Paid Family and Medical Leave Benefits Available to Massachusetts Employees on Jan. 1, 2021

On Jan. 1, 2021, employees in Massachusetts may begin to apply for and receive paid leave under the state's new Paid Family and Medical Leave (PFML) law. Massachusetts employers should therefore take any final steps necessary to ensure they comply with their obligations under PFML. This Holland & Knight alert provides an overview of the benefits provided by PFML, and summarizes recent guidance and updates from the Massachusetts Department of Family and Medical Leave (Department).

Overview of Paid Leave Under PFML

Starting Jan. 1, 2021, most Massachusetts workers will be eligible to take up to 26 weeks of paid leave per benefit year under PFML. Leave is available for the following qualifying reasons:  

• up to 20 weeks for a worker's own serious health condition
• up to 12 weeks for the worker to a) bond with a child after the child's birth, adoption or foster care placement, or b) address a need arising out of a family member's active duty or impending call to active duty in the armed forces
• up to 26 weeks for the worker to care for a family member who is a covered service member with a serious health condition

Beginning July 1, 2021, eligible workers may also take up to 12 weeks to care for a family member with a serious health condition.

During PFML, an employee will receive a weekly benefit amount, calculated based on a percentage of the employee's earnings, capped at a maximum weekly benefit amount of $850 per week. The Department will reevaluate the maximum weekly benefit annually. There is a seven-day waiting period before an employee can receive the weekly benefit amount. During the waiting period, an employee may elect to use accrued paid time off (PTO), but an employer cannot require an employee to use PTO during the waiting period.

PFML is funded by payroll contributions paid by employees, employers and self-employed individuals. Employers were required to start remitting contributions to the Department effective Oct. 1, 2019, unless the employer was approved for a private plan exemption.

Employers are required to provide their employees with written notice of the benefits available under PFML. Employers can find the PFML written notice requirements, as well as a copy of the PFML poster that employers are required to display in the workplace on the Department website. To provide notice to non-English speaking employees, employers can use translated notices also made available by the Department.

Before Jan. 1, 2021, employers should implement a PFML workplace policy providing information about PFML, whether the employer is participating in the program administered by the Department or an approved private plan, PFML contributions made by the employer and employees, the circumstances under which employees can take PFML, how to apply for PFML benefits, how PFML will interact with the employer's other leave policies (e.g., clarifying when the leave will run concurrently), and addressing how much notice an employee must provide the employer before taking PFML.

Also available for viewing are the PFML statute (Mass. Gen. Laws c. 175M) and the Department's final regulations, effective July 24, 2020.

How Do Employees Apply for PFML?

Unless the employer has an approved private plan, an employee will apply for PFML directly through the Department. The Department determines employee eligibility and administers PFML.

When an employee applies for PFML, the employer will receive an email notification from the Department about the employee's application. Upon receipt of this notification, the employer should confirm whether the employee has available PFML for the type of leave requested, how much PFML the employee has remaining in the benefit year, and whether the employee's work pattern or hours indicate fraud. The employer will have 10 business days to review the employee's application and respond to the Department with the information concerning the employee. If the employer fails to timely respond, the Department will proceed with the application using only the information provided by the employee.

Is PFML Limited to Current Employees?

No. Eligible workers include all current W-2 employees, and former W-2 employees if they are unemployed and have been separated for 26 weeks or less at the start of their PFML, regardless of the reason for termination. An out-of-state employee may be eligible for PFML, if the employer reported the employee's wages to the Department of Unemployment Assistance (DUA). Eligible workers may also include 1099-MISC contractors, if they are working for a business with a workforce made up of at least 50 percent 1099-MISC contractors.

If an Employee Took Leave for the Same Qualifying Reason in 2020, Is That Employee Still Eligible for PFML in 2021?

Yes. The benefit year for PFML is measured backward from the date the employee uses any PFML. However, any leave used by an employee during 2020 cannot be counted against the amount of leave provided by PFML starting in 2021, even if the leave was for the same qualifying reason.

If Two Employees Work for the Same Employer and Parent the Same Child, Are They Each Entitled to 12 Weeks of PFML to Bond with the Child?

Yes. PFML provides employees with up to 12 weeks of leave to bond with a child after the child's birth, adoption or foster care placement, so long as the bonding leave takes place within one year of the child's birth. If both parents work for the same employer, both parents are separately entitled to up to 12 weeks of PFML to bond with the child, and can choose whether or not to take PFML at the same time. This provides greater leave than the Massachusetts Parental Leave law, which provides up to eight weeks of unpaid leave, in the aggregate, if two employees parent the same child. 

Are Payments Made to a Retirement Plan Considered "Wages" for Purposes of Calculating PFML Contributions?

It depends on the type of retirement plan. Payments made to a deferred 401(k) compensation plan are considered wages subject to PFML contributions. Payments made to a non-401(k) retirement plan are not wages, and are therefore not subject to PFML contributions.

Is Paid Sick and Vacation Time Considered "Wages" for Purposes of Calculating PFML Contributions?

Generally, paid sick time and vacation time is considered wages subject to PFML contributions. Accrued vacation paid upon termination of employment, and sick time paid upon termination of employment, are not subject to PFML contributions.

How Can an Employer Avoid Remitting PFML Contributions to the Department?

Employers may apply for an exemption from making PFML contributions by offering an approved private plan that provides paid leave benefits that are equal to or more generous than those provided under the Department's PFML program. Two types of plans qualify for an exemption: 1) a self-insured private plan funded by an employer or 2) a purchased private plan offered by an insurance carrier licensed by the Division of Insurance (DOI).

For a self-insured private plan to be approved for an exemption, the employer must submit a self-insured insurance declaration certifying that the plan meets necessary requirements under PFML and also furnish a surety bond running to the Commonwealth of Massachusetts in an amount based upon its Massachusetts workforce size, representing the expected cost of PFML benefits payments that the employer should owe.  In July 2020, the Department updated its bond calculation formula, so employers applying for self-insured exemptions should use the most updated information, including the current bond form and instructions. Employers that are still considering whether to apply for a self-insured private plan exemption may find the Department's recently developed 2021 Self-Insured Bond Calculator useful in calculating the anticipated bond amount.

The Department is accepting employer applications for private plan exemptions on a rolling basis. An employer's application must be approved by the Department in the quarter prior to the quarter in which the private plan will go into effect.  The Department has explained that employers applying for an exemption will receive an email notification within one to two business days indicating that a determination has been made on the employer's application. Accordingly, employers who are seeking a private plan exemption for the quarter beginning Jan. 1, 2021 should apply as soon as possible to account for the Department's processing time.

Can an Employer Avoid Remitting Contributions to the Department by Having a Private Plan Exemption in 2020, and Participating in the Department's Program in 2021?

No. If an employer currently has a private plan exemption for 2020, it must renew the private plan for a second year (two consecutive "terms") by Dec. 31, 2020, or it will owe PFML contributions retroactive to Oct. 1, 2019, or the employer's exemption effective date. After the employer has a private plan exemption for two full years, the employer will not owe retroactive contributions if it does not renew the private plan for 2022.

Will an Employer Owe Retroactive Contributions if It Participates in the Department's PFML Program in 2020, Applies for a Private Plan Exemption in 2021 and Then Fails to Renew the Private Plan Exemption in 2022?

No. If the employer is currently participating in the state program by paying contributions to the Department and applies for a private plan exemption for 2021, and then elects to revert to the Department's PFML program in 2022, the employer is not required to pay any retroactive contributions.

Is There a Penalty if an Employer Fails to Maintain a Private Plan or Has Its Approval Withdrawn by the Department?

Yes. If an employer failed to maintain a private plan or had its approval withdrawn by the Department, the Department may assess a penalty of up to an amount equal to the employer's total annual payroll, multiplied by the applicable annual contribution rate. The employer may also be required to pay interest on this amount. Further, the employer may also be required to repay the amount paid to workers who received PFML benefits during the period that the employer failed to maintain its approved private plan.

Can an Employee "Top Off" Their PFML Benefits with Accrued, But Unused, Sick Leave, Vacation Time or Other Paid Time Off (PTO) in Order to Receive 100 Percent of Their Wages?

No. An employee may not apply partial sick or vacation time to make up the difference between their regular wages and their PFML benefit, which represents a portion of their wages.

Can an Employer "Top Off" an Employee's PFML Benefits Under a Leave Benefit Policy?

Yes. If an employee receives PFML from the Department, the employer can pay the difference between an employee's PFML benefits and the employee's regular wages under a leave benefit policy, so long as the employer is not applying the employee's accrued sick leave, vacation time or other PTO. An employer is not entitled to reimbursement for any amounts paid to an employee to "top off" the employee's PFML benefits.

Can an Employer Provide Paid Leave to an Employee Under a Paid Family or Medical Leave Policy or Temporary Disability Policy?

Yes. If employer has an applicable paid family or medical leave policy, or a paid temporary disability policy, the employee can take paid leave in accordance with that policy. Under these circumstances, the employer may be entitled to reimbursement from the Department for the amounts the employer paid to the employee during the leave because the employee receives compensation from the employer instead of receiving PFML benefits from the Department.

To qualify for reimbursement, the employee must take leave for a PFML-qualifying reason and take paid leave under the employer's paid family leave policy or temporary disability policy (i.e., not sick leave, vacation time or other PTO). The Department anticipates that this reimbursement will be in the form of a credit on the employer's account, and plans to provide more information about reimbursement in the coming weeks. Based on this information, an employer who wants to make an employee whole will need to decide whether it is easier from an administrative perspective to keep the employee on payroll and apply for reimbursement from the Department, or simply "top off" the employee's leave benefit during the period that the employee receives PFML benefits.

Can an Employer Seek Reimbursement for Paid Leave Used from an Employee Leave Bank?

Maybe. The Department has not directly addressed this question, but it has indicated that a voluntary program where employees donate leave time to fund a bank for the benefit of an employee experiencing a qualifying reason may be reimbursable.

What Recourse Does an Employer Have if an Employee Fails to Pay the Employee's Share of Health Insurance Premiums During PFML?

While an employee is on PFML, the employer is required to maintain the employee's health insurance benefits and pay the employer's share of health insurance premiums. The Department has not directly addressed what recourse the employer has if the employee fails to pay the employee's share of health insurance premiums.

Holland & Knight Can Help

For assistance with understanding PFML or specific questions about how it will impact your organization, please contact the authors or your Holland & Knight attorney.

Previous PMFL Alerts

For previous Holland & Knight alerts on the Massachusetts PFML law, please see below:

• "Questions and Answers on the New Massachusetts Paid Family and Medical Leave Law," April 8, 2019.
• "Update on Deadlines and Employer Obligations Under the New Massachusetts PFML Act," June 11, 2019.
• "Massachusetts Delays Start of Required Paid Family and Medical Leave Contributions by 3 Months," June 12, 2019.
• "Latest Developments and Deadlines Regarding the New Massachusetts PFML Law," July 16, 2019
• "Prepare to Implement Paid Family and Medical Leave Under New Massachusetts Law," Sept. 18, 2019

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.