Maryland’s Proposed FAMLI Regulations Are Finally Here – What Do They Say?

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On October 18, 2024, the Maryland Department of Labor (MDOL) finally issued its proposed regulations to implement Maryland’s paid family and medical leave insurance (FAMLI) law. Applicable to all employers with Maryland employees and starting July 1, 2026, the FAMLI law will provide most employees in Maryland 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.

Normally, an agency releases proposed regulations and, following a period of public comment, final regulations to implement a new law. The MDOL, however, has taken a far more extensive and inclusive approach to the traditional rulemaking process. After a series of public engagement sessions, the MDOL issued “draft” regulations at the beginning of this year, as discussed in our January 30, 2024 E-lert. Subsequently, amendments to the FAMLI law were made during the 2024 General Assembly session (which we covered in our April 10, 2024 E-lert). The MDOL then released a second set of “draft” regulations, which we reviewed in our July 17, 2024 E-lert. And, finally, we have the official proposed regulations, which are open for public comment. Below, we summarize both the law and what the proposed regulations provide.

The Law

Leave Amount and Reasons. Effective July 1, 2026, all employees who have worked at least 680 hours in Maryland over the prior 12 months will be eligible to receive up to 12 weeks of paid leave for their own serious health condition, to care for a family member’s serious health condition, for parental bonding (including kinship care), to care for an injured or ill military servicemember who is next of kin, or for certain qualifying exigency reasons related to a servicemember’s active duty. If an employee has taken FAMLI leave for their own serious health condition, they may receive an additional 12 weeks for parental bonding purposes (and vice versa). Leave must be taken in 4-hour increments.

Family members include the child of the employee or their spouse, the parent of the employee or their spouse, the spouse or a domestic partner, and the employee’s grandparent, grandchild, or sibling. These include biological, adopted, foster, step, legal guardian, and in loco parentis relationships.

Contributions. The benefits will be administered through a state program, which will be funded through contributions from employers and employees, starting July 1, 2025. The rate of contribution will be determined annually by the Secretary of Labor, but is capped at 1.2% of an employee’s wages, up to the Social Security wage base (which will be $176,100 in 2025). Contributions will be split 50-50, unless the employer elects to make the employee share of the contribution as well. Small employers with fewer than 15 employees will not be required to submit the employer portion of the contribution (although employee contributions are still required), and the Maryland Department of Health will reimburse certain licensed/certified community health providers for up to the full amount of their share of the premium.

Employer Notice to Employees. Employers must provide written notice to employees of their rights and duties under the law upon hire, annually, and within 5 days when leave is requested or when the employer knows leave may qualify.

Employee Notice to Employers. If the need for leave is foreseeable, employees must provide employers with at least 30 days’ written notice of their intention to take leave. If it is not foreseeable, they must provide notice as soon as practicable and generally comply with the employer’s absence-reporting requirements. If intermittent leave is required, the employee must make a reasonable effort to schedule the leave to not unduly disrupt business operations.

Employee Application for Benefits. Employees may apply for benefits up to 60 days before and 60 days after the anticipated start date of the leave, although the MDOL may waive the filing deadlines for good cause. Employers have 5 days to respond to an application.

Interaction with Other Benefits. FAMLI leave will run concurrently with FMLA leave. Employees cannot be required to use vacation, sick leave or other paid time off before or while receiving FAMLI benefits, although employers may permit employees to use such leave to bridge the difference between FAMLI benefits and full pay. However, if an employer provides paid leave specifically for purposes of parental bonding, family care, military leave, or disability, the employer can require employees to use such leave concurrently or coordinated with FAMLI leave. Employees receiving unemployment insurance benefits or workers’ compensation benefits (other than for a permanent partial disability) are not eligible for FAMLI benefits.

Job Protection and Health Benefits. During FAMLI leave, an employee may be terminated only for cause. They must be reinstated to their job, unless the employer determines that reinstatement will cause “substantial and grievous economic injury” to their operations and has notified the employee of that fact. In addition, employers must maintain the employee’s health benefits during FAMLI leave.

Private Employer Plan. Employers may establish their own plan or utilize a certified third-party insurance plan that meets or exceeds the rights, protections and benefits provided to employees under the law. Such private employer plans must be approved by the MDOL, which is directed to establish “reasonable criteria” for such plans.

The Proposed Regulations

The proposed regulations are divided into four sections: General Provisions, Contributions, Equivalent Private Insurance Plans, and Claims.

General Provisions. This section of the proposed regulations contains definitions (although other definitions are scattered throughout the rest of the regulations) and identifies forms and templates that the FAMLI Division will provide. Important definitions include the following:

  • Certain definitions closely follow – but are not identical – to relevant definitions under the federal Family and Medical Leave Act. These include:
    • “Continuing treatment” covering incapacity and treatment, pregnancy and prenatal care (although the proposed regulations specifically add childbirth, miscarriage, or stillbirth), chronic conditions, permanent or long-term conditions, and conditions requiring multiple treatments.
    • “Incapacity and treatment” involving treatment two or more times within 30 days of the first day of incapacity or treatment by a health care provider with a regimen of continuing treatment (and the proposed regulations specifically includes “home care administered by a competent individual under the direction of a licensed health care provider.” Like the FMLA, the individual is required to visit the health care provider within 7 days of the first day of incapacity, but the proposed regulations specifically permit the visit to be by tele-health. (The FMLA regulations state that the visit must be in-person, but during COVID, the US DOL began permitting tele-health visits as well).
    • “Licensed health care provider” generally follows the FMLA definition of “health care provider,” but unlike the FMLA, it does not include Christian Science Practitioners.
    • “Serious health condition” to mean an illness, injury, impairment or physical or mental condition that requires either (1) inpatient care or (2) continuing treatment by a health care provider. The proposed regulations also add donation of a body part, organ, or tissue.
    • “Service member’s next of kin” to mean the nearest blood relative other than a spouse, parent or child, in a specific order set out in the regulations.
  • “Application year” means the 12-month period beginning on the Sunday of the calendar week in which FAMLI leave begins.
  • “Carrier” means an insurer authorized by the Maryland Insurance Administration to sell insurance.
  • “Commercially insured EPIP” means an equivalent private insurance plan provided by an insurance company that has been approved to sell FAMLI products.
  • “Domestic partnership” means a relationship between two individuals who are at least 18 years old, not related within 4 degrees of consanguinity, not married or in a civil relationship with someone else, and agree to be in a relationship of mutual interdependence involving contributions to the maintenance and support of the other.
  • “Equivalent private insurance plan” or EPIP means a commercially insured or self-insured plan, approved by the FAMLI Division, that meets or exceeds the State plan.
  • “Kinship care” refers to existing definitions in Maryland law (meaning both a relative providing for the care and custody of a child due to a serious family hardship, and continuous 24-hour care and supportive services for a child placed by a child placement agency in the home of a relative related within 5 degrees of consanguinity).

This section of the regulations also provides that the FAMLI Division may mandate the use of approved templates and forms, including the following:

  • Employer notice to employee templates
  • Claim application form, certification of qualifying event forms, proof of relationship template, good cause exemption form, and intermittent leave use template
  • Request forms, reconsideration scheduling template, decision templates, and good cause exemption form.

Contributions. This section of the proposed regulations establishes the following important points:

  • Online account: Employers must create an online account to make required information reports, remit contribution payments, and communicate with the State.
  • Qualified employment: All wages paid for qualified employment are subject to contributions up to the Social Security wage base. Employment is qualified if: (1) the employer pays UI contributions to Maryland for that employee, or (2) the employer does not pay UI anywhere else and the employment is performed either wholly or partly in Maryland where (a) employment performed outside Maryland is incidental to the employee’s Maryland employment, (b) employment performed in Maryland is not incidental to out-of-State work and the base of operations or the place from which the employment is controlled or directed is in Maryland, or (c) the employment is performed by a resident of Maryland and not in a state in which employment is controlled or directed or where the base of operations is located.
  • Small employer: In determining whether the employer has fewer than 15 employees, all employees are counted – not just those in Maryland.
  • Failure to deduct contributions: If an employer fails to deduct the employee portion of the contribution from their pay, the employer is deemed to have elected to pay the employee’s share, and may not recoup the payment from the employee. But if there were insufficient funds in the employee’s paycheck because of other required federal, state, and local withholdings, the employer may recoup the contribution within the next 6 pay cycles.
  • Wage reporting and payment schedule: On a quarterly basis, employers must make contribution payments and informational wage and hour reports covering each employee. To be considered for small employer status, those employers must also report the number of non-qualified employees outside the State. Amendments to the quarterly reports may be made within a year.
  • Contribution delinquencies: Employers are given 30 days to address any delinquencies. If they fail to do so, the FAMLI Division can assess the amount of the contribution, interest, a penalty in the amount of two times the contribution, and order an audit of the employer.
  • Contribution overpayments: Employers may request reimbursement up to a year following any overpayment, and must return the employee’s share to the employee. If the employee cannot be found within 90 days, the money goes back to the State.

Equivalent-Private Insurance Plans. Many employers are interested in the option of an EPIP, rather than participating in the State program. An employer may purchase a EPIP plan from an approved insurance carrier or create a self-insured plan, and those employers will not be required to make the contribution payments to the State plan. As we previously noted, however, it appears that establishing an approved self-insured EPIP may be quite challenging, if not virtually impossible for most employers. Some of the more significant points in these proposed regulations with regard to EPIPs are as follows:

  • EPIP requirements: An EPIP must meet or exceed the benefits and requirements under the State plan, including: employee eligibility (and if the employee worked for the employer for less than 680 hours in the prior 4 quarters, the employer must contact the FAMLI Division for eligibility information); use of State-provided forms and notices; reasons, amount and use of leave; benefit amounts; limits on the timing and amount of employee contributions; claims processing, appeals and reconsideration procedures; confidentiality of employee information; job protection; and no retaliation for requesting/using FAMLI leave. Employers may not impose any additional conditions, restrictions, or barriers on the use of FAMLI leave beyond the State plan.
  • Appeal to the State: Employees may appeal the denial of benefits to the State, and if the State determines that benefits are due and would not be paid by the employer, it may pay the benefits and require reimbursement from the employer and/or EPIP administrator. There may be additional consequences for repeated failure to pay benefits, including termination of the EPIP by the State.
  • EPIP application: Employers must submit a FAMLI application form (to be prepared by the FAMLI Division), which will be reviewed by the FAMLI Division. Employers must address any deficiencies of which they are notified within 90 days, or the application will be denied.
  • Application fees: For a commercially-insured EPIP, the application fee ranges from $100 for an employer with fewer than 15 employees in Maryland up to $1000 for an employer with 1000+ employees in the State. The application fee for a self-insured EPIP is $1000. EPIP approval expires after 1 year, and the employer must re-apply for approval at least 90 days before expiration.
  • Special requirements for self-insured EPIPs: Only employers with 50 or more employees are eligible for self-insured EPIPs. The employer must obtain a surety bond in the amount of one year of expected future benefits as calculated using a State-provided formula, and there are additional conditions and requirements as to the bond. An employer may apply for a waiver of the surety bond requirement based on its capitalization and existing bondedness. The EPIP funds must be maintained in a separate account from all other employer funds and used only for benefit payments.
  • Oversight by the FAMLI Division: The Division may initiate a review of an EPIP at any time, and employers must provide any requested documentation and information within 30 days. Failure to cooperate with the review may result in termination of the EPIP approval.
  • Recordkeeping: The following documentation must be retained for at least five years: applications; benefits paid; adverse determinations; internal reconsideration requests and outcomes; underlying documentation for benefits determinations and reconsiderations; and employee contributions.
  • Reporting: Employers are ultimately responsible for all reporting, even if they use a third-party administrator. Failure to submit timely and complete quarterly reports on claims and wage and hour data may result in termination of the EPIP.
  • Voluntary termination: Employers may voluntary terminate an EPIP after one year, and must give 30 days’ notice to the FAMLI Division and employees. Upon termination, they must either join the State plan or have an approved application for a different EPIP.
  • Involuntary termination: The FAMLI Division may terminate an employer’s EPIP if it determines that the terms or conditions of the plan have been “repeatedly or egregiously violated in a manner that necessitates termination.” This could include: failure to pay benefits at all or in a timely manner; failure to make timely determinations; failure to maintain an adequate surety bond; misuses of EPIP money; and failure to submit required reports. Employers will be given 14 days’ notice and may request review within that period. Employers will be required to pay the amount that would have been owed to the State plan for the year prior to the termination.
  • Continuation of benefits upon termination: The EPIP must pay benefits for valid claims filed before the termination until earliest of the following: the total amount of the claim is paid, the duration of the leave ends, or the application year ends. The employer must also provide a report on claims paid and contributions collected or owing, and the FAMLI Division will determine if there are any contribution amounts due to the State plan.
  • Declaration of Intent to obtain EPIP approval: From May 1 through August 29, 2025, employers may submit a DOI (that meets certain requirements) to enroll in an EPIP, and they must submit an EPIP application by April 1, 2026 for a self-insured EPIP and by June 1, 2026 for a commercially-insured EPIP. The FAMLI Division will approve or deny a DOI within 15 days of submission. If approved, the DOI will allow the employer to collect and hold the employer/employee contributions that would have been paid to the State until EPIP approval, at which point the monies are either released, with the employee portions returned to the employee, or used to fund a self-insured EPIP. The DOI may be terminated for numerous reasons, including misuse of funds, failure to comply with FAMLI program requirements, excessive withholding of employee contributions, failure to submit reports, failure to respond timely to FAMLI Division requests, and failure to submit or denial of an EPIP application.
  • Deadlines for EPIP applications: initial self-insured EPIP applications must be submitted between January 1, 2026-April 1, 2026, while initial commercially insured EPIP applications must be submitted between March 1, 2026-June 1, 2026, with the effective date for both on July 1, 2026.

Claims. This is a quite lengthy and detailed section of the regulations. Of particular note, there are extremely limited options for an employer to report fraud, and no guidance on how the FAMLI Division will handle such reports. Other important points include the following proposals:

  • Definitions: The proposed regulations add the following significant definitions:
    • “Alternative FAMLI Purpose Leave” or “APFL” means a separate bank employer-provided leave specifically designated for medical leave, family leave, qualifying exigency leave, or leave under a disability policy. The regulations further specify that such leave must be: specifically designed to fulfill a FAMLI purpose; paid; not accrued; not subject to repayment upon departure; not available for general purposes; and available without a requirement to exhaust other leave.
    • “General purpose leave” means employer-provided paid leave, such as general paid time off (PTO), vacation, personal leave, or sick leave.
    • “Good cause” means the following: the inability to file a complete claim application due to an unanticipated and prolonged period of incapacity due to a serious health condition; a demonstrated inability to reasonably access a means of filing (e.g. natural disaster, power outage, or a significant and prolonged MDOL system outage); or a demonstrated failure of the employer to provide the required notification to the employee.
  • Required documentation: A claimant must provide certain documentation to support their benefits claim to include: personal identifying information; information about their employer; proof of relationship, meaning a signed affidavit from the employee, official governmental documentation, or documentation from licensed foster care or adoption providers; and certification of a qualifying event containing information that generally mimics the certification requirements under the federal Family and Medical Leave Act (the FAMLI Division will provide forms for the employee’s own or a family member’s serious health condition, and military caregiving reasons).
  • Employer response: An employer has five business days to respond to notice of an application, and if they fail to respond, the claim is considered complete. If they challenge the employee’s eligibility for benefits, the FAMLI Division will investigate and make a determination. If the employer submits a response after the five-day period that establishes ineligibility, the employee will retain any benefits received, but additional benefits will not be paid and job protection will no longer apply.
  • Claim updates: Claimants must update their claims within 10 days, or as soon as practicable if there is good cause, for changes in the following: the basis for leave, the dates, the duration, and whether the claimant has begun receiving workers’ compensation or unemployment insurance benefits.
  • Employer notice: The proposed regulations add “6 months prior to commencement of benefits” to the required points of time in which notice must be provided to employees. In addition, the FAMLI Division will issue forms and templates that employers will be required to use for such notices.
  • Employee notice: In addition to reiterating the law’s notice requirements for foreseeable and unforeseeable leave, the proposed regulations provide that employers may waive notice, and will be deemed to have done so if they did not include the failure of notice in their response to a claim or if they did not inform the employee that notice is required.
  • Intermittent leave: Employees must provide reasonable and practicable notice of the reason, dates, and duration of the leave. If they fail to provide reasonable and practicable notice of their intermittent leave schedule, they may be held accountable under their employer’s attendance policy, but only if the employer first notifies the FAMLI Division. If an employee’s use of intermittent leave is inconsistent with the FAMLI leave approval, the employer may request additional information related to their use of FAMLI leave.
  • State/EPIP notice to claimants: Claimants will receive notice of the following: submission of an application and whether it is complete; when notice is sent to the employer; when the employer’s response is submitted; whether their application is approved, including details of benefits; and whether their application is denied, with the reason and appeal rights.
  • State/EPIP notice to employers: Employer will receive notice of the following: submission of an application and, if initially incomplete, a complete application; claim determination; reconsideration of appeal of a benefits determination; and changes to benefits determinations.
  • Coordination of benefits:
    • Alternative Paid FAMLI Leave: The proposed regulations assert that employers may require employees to use AFPL concurrently or in coordination with FAMLI leave, but only if the employer provides advance written notice of this requirement. Then, if the employee declines to apply for FAMLI leave, their FAMLI benefit eligibility is reduced by the APFL taken. If the employee receives both, the FAMLI benefit is primary and APFL may be used to bridge the difference between the FAMLI benefit and full pay, but the employer may deduct the full amount of time taken from the APFL balance.
    • General Purpose Leave: Neither the employer nor employee can require the substitution of GPL for FAMLI leave, but they can agree in writing to use GPL to bridge the gap between FAMLI benefits and full pay. Any such agreement must be documented and retained by the employer. However, unlike APFL, only the actual amount of GPL used may be deducted from the GPL balance.
    • Sick leave: An employee may use sick leave prior to receiving FAMLI benefits without the employer’s agreement.
  • Benefit payment: The first payment will be within 5 business days after a claim is approved or FAMLI leave has started, whichever is later. Subsequent payments will be made every two weeks. If there is an overpayment, such as benefits were paid erroneously or based on a willful misrepresentation of the claimant, or a claim was rejected after benefits were paid, the FAMLI Division may seek repayment.
  • Fraud: If fraud is proven after benefits have been approved and issued, those benefits will be treated as an overpayment and job and anti-retaliation protections will not apply.

Dispute Resolution and Enforcement. Although the “draft” regulations included these sections (albeit without content, in the case of the Enforcement section), the proposed regulations curiously do not.

Continuing Concerns. The proposed regulations do not address some significant concerns for employers. Among them are the following:

  • The ability of employers to challenge fraudulent applications for benefits is quite limited. As noted above, employers have 5 days in which to respond to an application. The regulations contemplate that an employer may provide relevant information after that 5-day period, but if that information would result in a revocation of benefits, the employee is still entitled to the benefits already received and, more troublingly, job and anti-retaliation protection continue to apply until benefits are revoked. A separate section states that job and anti-retaliation protections do not apply once fraud is “proven.” There is no clarification of what that means or timeline for how long that might be – meaning that an employer may be required to continue active employment for an employee that it knows to have engaged in fraud until the Division says otherwise.
  • The regulations provide that, where an employee is taking FAMLI leave to care for a family member and the family member dies, the benefits continue for an additional 7 days – which effectively provides bereavement leave that is not one of the specified reasons under the FAMLI law.
  • While the draft regulations permit an employer to request additional information where an employee’s use of intermittent leave is inconsistent with the leave approval, there is no provision for an employer to request additional information in response to an initial notice of the need for leave, which may be necessary to establish fraud.
  • Moreover, the absence of dispute resolution and enforcement sections is troubling. Presumably the MDOL will release these sections later.

Next Steps

Interested parties may submit comments through November 18, 2024 to the FAMLI division: [email protected]. Following the comment period, the FAMLI Division may make additional changes to the regulations before issuing them in final form.

Stay posted for additional developments, of which there will be many.