Family and Medical Leave Insurance (FAMLI)

Shawe Rosenthal’s Guide to the Family and Medical Leave Insurance (FAMLI) Program

Overview. This law applies to all employers with employees in Maryland. It provides eligible employees with 12 weeks of paid family and medical leave, with the possibility of an additional 12 weeks of paid parental leave (for a possible total of 24 weeks of paid leave). This $1.6 billion program will be administered by the State and funded by contributions from employers and employees. The Maryland Department of Labor has created a new FAMLI Division to administer the program, and it will issue regulations to implement the provisions of the law.  Regulatory proposals are marked with a bullet point “▪”.

Significant MDOL resources.

 Significant Shawe Rosenthal resources.

What Is the Status of the Regulations? The FAMLI Division previously issued “draft” regulations, as discussed in our January 30, 2024 E-lert. The law was subsequently amended during the 2024 General Assembly Session, as mentioned above, and the FAMLI Division will be issuing an updated version of their “draft” regulations sometime in early summer 2024. The public will be able to offer comments, which the FAMLI Division will take into consideration before formally issuing proposed regulations later this year.

What Is the Portal and How Will It Be Used? The FAMLI Division is in the process of developing a portal through which employers will register with an email address for communications, and will submit all required information and contributions.

The FAMLI Division will also provide information to employers about employee claims through the portal. Once an employee fills out an application on the FAMLI portal, the FAMLI Division will immediately notify the employer through the registered email address. The employer then has 5 days to respond and provide information that could impact the benefits determination, such as the employee took employer-provided Alternative FAMLI Purpose Leave (discussed further below) already, or that the employee took FMLA leave and failed to apply for FAMLI benefits although they were notified of their right to do so.

Which Employers Are Covered by the Program? All employers with Maryland employees are covered, including state/governmental entities. However, those small employers with 15 or fewer employees are not required to make contributions to the fund, although their employees are required to pay their portion of the contribution and are entitled to receive paid leave under the program.

Who Is a Small Employer? In determining the 15-employee threshold, all employees – including those employed outside of Maryland – are counted. The FAMLI Division will use a 4-quarter average for the prior year and re-evaluate on an annual basis.

What About Employers Serving Individuals with Mental Disorders, Substance-Related Disorders or Developmental Disabilities? The State will reimburse the employer’s contribution for community-based agencies or programs funded by the Behavioral Health Administration, the Developmental Disabilities Administration, or the Medical Care Programs Administration to serve individuals with mental disorders, substance-related disorders, or developmental disabilities. There are different rates of reimbursement for the different categories of community-based agencies or programs.

Who Is Eligible for the Paid Leave Benefit? Employees who have worked 680 hours in Maryland in the 12 months prior to the date leave is to begin are eligible for the benefit.

Only employees who perform services under employment located in the State are covered by the FAMLI program, and the FAMLI Division will apply the localization rules for unemployment insurance to determine if an employee who is physically located outside of Maryland meets this requirement. For the most part, if an employer is paying unemployment insurance contributions in Maryland for an employee, that employee is covered by FAMLI. There may be other employees who are not covered by UI but are still covered by FAMLI, however.

    • Under the draft regulations, employees are not eligible for FAMLI benefits if they are receiving either unemployment or workers’ compensation benefits.

What About Out-of-State Employees? The UI localization rules cover several different out-of-state situations. For employees who physically work, at least in part, in Maryland, the rules provide that an employee’s service is localized within Maryland if it is performed (1) entirely within Maryland or (2) both within and outside Maryland, as long as the non-Maryland service is incidental (meaning temporary or transitory, or consisting of isolated transactions) to the service performed in Maryland. The factors for determining if service is incidental or transitory are: (1) the intention of the employer and employee as to whether the service is an isolated transaction or a regular part of the employee’s work; (2) the intention as to whether the employee will return to Maryland after completing their out-of-state work; and (3) the length of service within Maryland as compared to outside Maryland.

For employees who physically report to a Maryland location but may then travel outside Maryland to perform work, the UI localization rules provide that they will be covered by FAMLI if their service is not localized in any state, they perform some services in Maryland, and their base of operations is in Maryland. The “base of operations” is a more-or-less permanently fixed location from which the employee starts work and to which they customarily return to receive work instructions, obtain supplies, repair equipment, or perform other functions necessary for their job. This can be the employee’s business office, or an employment contract may set forth a particular place.

The UI localization rules further provide that a remote employee will also be covered by FAMLI if their employment is not localized in any State and they have no base of operations, or the base is in a state where they perform no service, or the base moves from state to state – but their service is directed or controlled from Maryland.

And if none of the above rules establish where the remote employee’s employment is based, the UI rules provide that they will be covered by FAMLI as long as they live in Maryland and perform some services in Maryland.

Employees who live in Maryland but work in another state are not covered by FAMLI.

What Is the Employer’s Reporting Requirement? Employers will submit wage and hour reports for all covered employees on a quarterly basis through the portal. The FAMLI Division will use that information to determine an employee’s eligibility and benefit amount upon receipt of that employee’s application for benefits.

What Is The Required Contribution from Employers and Employees? The total contribution rate is capped at 1.2% of an employee’s wages, up to the Social Security cap, currently $168,600. It is split 50-50 between employers and employees. The Secretary has announced that the rate will be .90%. The Secretary will adjust the rate annually.

“Wages” mean the following: hourly wage or salary; commission; compensatory pay; severance pay; standby pay; tip or gratuity; holiday or vacation pay; and any other paid leave, including sick leave, paid entirely by the employer.

The contribution payments are required quarterly on April 30, July 31, October 31, and January 31. The employee’s contributions should be deducted each pay period by the employer, but will be paid to the State in accordance with this quarterly schedule.

What Are the Reasons Employees May Receive Paid Leave Benefits? The reasons generally mimic the reasons for the federal Family and Medical Leave Act, with some expansions:

  • To care for a child during the first year following birth, adoption, foster placement, or kinship care (this last is not covered by FMLA).
    • The draft regulations refer to existing kinship care definitions already contained in the Maryland Code, which includes both informal and formal kinship relationships.
  • To care for a family member with a serious health condition (as discussed below, the definition of family member is greatly expanded from the FMLA).
    • Notably, under the draft regulations, serious health condition under FAMLI also includes continuing treatment of home care by a “competent individual” as well as organ/tissue/body part donation.
  • For the employee’s own serious health condition.
  • To care for a service member who is the employee’s next of kin.
  • Due to a qualifying exigency arising out of a family member’s military deployment.

Who Is a “Family Member” for Purposes of the Program? The law defines family member to include biological, adopted, foster and step relationships for the following:

  • A child, as well as one for whom the employee has legal or physical custody or guardianship, or for whom the employee stands “in loco parentis” (meaning they act as a parent). It also includes the ward of the employee or the employee’s spouse. Note that, unlike FMLA, the child does not have to be under the age of 18.
  • A parent, as well as the legal guardian of the employee or the employee’s spouse, or who acted “in loco parentis” to the employee or the employee’s spouse when they were a minor. Note that the FMLA does not cover the parents/guardians/in loco parentis individuals of the employee’s spouse.
  • A spouse.

The law also identifies the following as family members, which is beyond what is covered by the FMLA:

  • A grandparent.
  • A grandchild.
  • A sibling.
  • A domestic partner.
    • The draft regulations provide that, in seeking FAMLI leave for bonding or care for another, the employee must submit proof of relationship, including an affidavit or official documents. The employee must also submit official documentation of the qualifying event. This documentation is submitted to the State, not the employer.

How Much Leave May Employees Take? Employees may take up to 12 weeks per 12-month period for a covered reason. If the reason is the employee’s own serious health condition, they may receive an additional 12 weeks for birth/adoption/foster placement/kinship care reasons, for a total of 24 weeks.

What About Intermittent Leave? If intermittent leave is required, the employee must make a reasonable effort to schedule the leave so as to not unduly disrupt the employer’s operations. The employee must also provide reasonable and practicable prior notice of the reason for the need for intermittent leave. Intermittent leave must be taken in increments of at least 4 hours, unless the shift is less than 4 hours. (Note that the FMLA only permits 1-hour increments).

    • Under the draft regulations, if the employee’s intermittent use is inconsistent with their State approval, the employer may request additional information about their use of leave. But there is no provision that allows employers to request additional information with regard to the use of FAMLI leave in a block.

What Benefits Will Employees Get? There is a formula for calculating pay benefits, subject to a minimum weekly amount of $50 and maximum of $1,000 (the latter of which will be subject to increases tied to the Consumer Price Index).

  • If the employee’s average weekly wage is 65% or less of the State average weekly wage, they receive 90% of their wage.
  • If the employee’s average weekly wage is greater than 65% of the State rate, they receive 90% of their wage up to 65% of the State rate, then 50% of anything in excess of that.
  • If employees are taking partially paid leave, they may still get a benefit from the program.

In addition, employers must maintain health benefits for employees on leave in the same manner as is required under the FMLA. (Generally speaking, the FMLA requires continuation of group health insurance coverage during the period of leave, as long as the employee continues to pay their portion of the premium.)

How Are Claims Filed? Using the FAMLI portal, employees may file an application for benefits up to 60 days before and up to 60 days after the anticipated start of the covered leave. This deadline can be waived for good cause, however.

    • The draft regulations define “good cause” as including the employee’s serious health condition that prevents the timely filing, the demonstrated inability to access a means to timely file (e.g. natural disaster, power outage, prolonged Departmental system outage), or the employer’s failure to provide the requisite notice.
    • Under the draft regulations, employees are to update their claim application within 10 days for any changes to the leave basis, start, end, duration, and receipt of workers’ compensation benefits.
    • Under the draft regulations, requests for intermittent FAMLI leave must be submitted every two weeks. Benefits will not be paid for leave that exceeds the certified amount without an updated certification.

How Does an Employee Certify a Claim for Benefits? The certification requirements generally track the FMLA. The employee will be required to submit a certification that includes:

  • The date on which the serious health condition commenced.
  • The probable duration of the condition.
  • Appropriate facts related to the serious health condition known by the health care provider.
  • If the claim involves the care of a family member, an estimate of the amount of time required.
  • If the claim involves the employee’s own serious health condition, a statement that they are unable to perform their job functions.
  • If the claim involves intermittent leave, the expected duration of such leave.

Employees may appeal a denial of benefits, and seek judicial review after exhausting any administrative appeals.

What Notice Are Employees Entitled To? Employers must provide notice of employees’ rights under this law:

  • at the time of hire
  • annually
  • within 5 business days when an employee requests paid family and medical leave or
  • when the employer knows that their leave is for a covered reason under the program.
    • The draft regulations also state that notice must be given 6 months prior to the commencement of benefits, as well as 30 days prior to changes to the FAMLI procedures or plan.

There are specific requirements that must be contained in the notice, and the Department of Labor will develop standard notices that can be used by employers.

What Notice and Information Are Employers Entitled to from the Program? Through the portal, the program will notify employers that a claim has been filed within 5 business days, and within 10 business days whether the claim has been approved or denied. The program will also notify employers each time there is a change in status for the application. Under the 2024 amendment to FAMLI, employers will receive information about an employee’s application for benefits.

What Notice and Information Are Employers Entitled to from the Employee? If the need for leave is foreseeable, the employer can require the employee to provide at least 30 days’ written notice. If the need is unforeseeable, the employee must provide notice as soon as practicable and, like FMLA, generally comply with an employer’s notice requirements for other leave, as long as those requirements do not interfere with the employee’s ability to use paid family and medical leave.

    • Under the draft regulations, employers may waive notice, and waiver is presumed if the employer did not notify the employee of the need to provide notice to the employer, or if the employer fails to assert this in response to a notice of claim from the FAMLI Division.
    • Under the draft regulations, employees must provide reasonable and practicable notice of the reason and duration of their intermittent leave, although apparently not as to the leave itself, which is not helpful for employers.
    • Under the draft regulations, if employees fail to provide such notice of intermittent leave, they may be held accountable under the employer’s attendance policy. But since the notice provision only applies to the overall need for intermittent leave, and not each incident of leave, it is unclear how this would apply. In addition, the employer must notify the FAMLI Division of the notice failure.

What If the Employer Thinks the Employee Is Lying? The Secretary is directed to establish procedures for employers to report suspected fraud. Employees who are found to have willfully made false statements or failed to disclose material facts will be disqualified from receiving benefits for a year. Although the law does not address it, employers should be able to apply their normal disciplinary process to such employees as well.

    • Under the draft regulations, employers must respond to a notice of claim application within 3 (although the webinar says 5) business days, otherwise the application is considered complete. The FAMLI Division will investigate any employer challenges. But the Division may consider a late submission and negate any ongoing benefits. Job and anti-retaliation protections cease when benefits cease in such a case. Notably, this appears to be the only path for employers to report fraud, and it is wholly lacking in any kind of detail as to how the FAMLI Division will handle such information. Problematically, it appears that the employer must wait for the FAMLI Division to stop benefits before taking any kind of employment action based on the fraud.

What Is the Employee’s Right to Reinstatement? The leave under this law is job-protected, meaning that the employee generally must be reinstated to their position at the end of the leave. The two exceptions are: (1) if the employee is terminated for cause, or (2) if restoring the employee to their position would result in “substantial and grievous economic injury to the operations of the employer.” This second exception sets an undoubtedly high standard, but would likely apply in the situation of a reduction in force, for example. The employer would have to notify the employee of the denial of restoration at the time the determination of economic injury is made.

Can Employees Waive Their Rights Under This Program? The law prohibits any waiver of employees’ rights to benefits under this law, by collective bargaining or otherwise.

What If There’s a Collective Bargaining Agreement? If the CBA provides for more leave than this law, the employer must comply with the CBA.

What About FMLA? If an employee declines to apply for benefits under this program while on designated leave under the federal Family and Medical Leave Act, the FMLA leave will still count against the employee’s 12-week entitlement to benefits.

What About Existing Employer Leave Policies? The law is clear that employers cannot require employees to use “General Purpose leave,” meaning PTO, sick leave, or vacation, before or while using FAMLI leave, but employers may permit employees to top off their FAMLI benefits with such leave to reach 100% of their pay.

    • The draft regulations provide that only the actual amount of supplemental leave used may be deducted from the general purpose leave balance.
    • The draft regulations provide that employees may use sick leave prior to receiving FAMLI benefits without employer agreement.

If an employer provides “Alternative FAMLI Purpose Leave,” which is leave that is specifically limited to a FAMLI purpose (like paid parental leave or paid medical leave), the employer may require employees to use that concurrently.

  • In the webinar, the FAMLI Division gave the example that if an employer offers 6 weeks of fully paid parental leave, it can require the employee to take that leave first, and then when the employee applies for FAMLI, they would be eligible only for 6 weeks of FAMLI benefits rather than the full 12.
    • Under the draft regulations, AFPL is paid, not accrued, not subject to repayment upon employee departure, not available for general purposes, and available without requirement to exhaust another leave first.
    • The draft regulations also provide that an employer may deduct the full amount of leave taken under both AFPL and FAMLI from the AFPL balance, even if only partial AFPL benefits were used.

As for Short-Term and Long-Term Disability programs, the FAMLI Division asserted in its webinar that FAMLI is primary, with STD and LTD used only to get up to full wage-replacement. Because that is not how STD and LTD currently operate (with most plans only providing 2/3 of wages), the Division believes the STD and LTD market will evolve to achieve this result.

Equivalent Private Insurance Plans. Employers must apply and be approved by the FAMLI Division to use an EPIP. There are two options.

First, employers can purchase a previously-approved plan through a private insurance company. The FAMLI Division noted that insurance code requirements will apply to such plans, and there may be employer obligations under the insurance code that are separate from FAMLI.

Second, employers may implement a self-insured plan that meets or exceeds the requirements of the FAMLI law, as reviewed and approved by the FAMLI Division. Employers will still be required to submit quarterly wage and hour reports, and will also submit claims information on a quarterly basis that will be audited by the State. In addition, according to the webinar, they may be required to pay a fee for having such a plan (in addition to onerous bonding and other requirements as we previously discussed in our January 30, 2024 E-lert on the draft regulations).

What If the Employer Violates the Requirements? Employers are prohibited from discharging, demoting, discriminating against, or taking adverse action against an employee who has filed for or received benefits or leave under this law, asked about rights and responsibilities under this law, stated that they intend to file a claim/complaint/appeal, or testified/assisted in a proceeding.

 An employee can file a complaint and, within 90 days, the Secretary will conduct an investigation and attempt to resolve the issue through mediation. If there has been a violation and mediation is unsuccessful, the Secretary may issue an order directing the recovery of economic damages and seeking reinstatement (if applicable). The Secretary may also impose a civil penalty of up to $1000 for each employee for whom the employer is not in compliance. If the employer fails to comply with the order within 30 days, the Secretary or the employee may bring suit. A court may award treble damages, punitive damages, attorneys’ fees and costs, injunctive relief and any other relief it deems appropriate.

If an employer willfully makes a false statement or fails to report a material fact in connection with an employee’s claim for benefits, a civil penalty of up to $1000 per occurrence may be imposed.

If an employer fails to pay the contributions, the Secretary may assess the amount of the contributions owed, plus a penalty in the amount of two times the missing contributions. The Secretary can also order an audit.

If the employer has an EPIP, and the employee successfully appeals the denial of benefits, the Secretary can assess the FAMLI Division’s costs against the employer.

When Does This Law Take Effect? Contributions do not begin until July 1, 2025 and the benefits do not begin until July 1, 2026.