Round Two of Maryland’s “Draft” FAMLI Regulations – What Do They Say?

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On July 10, 2024, the Maryland Department of Labor’s (MDOL) issued a second version of “draft” 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.

The MDOL issued a first draft of the regulations earlier this year, and we discussed the items of interest or significance in a 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). And now we highlight the more significant developments in the latest version of the draft regulations.

Definitions. There has been some consolidation of the definitions from the various sections, with little overall change.

  • FAMLI’s new definition of “health care provider” does not include the FMLA’s provisions as to Christian Science Practitioners or practitioners accepted by a group health plan’s benefits manager to substantiate a claim for benefits.

Contributions. The following new points are significant:

  • The draft regulations clarify that the online account that employers must create will be used to make required information reports, remit contribution payments, and communicate with the State.
  • Following submission of the quarterly wage and hour reports, employers may amend the submission before the due date of the next report.
  • Employers may seek reimbursement of contribution overpayments, and must return the employee’s share to the employee. If the employee cannot be located, the employee’s contributions go back to the State plan.

Equivalent-Private Insurance Plans. Many employers are interested in the option of an EPIP, rather than participating in the State program. As we previously noted, however, it appears that establishing an approved self-insured EPIP may be quite challenging, if not virtually impossible. In addition to the previously-proposed onerous requirements, some of the more significant new points include the following:

  • There are new definitions for “insurance producer” (adopted from the existing definition in the Insurance Article of the Maryland Code) and “seeding period” (the time from July 1, 2025 through June 30, 2026, when contributions are collected before benefits begin).
  • Employers will be notified of any deficiencies in their EPIP applications and will have 90 days to fix them. If they are not fixed, the application will be denied.
  • There is a tiered schedule of application fees for a commercially-insured EPIP, ranging from $100 for an employer with fewer than 15 employees up to $1000 for an employer with 1000+ employees.
  • EPIP approval expires after one year, and employers must apply for renewal at least 90 days before expiration. (The prior version of the regulations required annual renewal for the first three years, and then only every 3 years thereafter, so this is not a good change).
  • Only employers with 50 or more employees are eligible for a self-insured (rather than commercially-insured) EPIP. Thus, smaller employers are no longer able to access this option – although realistically, the requirements for a self-insured EPIP are so onerous that few would actually be able to meet them.
  • The surety bond required for a self-insured EPIP must be issued by a surety company certified by the U.S. Treasury Department Bureau of the Fiscal Service, in addition to being authorized to do business in the state.
  • An employer may apply for a waiver of the surety bond requirement based on its capitalization and existing bondedness.
  • An employer whose EPIP approval has been terminated without a new EPIP being approved will be automatically enrolled in the State plan with contributions retroactive to the beginning of the most recent quarter.
  • Employers who intend to submit an EPIP may submit a Declaration of Intent to Obtain Approval of EPIP between May 1, 2025-August 31, 2025. The DOI must meet certain specific requirements. The Department will approve a compliant DOI within 15 business days of submittal.
  • If the DOI is approved before May 31, 2025, the employer is exempt from contributions during the entire seeding period. If the DOI is approved between June 1, 2025-August 3, 2025, the employer will be exempt from contributions from October 1, 2025 through the end of the seeding period.
  • The regulations set 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.
  • An employer whose EPIP is approved must remain in the EPIP for at least 4 calendar quarters.

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:

  • Oddly, the second draft regulations retreat from the specific list of required personal documentation that an employee must provide in support of their application for benefits, and now simply states that they must provide “personal identifying information as required by the Division.”
  • Similarly, the list of information about the employer has been reduced to that “required by the Division.”
  • Employers now have 5 business days (rather than 3 as set out in the first draft regulations) to respond to a claim application.
  • For intermittent leave, in addition to providing employers with “reasonable and practicable notice” of the reason and duration of the leave, employees must also give dates. Although this somewhat addresses the concern that we previously articulated about the lack of notice for the actual incidents of leave, it is unclear how this would actually work. Are the dates supposed to be provided in advance? But what if the intermittent leave is unpredictable?
  • The calculation of the claimant’s average weekly wage will be based on the previous 4 completed quarters of employment, divided by 13. (The last iteration of the draft regulations based the calculation on the previous 680 hours worked.) Oddly, if the claimant is a qualified previous employee (i.e. currently unemployed), the Division will use only the highest quarter of the most recent 4 quarters worked to calculate the average weekly wage. (It is curious why the draft regulations make that distinction for a previous employee).
  • Similarly, for intermittent leave benefits, the Division will look at the average number of hours worked per week during the highest of the previous 4 completed calendar quarters. (The first draft regulations looked at the average hours worked per week during the “qualifying period” – but failed to define that period).
  • Claimants approved for intermittent leave must submit requests for benefits within 5 business days of the leave, absent good cause. (The first draft regulations required a submission every 2 weeks).
  • For EPIPs, to the extent that the FAMLI claim procedures are more or less restrictive than those outlined by the Maryland Insurance Administration, the latter will control.

Dispute Resolution. There were minimal changes to this section. Unlike under the previous draft regulations, employers are now entitled to notice of a claimant’s appeal over the denial of benefits – but there is still no specific provision for their participation in the hearing process. Presumably the employer’s interests are covered by the Division/EPIP’s defense of the Division/EPIP’s denial of the claim, but there is no guarantee that will be the case.

Enforcement. Although there is a section on enforcement, there are still no actual draft regulations provided at this time.

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

  • Although the law permits judicial review of any benefits decision following exhaustion of the administrative hearings process, the regulations only allow “parties” to invoke that process. “Parties” are specifically defined as the claimant, an EPIP administrator, or the Division – but not the employer. That means the employer has no ability to challenge a benefits award in court.
  • Also as noted above, the employer has no ability to challenge the benefits award in the administrative hearings process.
  • 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 until the 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.

The Regulatory Process and the Law’s Status. Normally when a government agency is directed by law to issue regulations, they first issue official “proposed regulations” that are published in the Maryland Register, and the public is invited to submit comments for some period of time. After the public comment period is closed, the agency then considers the submitted comments and may make changes before issuing “final regulations.”

Here, however, the MDOL’s FAMLI Division has taken a decidedly different and much more informal and inclusive approach. During the summer of 2023, it engaged in a phased process in which the public was invited to participate in the discussion of six different topic areas, leading to the release of “Draft Outlines” of possible regulations for each topic area. The public was then again invited to provide comments on the Draft Outlines, which the MDOL apparently took into account before issuing the first set of “draft” regulations in January 2024.

Following changes to the law during the 2024 General Assembly session and presumably in response to comments received to that version of draft regulations, the FAMLI Division has now released this second set of draft regulations. These are not the official proposed regulations, however. The MDOL has stated that it will issue those at a later point for public comment (yet again) in accordance with the formal regulatory process. But for now, interested parties may submit comments through July 24, 2024 to the FAMLI division: [email protected].

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