurrently with any federal FMLA leave or unpaid family leave that an employee might be entitled to use. However, pursuant to the 2023 amendment to the TCA, an employer cannot require an employee to exhaust other paid leave benefits (such as vacation, PTO or sick and safe leave), before or while receiving benefits under the program.

Unlike private short-term disability FAMLI Program is not just a funding mechanism; it also provides employees with a guaranteed right to take leave. Generally, an employer may only terminate an employee who is out on FAMLI leave for cause, and, unless one of the statute’s limited exceptions applies, the employer must restore the employee to the same position at when the leave has expired. In short, under the new program, while an employer need not pay for the leave, it still will be obligated to provide the time away from work.

And speaking of funding, the TCA contemplates that the leave will be funded through employer and employee contributions. While all employers with at least one employee in Maryland are covered by the new law, only employers with 15 or more employees must contribute to the FAMLI fund. Self-employed individuals who do not employ anyone other than themselves may elect to participate in (and contribute to) the FAMLI fund to be eligible for benefits, or they can opt-out. The benefits for which an employee is eligible will be calculated based by applying set minimum and maximum weekly benefit amounts to their rate of compensation.

Additionally, the TCA contemplates that the leave will be funded through employer and employee contributions. While all employers with at least one employee in Maryland are covered by the new law, only employers with 15 or more employees are required to contribute to the FAMLI fund. Self-employed people who do not employ anyone besides themselves may elect to participate in (and contribute to) the FAMLI fund and be eligible for benefits or can opt-out. The benefits that an employee will be eligible for are calculated based on their rate of compensation (with set minimum and maximum weekly benefit amounts).

What Questions do the Proposed Regulations Answer

As anticipated, large portions of the proposed regulations focus on the administration of the FAMLI Program. Under the proposed regulations, the MDDOL would create a new FAMLI Division to administer the program, establish template forms and notices and oversee compliance.

The regulations also set out a process for employers who wish to opt out of the FAMLI Program by providing their own equivalent or superior leave to their employees (referred to in the regulations as “Equivalent-Private Insurance Plans”) and a process for self-employed individuals who wish to participate in the FAMLI program.

The regulations incorporate extensive set of definitions to clarify the terms of the TCA.  In particular, two big questions that the TCA left open were which employers qualify as small employers (excused from making contributions to the fund) and what work will count toward qualifying an employee for benefits under the program.

  • As to the small employer definition – as noted above, only employers with 15 or more employees must contribute to the FAMLI Fund. However, the TCA does not specify whether the 15-employee threshold includes employees working in other jurisdictions. Under the proposed regulations, the number of employees for the purposes of determining small employer status would be assessed based on the average number of employees employed both inside and outside Maryland during the prior calendar year.
  • As to qualifying work – the TCA provides that for an employee to qualify for benefits, they must have performed at least 680 hours in “qualified employment” either for a single employer or multiple employers over the twelve-month period immediately preceding the commencement of the leave.

    The proposed regulations clarify that in addition to work performed in Maryland, “qualified employment” also includes all work performed partly in Maryland if: (1) the work performed outside Maryland is incidental to the work performed in Maryland, or (2) if the work outside Maryland is not incidental to the work in Maryland if (i) the employer’s base of operations is in Maryland, (ii)  the employment is controlled or directed from Maryland, or (iii) if the employee is a resident of Maryland, but only if the other state where the employee performs work is not the same state from which the employee’s employment is controlled from or where the employer’s base of operations is located.

Under the structure established by the proposed rules, employers would be responsible for setting up an online registration through the FAMLI Division and remitting quarterly contributions and reports online.  While employers (with the exception of small employers) would be responsible for remitting 100 percent of the contributions to the program they would be permitted deduct and collect up to 50 percent of those contributions from their employees’ pay. However, the proposed regulations make it clear that if an employer fails to deduct the contributions from an employee’s pay for any pay period, the employer will be treated as having elected to pay the employee’s portion for that pay period.

For mid- to higher-paid employees the cap on benefits under the FAMLI Program will be lower than the employees’ regular salary. As noted above, employers can permit (but cannot require) employees to use general paid leave (such as sick leave or PTO) concurrently with FAMLI. 

The proposed regulations clarify that there must be a mutual written agreement between employer and employee for an employee to use general paid leave concurrently with FAMLI benefits (which some employees may wish to do to supplement the benefits). The proposed regulations also introduce a new concept of Alterative FAMLI Purpose Leave (AFPL), allowing employers to offer additional leave to be used concurrently with and in supplementation of the FAMLI benefits.

Employers can require employees to use AFPL concurrently with FAMLI to supplement their wages, which essentially gives employers the opportunity to create a new type of leave to “true up” benefits for mid-level and highly compensated employees, or to convert paid leave that currently offered (such as paid parental leave) to work in conjunction with the new benefit.

Also with respect to the interplay of various forms of leave, the proposed regulations include provisions allowing an employee’s FMLA leave use to be offset against the maximum duration of an employee’s FAMLI leave, ensuring that employees cannot extend their overall period of protected leave by first taking FMLA leave and then applying for FAMLI leave.

Concluding Thoughts

As noted above, as the new regulations are likely to undergo changes before they are finalized and made effective, employers and practitioners are well advised make basic preparations but to await the final regulations before formalizing any new policies and procedures.

That said, given that the contributions to the FAMLI Fund are set to begin less than one year from now on July 1, 2025, there certainly is no harm in using the proposed regulations as a jumping off point for planning ahead – particularly for employers that are considering the creation of a Equivalent-Private Insurance Plan.

For more information on employment law, you can reach Jessie at jbsummers@lerchearly.com.