Maryland: What to Expect from the State's Paid Family and Medical Leave Program

By Fiona Ong and Mark J. Swerdlin - Shawe Rosental LLP

September 7, 2023

Maryland has enacted a paid family and medical leave insurance program that, starting in 2026, will provide most Maryland employees with 12 weeks of paid family and medical leave, with the possibility of an additional 12 weeks of paid parental leave, as we have previously detailed in our E-lerts from April 12, 2023 and April 12, 2022. The Maryland Department of Labor (MDOL) was directed to issue regulations to interpret and implement the Act by January 1, 2024. The MDOL has begun the regulatory process, and its actions provide some insight into what the MDOL might be thinking on a variety of topics of specific interest to employers.

The Regulatory Process. The MDOL’s newly created Division of Family and Medical Leave Insurance (FAMLI) has established an aggressive and rigorous process to meet the mandated deadline. This process consists of six phases, with each phase dealing with a different topic: Equivalent Private Insurance Plans (EPIP), Optional Self-Employment Plans (OSEP), Contributions, Benefits, Appeals/Enforcement, and Miscellaneous.

Each phase begins with the MDOL’s FAMLI Division issuing a discussion document about the topic, soliciting input on particular topic issues. One week after the release of the discussion document, the MDOL holds a virtual public meeting where members of the public may provide their written or verbal input on the issues listed in the discussion document. Several weeks later, the FAMLI Division issues “draft” proposed regulations (which they have termed “Draft Outlines”), and stakeholders may provide written comments to the FAMLI Division. The FAMLI Division has stated that the feedback and input received during public meetings and in response to the draft rules will be considered in its development of the actual proposed regulations. The public will have another opportunity to offer comment on those proposed regulations, before the MDOL issues the final regulations.

Of particular interest to employers, the MDOL has issued Draft Outlines for EPIPs and Claims thus far, as we summarize below. (They also issued one for self-employed individuals, which is not relevant to most employers). We note that these documents are preliminary and may drastically change after stakeholder comments are considered. Nonetheless, we can glean some indication of how the MDOL might interpret and apply the law.

Equivalent Private Insurance Plans. A provision in the Act allows employers to forego participation in the State Plan by providing a private Equivalent Private Insurance Plan (EPIP). Any EPIP will have to meet or exceed the standards of the State Plan regarding coverage, reasons for leave, duration and timing of leave (including intermittent leave), benefit amount and contribution amount.

The FAMLI Division released its Draft EPIP Regulatory Outline on July 6, 2023, with written comments due by July 13. The following are some points of particular significance:

•    Decisions, Approvals, and Reconsiderations – An employer must let the employee know within five (5) business days if their application for paid leave is incomplete and must render a decision of approval or denial within 10 business days. Each decision must be in writing, electronic or hard copy, and must include the amount of leave, reason for denial and appeals process (if applicable), and weekly benefit amount. Additionally, if the employee has worked less than 680 hours for the employer, the employer must provide a statement on how the employee may contact the MDOL for further information on their benefit amount.
•    Forms and Notices – Written notices must meet all MDOL requirements. Any forms developed by the employer for use by employees and their healthcare providers must be submitted to the FAMLI Division for approval at least 30 days before use.
•    Employer Application Process for EPIP– All EPIPs must be approved by the Division before an employer is exempt from participation in the State Plan. EPIPs may be either through a commercially insured product or a self-insured plan. For self-insured plans, special requirements will be added such as proof of solvency, separate accounts, and recertifications. An approval for an EPIP application may take up to 60 days from the date of application to the Division.
•    Proof of Solvency – Of particular concern, the FAMLI Division proposes that proof of solvency be established with a surety bond equal to one year of expected future benefits. The FAMLI Division may collect the bond if the employer’s EPIP approval is terminated, whether voluntarily or involuntarily.
•    Separate Account – The employer will have to create a separate account from other employee accounts for the collection and distribution of funds for the program.
•    Voluntary Termination of EPIP – If an employer opts to go with an EPIP, it will be difficult to transition back to the State Plan. Any employer that is approved for an EPIP between October 1, 2024, and January 1, 2026, must remain with an EPIP until at least January 1, 2029. If the employer wishes to leave the EPIP and go with the State Plan, the employer must remit to the FAMLI Division any employee contributions in their possession and past due employer contributions back to October 1, 2024. An employer may not voluntarily terminate an EPIP unless it has been in its EPIP for at least one (1) year. If an employer chooses to terminate an EPIP, they must notify their employees in writing at least thirty (30) days before the effective date of termination.
•    Involuntary Termination of EPIP – The FAMLI Division will have broad discretion to terminate any EPIP for failure to adhere to the standards set by the State Plan. Termination of an EPIP will be accompanied by a Notice of Termination and may result in civil penalties and/or collection of past-due mandatory contribution debt for a period of one year prior to the date of the Notice of Termination of EPIP approval. An employer may be able to request a higher-level review of the termination.
•    Temporary Provisions – In the event an EPIP application cannot be timely submitted, and the employer intends to opt into an EPIP, the employer may submit a Declaration of Intent (DOI) to the FAMLI Division. The DOI will allow the employer to be temporarily exempt from paying into the State Plan.
•    Recordkeeping and Reporting – Any self-insured EPIP will require extensive recordkeeping to collect and maintain applications for benefits, payment dates and amounts, appeals and outcomes, premium contributions, and wage data. Documentation must be retained for at least 5 years. The employer must ensure that wage and hour data is submitted to the FAMLI Division on a quarterly basis, and other information, including extensive and detailed individual claims-level data, is submitted annually.

Contributions. The FAMLI Division issued its Draft FAMLI Contributions Regulatory Outline on August 11, 2023, with written comments due by August 18. There is less of critical significance in this outline, with much of the information simply reiterating, or slightly expanding on the statutory language in a mostly logical way. However, the following may be of interest to employers:

•    Employees are covered if they provide localized service in Maryland, and the FAMLI Division will model this regulation on the unemployment insurance localized service regulations.
•    If the employer fails to make the proper deduction of the employee’s portion of the premium, the employer will be considered to have elected to pay the employee’s contribution. The employer will not be able to recoup those payments from the employee.

Claims. On August 18, 2023, the FAMLI Division issued their Discussion Document for Phase 5, Claims. Some of the more significant discussion points are:

•    Who is Covered – The FAMLI Division is seeking input from stakeholders whether to define a “covered employee” as only an individual who worked 680 hours or more in a localized position in Maryland over the past twelve (12) months, or whether a “covered employee” could include a previous employee who is unemployed but met the 680 hours requirement in the past 12 months. The FAMLI Division may also require those 680 hours to be accumulated while paying into the program. Furthermore, there are employees who will be exempt due to their employer’s own EPIP and who then transfer to another employer that participates in the State Plan. The FAMLI Division might discount any hours worked while the employee was not paying into the program.
•    Definitions – The Act allows leave for “kinship care” of an individual within the first year after birth. The FAMLI Division will have to decide whether to allow informal or formal kinship care for benefits. Formal kinship care is when social services places a child in the 24/7 care of a relative. Informal kinship care is when a relative provides care and custody of the child due to serious family hardship.

Additionally, the Act’s definition of “family member” includes a “domestic partner” of the covered individual. Id. The FAMLI Division is leaning towards modeling who is considered a “domestic partner” after definitions already found in Maryland Code.

To show proof of family membership, the FAMLI Division may require a signed certification, under the penalty of perjury, attesting to a familial relationship or it may require formal proof such as birth certificates or marriage licenses.

Finally, the FAMLI Division may model what is considered a “serious health condition” after FMLA regulations.

•    Information Requirements – The FAMLI Division suggests that it might allow the use of FMLA forms in lieu of state forms where the leave qualifies for both.
•    Intermittent Leave – Leave benefits will be calculated by dividing the weekly benefit amount by the average number of hours worked per week by the employee for the employer during the qualifying period, and then multiplying by the number of hours used for intermittent leave. Intermittent leave cannot be taken in increments of less than 4 hours a day.
•    Ability of Employers to Verify Claims by Employees – One major concern for employers is possible fraudulent use of leave. The Discussion Document for Phase 5 only suggests that the FAMLI Division may develop a process where employers or members of the public may submit a form to notify the FAMLI Division that an individual has submitted a fraudulent claim.
•    Notice Requirements of Employees to Employers –If the employee can show “good cause,” applications may be approved for those beyond the normal 60-day application period. The FAMLI Division is still determining what may constitute “good cause.” Likely, any showing of good cause may involve some degree of incapacitation, natural disaster, or prolonged departmental system outage.

Looking Ahead. In addition to providing input during each of the six phases, the public will be able to provide comments when the actual draft regulations are issued. Employers are encouraged to weigh in, so as to ensure that their concerns are taken into account.

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