Maryland Makes Notable Changes to Its Paid Family and Medical Leave Insurance Program, Including Implementation Delays

What You Need to Know

• On May 3, 2023, Governor Wes Moore approved the Maryland General Assembly’s modifications (SB 828) to the Maryland Time to Care Act of 2022, which established the Maryland Family and Medical Leave Insurance (“FAMLI”) Program (the “Program”) just over a year ago.
• Among its notable updates, SB 828 delays implementation of the Maryland FAMLI Program.
  • Specifically, employer and employee contributions to the Program will now begin on October 1, 2024, instead of October 1, 2023.
  • In addition, eligible employees may begin using Program benefits on January 1, 2026, instead of January 1, 2025.
• Another important takeaway from SB 828 is its adoption of updated coordination of benefits language between FAMLI leave and employer-provided paid time off, including vacation, paid sick time, parental leave, and disability benefits.

Overview

Under the Maryland FAMLI Program,¹ eligible employees generally will be entitled to receive up to 12 weeks of paid family and medical leave per benefit year.²  FAMLI benefits cover the following absences: (1) to care for a child during the first year after the child’s birth or after the placement of the child through foster care, kinship care or adoption, (2) to care for a family member with a serious health condition, (3) the employee’s own serious health condition that results in their being unable to perform the functions of their position, (4) to care for a service member who is the employee’s next of kin, or (5) for a qualifying exigency arising out of the deployment of a service member who is a family member of the employee. Importantly, for purposes of Maryland FAMLI, covered employers include any person or governmental authority that employs at least one individual in the state of Maryland. See Seyfarth’s May 20, 2022 and April 12, 2022 updates for more details on employee rights and employer obligations under the Program.

Summary of Additional Changes

Coordination of Benefits

The original FAMLI statute contained burdensome language involving the interaction and coordination of Maryland FAMLI benefits and employer-provided paid leave. Specifically, the original statute stated that employees must exhaust any employer-provided leave that is not required to be provided under law before receiving FAMLI benefits. Further, under the original statute such employer-provided leave would receive the same protections as leave under the statute and not count against the number of weeks of FAMLI benefits available to the employee.

By comparison, the revised language notes that employees cannot be required to use or exhaust paid vacation, paid sick leave, or “other paid time off under an employer policy” before or while receiving FAMLI benefits. The employer and employee, however, can agree that the employee will use available paid vacation, sick leave or other time off to receive up to 100% of the individual’s average weekly wage during their FAMLI leave period.

In addition and notably, the coordination of benefits updates described in the prior paragraph do not apply to “separate employer-provided leave policy due to parental care, family care, or military leave or under a disability policy.” For these employer-provided benefits, the revised statute states that an employer can require FAMLI benefit payments be made concurrently with or otherwise be coordinated with payments made or leave allowed under the employer policy.

Contribution Split

The revised legislation sets the FAMLI total rate of contribution for employers and employees, which was intentionally left open in the original statute. The revised legislation clarifies that the contribution rate will be a 50/50 split between employers and employees³and that the total contribution rate cannot exceed 1.2% of an employee’s wages. The contribution rate will be applied to all wages (see below for definition) up to and including the Social Security wage base. The total contribution rate will be set on or before October 1, 2023. The initial contribution rate goes into effect on October 1, 2024, and will be in effect through June 30, 2026.

Updated and New Definitions under the Program

The new legislation expanded the definition of covered “family member” and added a definition for “wages.” “Family member” now includes domestic partners of a covered employee for purposes of the Program. “Wages” are defined as hourly wage or salary; commission; compensatory pay; severance pay; standby pay; tip or gratuity; holiday or vacation pay; and any other paid leave, including sick leave (paid entirely by employers).

Employer Takeaways

The Maryland Division of Labor and Industry is expected to issue FAMLI implementing regulations by January 1, 2024, so employers with Maryland operations should keep this date in mind as we approach the last few months of 2023.

With the paid leave landscape continuing to rapidly expand and grow in complexity, we encourage companies to reach out to their Seyfarth contact for solutions and recommendations for addressing compliance with paid leave requirements. To stay up-to-date on paid leave developments, click here to sign up for Seyfarth’s Paid Leave mailing list. Companies interested in Seyfarth’s paid family leave laws survey should reach out to paidleave@seyfarth.com.

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¹Besides Maryland, California, Colorado, Connecticut, Delaware, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Washington, Washington, D.C., and San Francisco (CA) have previously enacted mandatory paid family leave (“PFL”) laws. In addition, New Hampshire and Vermont have instituted voluntary PFL programs in recent years. And Virginia recently added paid family leave as a class of insurance that private insurers can offer to employers. Certain mandatory PFL laws are more appropriately called paid family and medical leave laws because they include benefits for absences related to an employee’s own medical condition, as well as “family” leave (e.g., bonding with a new child; care of a family member with a serious health condition; etc.). There are currently four PFL laws — California, New Jersey, New York and Rhode Island — that do not offer leave benefits for an employee’s own medical condition. However, each of these jurisdictions offers a separate state disability insurance benefit. San Francisco’s program is tied to the California state PFL program and is limited to paid parental leave.

²An employee may receive an additional 12 weeks of FAMLI benefits if the individual qualifies for both parental leave (i.e., bonding with a new child) and a medical leave due to their own serious health condition in the same application year.

³Employers with fewer than 15 employees are not required to contribute.  For employees who work for employers with fewer than 15 employees, the total required contribution will be 50% of the total contribution rate.