This week the Chamber submitted written comments and questions on the draft Paid Family and Medical Leave Regulations on behalf of the 1,300 employers in our membership. Since the law was adopted, the Chamber has worked with dozens of employers representing hundreds of thousands of workers in Massachusetts, ranging in size from fewer than 25 employees to more than 10,000. These employers universally raise concerns over the plan to begin collecting contributions on July 1, 2019. Many of these same employers already provide paid leave benefits to their employees, so their concerns are not over whether to provide the benefit, but rather the existing lack of clarity and, as a result, their ability to comply with the law on such a short timeline. With that in mind, we urge the Department to consider delaying the contribution start date by three months, to October 1, 2019 to ensure a smooth rollout that will protect the program’s integrity.
Addressing the concerns listed below will make it easier for employers to offer the best possible leave programs to their employees while maintaining compliance with the law.
Section xx.02 Definitions
- Generally, the definitions depart from the definitions in the federal Family and Medical Leave Act (FMLA). The definitions in the state Paid Family and Medical Leave law should align with the FMLA definitions. This will improve the law’s clarity for employees, employers, and administrators. There are already existing legal interpretations of FMLA definitions, and this will reduce the new compliance burdens and avoid confusion during implementation.
- It appears that an employee is considered covered by the Massachusetts PFML plan for 26 weeks after terminating employment if the employee had met the eligibility requirements upon separation. It would be important that the former employee process a claim through the state in cases where a company has set up a private plan.
- There is a challenge in defining employer by Federal Employer Identification Number (FEIN). Multiple affiliates within a single company may each have a FEIN, and many of which co-employ individuals. Defining employer by FEIN makes compliance with the law administratively burdensome because efforts need to be duplicated, and it could result in double tax contributions. Using the FMLA definition of employer would resolve these complications.
- In defining intermittent leave as ‘leave periods from an hour or more to several weeks’ the department has opened up the possibility that applications will be submitted to the Department and to private companies for a single hour. The administrative burden to provide for a single hour off is disproportionate.
Section xx.04 Registration and Filing
(2) Quarterly filing and Contribution Payment
- Submitting 1099-MISC information on a quarterly basis is administratively burdensome, particularly for smaller organizations. This requirement also poses a significant challenge to multistate companies who would have to identify the work and home location of any individual who received a 1099-MISC. We recommend requiring less frequent submissions.
- The requirement to provide information to all 1099-MISC contractors about an employer’s benefits program is overly burdensome and should be more narrowly defined. For example, vendors and one-time contractors, such as one-time event speakers, receive 1099-MISC forms, but do not require information about benefits.
- When must an employer begin filing the required quarterly reports?
Section xx.05 Contributions
(5) Allocation of Contributions between Employers and Employees and Covered Contract Workers
- Is the employee portion pre-tax?
- It's unclear if there will be two separate deductions (one for medical, one for family leave) or one combined deduction. It would be much better to have two – one for medical and one for family leave. Doing so would allow companies to apply for an exemption for one type of leave, while leaving employees free to use the state benefit for the other. This is the approach in other states, like New Jersey.
Section xx.07 Application for Exemption due to Approved Private Plan
- Many large companies will use a third-party administrator (TPA) to manage their private plans. Given the tight timeframe between finalized regulations and program implementation there is very little time for TPAs to design and bring to market a product that is both in full compliance with the law and suitable for the employer’s needs.
- Are there rules for filing a claim once a private plan is approved?
- When using a private plan, the business has to offer the same private plan benefits to eligible contracted individuals or make contributions – is this true even if the business employs less than 50% of its workforce through self-employed contractors?
- How will the Department determine if a private plan meets the necessary thresholds to qualify for an exemption? Is it based on the total value or are their other requirements as well?
- What is the process to apply for an exemption?
- Must an employer applying for an exemption submit the payroll tax due July 1, 2019?
- Assuming an employer submits the payroll tax but is subsequently granted an exemption, will the employer receive a reimbursement?
- Assuming, under an employer’s short-term disability plan, the total amount an employee receives exceeds the employee’s weekly benefit amount under the Act, would this be sufficient to qualify for an exemption?
- If an employer opts out what would then be the relationship between the employer and the new department? Would it be entirely removed from the state program or would the leave still need to be administered/counted through the state and paid through the employer plan?
- Will employers who apply for an exemption and are approved have to submit a report on employee notification to the Department?
- If an employer applies for an exemption and is denied, will they be expected to remit retroactive contributions to the state program?
(7) Audits, Withdrawal of Approval, and Penalties for Private Plans
- Will employers have to notify the Department every time their long- or short-term disability vendors change even if the benefits do not?
- Will employers have to notify the Department when making minor modifications to human resource manuals?
Section xx.08 Claim for Benefits
- Requiring an individual to consent to health care information being shared raises privacy concerns.
- In some cases, the duration and start date of a leave is unknown or inaccurate in advance of the leave.
- What is considered evidence of a family relationship?
- If the individual files after 90 days and receives reduced benefits, how is the reduction calculated given some of the amount is attributable to the employee’s own contributions?
(6) Information from Employer or Covered Business Entity
Five business days
- There is a significant amount of information necessary to process a claim, so this is not enough time for employers, especially if key personnel are out of the office. Will there be a form to fill out too?
Description of the employee/covered individual’s position
- There is no basis for employers to be required to provide a job description in the event of a claim for benefits. This is administratively burdensome, irrelevant to the issue of wage replacement, and goes beyond the scope of the statutory language.
Weekly hours worked
- For what period is this information supposed to be provided? Many employees’ actual or scheduled work hours will change quarter to quarter.
- There are several ways to look at this, so it needs to be clear what is counted as an “hour worked”. Does it mean the average number of actual hours worked, scheduled hours, overtime hours worked, etc.? Are vacation, PTO, sick or holiday hours counted?
- What is the lookback timeframe?
Section xx.09 Approval of Payment for Benefits
(4) Intermittent Leaves
- Can the employer require use of PTO during the 7-day waiting period?
Section xx.10 Amendment or Extension of Benefits
(2) Extension of Benefits
- Please provide more information about the process for an employee who is filing a late request for exemption to the Director, including examples of what would be considered “good cause shown” and what would not.
- What if the individual is unable to file the extension? Can a family member file the extension in their place?
Section xx.12 Weekly Benefit Amount
- Please provide examples of calculations for both contributions/deductions and benefit payments. As written, they are hard to understand and unclear.
Section xx.13 Intermittent Leave
(3) Impact on Leave Allotments
- What is the total duration of intermittent leave time available? This should ideally align with FMLA durations. Intermittent leave is administratively burdensome and has a significant impact on a business's ability to staff, especially in very tight labor markets.
General Comments and Questions
Implementation and Notification Timeline
- We reiterate our request, made by the negotiators on May 20th, to delay implementation of this program three months until October 1, 2019. Doing so will ensure clarity on the regulation, allow employers time to clearly communicate to employees regarding payroll deductions, and also allow enough time for acceptable private sector options to be developed and brought to market.
- Beginning June 30th employers will be required to notify employees of the benefits available to them under the law. In the case of employers who plan to apply for an exemption, it would be beneficial to have flexibility to delay this notification until after they receive notice of either a denied or accepted exemption so that employees receive consistent and clear information.
- As written, it is unclear whether employers are required to notify all new hires of the benefit, or only those who will qualify for coverage.
- When employers do notify their workforce, and request in return written acknowledgement of receipt from employees and contractors who are eligible for PFML benefits, there should be an allowance for good faith efforts to obtain said acknowledgement. As written, employers who have put forth their best effort to notify employees could be subject to hefty fines if the employees do not respond in a timely manner.
Benefits and eligibility
- If an employee moves out of state, at what point is he or she no longer eligible for PFML benefits?
- Is there a mechanism in place to prevent employees from using vacation or sick time during the time they are receiving PFML in order to prevent them from receiving a double recovery?
- The law does not provide any eligibility requirements for length of service or hours worked as in the FMLA. An employee could start employment and immediately apply for 12 weeks of medical leave, and another 14 weeks of family leave. Other state programs have a waiting period and/or hours worked requirement. This is a lot to ask of employers.
- How will benefits be taxed? Companies with private plans must know this in order to properly setup payroll systems. Other states do not consider the benefits paid for disability subject to state income tax, but they do consider benefits paid for family leave taxable.
- Does the law require employers approved for private plans to set up a trust?
- If wages are reported quarterly, but employees reach the SSA cap mid-way through the year, is the expectation that employers continue to separately track wages beyond the SSA-cap threshold? If so, this is burdensome, and also may result in a total wage report to the Department in excess of the wages that can actually be considered under the statute.
- What happens to the unused individual and employer contributions?
- There are significant concerns regarding employee privacy because doctors’ notes and/or certification from a health care provider must be submitted to the Commonwealth in order to qualify for leave. How is this information going to be protected?
- Increasingly, companies in Massachusetts employ individuals who commute or telecommute from out of state. In both situations there is a lack of clarity on how the PFML program should be applied. If an employee lives out of state, but travels to a physical location in Massachusetts are they fully covered by the state program? Does that change if they only commute to the physical location for two or three days a week, and work remotely for the other days?
- How do out-of-state remote working situations impact the weekly benefit calculations that a company submits to the Department?