Massachusetts is About to Get Paid Family Leave – Is Maine Next?

by David V. Jean, CPA, CCIFP

Massachusetts employers are preparing for the effective date of the Paid Family and Medical Leave (PFML) law. The law gives covered individuals the option to take paid time off work to care for their own medical needs or to care for a close family member.

No such legislation yet exists here in Maine, but Maine employers should be paying close attention to what’s happening in Massachusetts. Paid leave laws are currently moving through the Maine legislature. Looking to Massachusetts gives us an idea of what obligations Maine businesses could soon face. And for Maine employers that have workers in Massachusetts, PFML is relevant right now.

Paid Leave in Massachusetts

Massachusetts employees who are eligible for PFML benefits will be able to take up to 20 weeks of paid medical leave per year and up to 12 weeks of paid family leave per year. Covered individuals may also take up to 26 weeks of paid family leave to care for family members who become seriously sick or injured while on active duty in the armed forces. Total annual leave is capped at 26 weeks for all covered individuals. The weekly benefit amount for an employee on paid leave is calculated based on the employee’s earnings, but is capped at $850 per week.

Massachusetts employees who work for private employers or the state or federal government are automatically covered. Independent contractors who receive 1099-MISC tax forms may be covered, if they work for a company whose workforce is at least 50% independent contractors. Self-employed Massachusetts workers may opt in to fund their own coverage. Employers can be exempted from participating in PFML if they offer paid leave benefits that are equal to or greater than the coverage provided by PFML.

The program will be rolled out over the next few years. Employers must start withholding PFML deductions on July 1st of this year. Those first-quarter contributions must be remitted to the Department of Family and Medical Leave (DFML) in October. Employees can begin accessing their benefits on January 1, 2021. All benefits will be available to eligible employees by July 1, 2021.

The contribution rate for covered individuals is 0.63% of gross wages. (For 2019, a 0.52% contribution covers medical leave and a 0.11% contribution covers family leave.) Whether an employer is obligated to share the cost of its employees’ contributions depends on its size. An employer with 25 or more workers in Massachusetts must cover 60% of the medical leave contribution for covered individuals. Employers with fewer than 25 employees don’t have to pay any portion of the employees’ contributions.

Paid Leave in Maine

Although Maine employers don’t yet have to offer paid family and medical leave, a few pieces of legislation are set to change that. One bill that’s currently making its way through the legislature would create a program very similar to Massachusetts PFML.

House Bill 1410, “An Act To Create Paid Family and Medical Leave Benefits,” was introduced on March 26th. Under this proposal, eligible Maine employees would be able to take up to 20 weeks of paid medical leave per year. Covered individuals would also be entitled to 12 weeks of paid family leave or 20 weeks to care for a family member who is a covered service member. Paid leave would be capped at 20 weeks total for all eligible employees. The proposed benefits would be funded through employee contributions of at least 0.55% of gross wages. (Recent figures suggest the contribution rate would actually have to be closer to 0.75% of gross wages.)

That bill is still up in the air, but a separate paid leave bill recently became law here in Maine. On May 16th, the Maine Senate voted to pass Bill 369, “An Act Authorizing Earned Employee Leave.” The proposed law affects non-seasonal employers that have more than 10 employees for more than 120 days per calendar year. Those employers would be required to provide employees with one hour of paid leave for every 40 hours worked, with an annual cap of 40 hours of paid leave. While the original bill called for paid sick leave, under the amended version employees can use their paid leave for any reason.

About 85% of Maine workers are eligible for paid leave under this law. Still, the majority of Maine’s nearly 51,000 businesses would be exempt, according to Sen. Rebecca Millett, the bill’s sponsor.

Assuming Governor Mills signed the paid leave bill into law on May 28 and it will take effect on January 1, 2021.

How Maine Businesses are Affected by PFML

Most Maine employers don’t have to do anything about paid leave just yet, but a business that’s located in Maine and includes employees working in Massachusetts may have to take steps to comply with PFML.

Keep these three key factors in mind:

  •    PFML eligibility is determined by the state where the employee works, not where the employee lives or where the employer is headquartered.
  •    It’s the employer’s responsibility to withhold and remit contributions for all covered employees to the Massachusetts DFML.
  •    Independent contractors are only covered by PFML when they work for a company that has more than 50% independent contractors.

A Maine business that employs independent contractors who work in Massachusetts doesn’t have to remit PFML contributions unless a majority of its workforce is independent contractors. If a Maine business has W-2 employees who work in Massachusetts, said business will have to participate in PFML. Whether or not the employer is responsible for paying a portion of those employees’ contributions depends on the size of the company.

Is your business ready to comply with PFML? And will you be ready to adapt to any new paid leave laws that pass in Maine? Our business advisory department can answer your questions. Contact ARB today to prepare for what’s next.

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