Maryland's Employer-Funded Paid Leave to Be Phased In Over Next Two Years

Starting in 2025, Maryland workers may have an easier time making ends meet when they take otherwise unpaid leave under the federal Family and Medical Leave Act (FMLA). Thanks to Maryland's newly enacted Time to Care Act of 2022 (TTCA), Maryland workers will be able to apply for paid leave benefits from a state fund beginning on Jan. 1, 2025.

[On April 8, the Maryland state legislature overrode a legislative veto by Gov. Larry Hogan.]

As the TTCA will be phased in incrementally over the next two years, employers will have time to plan and prepare, become familiar with the TTCA's benefits scheme, and project the potential additional costs that the TTCA will impose on them. Employers also may want to plan for the effect the TTCA may have on existing leave policies and bargaining agreements.

Guidance in the form of regulations from the Maryland Department of Labor is expected by June 1, 2023. In the meantime, answers to some of the most frequently asked questions (FAQs) about the TTCA are provided below.

How does the Time to Care Act of 2022 work?

The TTCA creates a Family and Medical Leave Insurance (FAMLI) Fund to provide up to 12 weeks of paid leave to covered individuals as part of a new FAMLI program. The state treasurer will be the custodian of the fund and will manage it according to regulations that will be promulgated by Maryland's secretary of labor.

The TTCA's benefits will be paid to eligible individuals directly by the state of Maryland. Individuals will need to submit applications to the state, which is required to notify employers when their employees apply. The money to fund the benefits will come from payroll deductions.

The TTCA's benefits are not limited to employees. The law permits self-employed individuals to elect to contribute to the FAMLI Fund and receive paid leave benefits at the same level as employees. The TTCA also allows employers to opt out of the payroll tax scheme by adopting private programs of their own, provided they are equivalent to the TTCA.

When does the TTCA become effective?

The TTCA's official effective date is June 1, 2022, but its provisions do not take effect all at once. Contributions from employees and employers (and self-employed individuals who participate in the program) are not required until Oct. 1, 2023. Covered individuals can submit claims for benefits beginning on Jan. 1, 2025.

Whom does the TTCA cover?

The TTCA defines "employer" as "a person or governmental entity that employs at least one individual" in Maryland, but the law does not limit coverage to employees employed within Maryland. Accordingly, it is not clear how the law would apply to Maryland employees who divide their work time between Maryland and the neighboring District of Columbia, which has its own paid family and medical leave law.

Who is eligible to apply for paid leave benefits under the TTCA?

Paid leave benefits are available to a "covered individual," a term that includes certain employees and certain self-employed individuals. An employee is a "covered individual" if he or she worked "at least 680 hours over the 12-month period immediately preceding the date on which leave is to begin." The term "covered individual" also includes a "self-employed individual who elects to participate in the program by filing a written notice of election with the secretary [of labor]," in accordance with regulations that the secretary is required to establish. (A self-employed individual who elects to participate must "participate for an initial period of not less than 3 years.")

What are the types of leave for which a covered individual may seek paid leave benefits under the TTCA?

Under the TTCA, there are five broad categories of leave for which a covered individual may obtain paid leave benefits. They include leave taken to:

1. Care for a newborn child or a child newly placed for adoption, foster care, or kinship care during the first year after the child's birth, adoption, or placement.
2. Care for a family member with a serious health condition.
3. Attend to a serious health condition that results in the covered individual being unable to perform the functions of the covered individual's position.
4. Care for a service member with a serious health condition resulting from military service who is the covered individual's next of kin.
5. Attend to a qualifying exigency arising out of the deployment of a service member who is a family member of the covered individual.

The TTCA provides definitions for its key terms (e.g., "serious health condition," "family member," and "service member").

How much do covered individuals receive in TTCA benefits?

Individuals receiving TTCA benefits are paid a weekly benefit amount once every two weeks. The amount of the weekly benefit is determined on a case-by-case basis using a formula that takes into account the state average weekly wage and the individual's average weekly wage, calculated based on total wages paid over the preceding 680 hours the covered individual worked. There is a partial leave benefit available when a worker is working a portion of each week during the leave.

The amount of an individual's weekly benefit can range from a floor of $50 to a ceiling of $1,000. The ceiling is subject to adjustment by the secretary of labor during each succeeding twelve-month period beginning on Jan. 1, 2025. The adjustments are tied to the annual percentage change in the Consumer Price Index for all urban consumers (CPI-U) for the Washington-Arlington-Alexandria, DC-VA-MD-WV metropolitan area.

How do employers make contributions to the FAMLI Fund?

Beginning in 2025, the TTCA requires the secretary of labor to determine on a biannual basis, "in consultation with [s]tate agencies and relevant stakeholders," the appropriate total rate of contribution, and the appropriate formula for allocating between employers and employees their respective shares of contributions to the FAMLI Fund.. Under one formula, employers would contribute 75 percent and employees the remainder. Under the alternative formula, employees would contribute 75 percent, and employers would contribute the remainder.

Employee contributions are made through payroll deductions from employee wages.

May an employer opt out of Maryland's TTCA scheme?

Yes. An employer is permitted to satisfy the requirements of the TTCA through a private employer plan that must be filed with the Maryland Department of Labor for approval. The private plan may consist of employer-provided benefits, insurance, or a combination of both, but it must meet or exceed the rights, protections, and benefits provided by the TTCA and must cover all of the employer's eligible employees. An employer with an approved private plan is exempted from making contributions to the FAMLI Fund.

Are TTCA benefits available for leave taken on an intermittent basis?

The TTCA states that benefits are available to employees taking family or medical leave on an intermittent basis. "If leave is taken on an intermittent leave schedule, the covered individual shall: (i) make a reasonable effort to schedule the intermittent leave in a manner that does not unduly disrupt the operations of the employer; and (ii) provide the employer with reasonable and practicable prior notice of the reason for which the intermittent leave is necessary."

How does the TTCA affect existing paid leave policies?

The TTCA states that employees must "exhaust all employer-provided leave that is not required to be provided under law" before receiving TTCA benefits. The TTCA also states that "[a]n employee's right to benefits may not be diminished … by an employer policy" and that an agreement to waive an employee's rights under the TTCA is "void as against public policy."

How does the TTCA impact benefits for employees covered by a collective bargaining agreement?

The TTCA states that an employee's right to benefits "may not be diminished by a collective bargaining agreement." Employers may want to review their collective bargaining agreements, as well as any benefits provided thereunder, to determine whether any adjustments are needed to harmonize an agreement's terms or existing paid leave benefits with the TTCA. A failure to address those issues prior to renewing or signing a bargaining agreement could be costly to employers, especially where the bargaining agreement calls for paid leave benefits that are duplicative of the benefits employees will receive under the TTCA.

Are employees receiving unemployment insurance or workers' compensation benefits eligible for TTCA benefits?

The TTCA states that the Maryland Department of Labor must report to the state legislature by January 1, 2023, whether covered employees who receive benefits under the FAMLI Fund should also be eligible for unemployment benefits.

The TTCA states that workers who are receiving wage replacement benefits under Maryland's workers' compensation law are not eligible for TTCA paid leave benefits, with the sole exception of workers who are receiving compensation for a permanent partial disability.

Are there notices that employers must provide to employees?

Yes. An employer must "provide written notice to each employee" of his or her rights and duties under the TTCA "at the time of hire and annually thereafter." In addition, "[w]hen an employee requests leave under [the TTCA], or when an employer knows that an employee's leave may be for a reason under [the TTCA]," the employer has five business days to provide the employee with notice of eligibility to take leave for which TTCA benefits may be provided. Both notices "shall be provided in accordance with regulations adopted by the [s]ecretary [of labor]."

Does the TTCA include job restoration protections?

Yes. An employee who receives benefits under the TTCA or takes leave for which TTCA benefits may be payable is entitled to be restored to an equivalent position on the expiration of leave. With respect to continuation of employee benefits during leave for which workers receive TTCA benefits, the TTCA borrows the group health plan provisions set out in Maryland's Parental Leave Act. Specifically, the employer must maintain an employee's group health plan coverage for the duration of the leave and in the same manner that coverage would have been provided if the employee had continued in employment continuously for the duration of the leave. Under the Parental Leave Act, if an employee fails to return after the end of the authorized leave period, the employer is entitled to recover the premiums that it paid to maintain the employee's coverage.

When will Maryland promulgate regulations under the TTCA?

The TTCA requires the state to issue regulations on or before June 1, 2023. The regulations are essential to establish the process by which covered individuals can apply for TTCA benefits, including the forms they are required to use to certify their eligibility as well as the justification for the leave. The regulations also are necessary to provide the specific content of the notices that employers will be required to provide to their employees.

Although full implementation of the law is more than two years away, Maryland employers have some decisions to make in the near term. Those decisions include whether to incur the payroll costs to fund the state's program or instead seek state approval for a privately funded solution. Employers also may want to consider whether and how to restructure existing paid leave polices or modify benefits for employees covered by collective bargaining agreements.

James J. Murphy is the office managing shareholder in the Washington, D.C., office of law firm Olgetree Deakins. © 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C. All rights reserved. Republished with permission.