On Tuesday, the Department of Family and Medical Leave (the Department) published its long-awaited final regulations governing the Commonwealth’s new Paid Family and Medical Leave Law (PFML), G.L. c. 175M. Some of the changes from the previous version of the regulations were expected, including those made to conform the regulations to amendments that were passed by the legislature just last week—most notably, the three-month delay of contributions and the increased contribution rate. Other changes, however, came as a surprise. The following is a summary of the most important changes for employers as they prepare for the new law to take effect.
The final regulations clarify that “employment” under the new law does not include any of the services that do not constitute “employment” under Massachusetts’ unemployment statute, such as services provided by minor children for their parents, services performed by student-workers in exchange for financial assistance, services performed by inmates, services performed by employees of churches, and services provided by licensed real estate brokers and agents who are compensated exclusively by commissions.
Keep in mind, however, that although workers who provide these services are not “employees” for purposes of the PFML, they may still be “covered contract workers” if they receive a 1099 instead of a W-2. And, unfortunately, the Department’s efforts to clarify when such contractors must be counted as part of an employer’s workforce may only create more confusion.
Under the final regulations, an employer is expected to count their workforce by counting, for each pay period in the previous calendar year, all employees who are on the payroll and all individual contractors who provided services during that pay period, and then divide the total by the number of pay periods in that year. In two separate places, however, the regulations continue to state that employers need only count self-employed contractors if their average total workforce consists of more than 50% self-employed contractors.
Until we receive further guidance, employers may refer to the Department’s website, which now offers a decision tree to assist employers in determining their workforce count, as well as a calculator to assist employers in determining the amounts of required contributions.
Additionally, the Department did answer a related question that had been troubling many employers—whether they must count all members of a limited liability company (LLC) or limited liability partnership (LLP) that provides contracted services to their business. The previous version of the regulations was ambiguous on this point, defining as a “self-employed individual” any member or partner of such a business. The final regulations clear up this ambiguity by specifying that such individuals must be counted only if they are the “sole” member or partner of the LLC or LLP.
In a surprising reversal, the Department has decided that employees and other covered individuals may take leave under the new law to care for a child regardless of the child’s age or whether the child is capable of “self care.” This means that, unlike under the federal Family and Medical Leave law (FMLA), family leave will be available for parents to care for their adult child as long as the child has a “serious health condition,” i.e. the child does not also need to have a physical or mental impairment that rises to the level of a disability and be incapable of activities such as dressing, bathing, and transferring. This change is likely to increase the number of claims for family leave significantly.
As we reported last week, the legislature recently amended the PFML law to clarify that medical leave shall be available to an employee with a serious health condition only if that condition “makes the covered individual unable to perform the functions of the covered individual’s position,” a standard that must be construed in accordance with the FMLA. Consistent with that amendment, the final regulations substantially narrowed the definition of “incapacity”—from an inability to “work, attend school or perform other regular daily activities” to an inability to “perform the functions of one’s position” (or, for a former employee, the most recent position or other suitable employment).
The final regulations also include several changes related to PFML taken on an intermittent or reduced schedule basis.
First, the regulations clear up internal inconsistency regarding intermittent or reduced schedule medical leave, confirming that such leave may be taken only if the covered individual’s healthcare provider certifies that it is “medically necessary” and that the employer’s agreement is no longer required.
Second, the regulations allow employers to require covered individuals to take intermittent leave in “designated minimum increments” established by the employer. These increments may be no greater than four hours and we interpret them as minimums, not blocks. Thus, in our view, if an employer establishes a two-hour “designated minimum increment,” an employee who takes intermittent PFML to receive medical treatment for three hours will have used three hours of PFML, not four hours.
Third, the regulations make clear that the seven-day waiting period applicable to claims for intermittent or reduced schedule leave is “seven consecutive calendar days, not the aggregate accumulation of seven days of leave” and that the waiting period counts towards the total number of available weeks of leave. In other words, an employee will not get 12 paid weeks plus one unpaid week for the birth of a child. Instead, the employee will get 12 weeks total, 11 of which will be paid.
Some of the other changes made in the final regulations include:
- delaying the Department’s collection of contributions by three months, from July 1 to October 1, 2019;
- increasing the contribution rate from 0.63% to 0.75% of wages or other qualifying payments;
- providing for refunds of contribution overpayments;
- allowing employers to deduct different percentages of the family and medical leave contributions from the wages or qualifying payments of different groups of covered individuals, as long as they are not greater than the maximum allowable deduction for each type of leave;
- allowing the Department to waive or modify any penalty or assessment imposed or due for failure to make requirement contributions, upon a showing of good cause;
- clarifying that the bond required to be furnished to the Department by any employer who elects to use a self-insured private plan must be a surety bond issued by a surety company authorized to transact business in Massachusetts;
- making clear that the amount an employee or other covered individual must have earned in order to meet the “financial eligibility” test for PFML benefits may change every year and will be determined by the Department of Unemployment Assistance;
- allowing the Department to require a healthcare provider to verify, supplement or amend information in a certification if the Department determines that it is incomplete, inaccurate, inauthentic or otherwise insufficient;
- limiting the fitness-for-duty certification and related provisions to employees, to the exclusion of all other covered individuals; and
- allowing an employer to deny reinstatement upon return from leave where the employee was hired for a specific term that has expired or for a specific project that has been completed, as long as the employer would not have continued to employ the employee.
The final regulations are an improvement over the previous draft, but there are still important unanswered questions, including how employers should handle delays between the taking of PFML leave and the filing of an actual claim. In the short term, however, employers should focus on hanging their posters, distributing the required notices, determining what portion of the required contributions they will deduct from wages and payments to other covered individuals, and ensuring that their payroll systems are set up to do so in advance of the October 1 start-date.
Given the many changes to the new law and the regulations in recent days, the Department has announced that it will publish an addendum to its previously-published notice form. Employers who have already provided the required notice may use the addendum to update their employees about the three-month delay and increased contribution rate. We expect the Department to also publish an updated initial notice for use by employers that have not already circulated the required notice.
We will continue to update employers as additional guidance is made available by the Department, and our attorneys are available to answer any questions you may have about how the law and the final regulations may apply to your workforce.