On April 9, 2022, the Maryland General Assembly passed the Maryland Time to Care Act of 2022 (MTCA) over the Governor’s veto. The MTCA greatly expands the leave rights of Maryland employees while affording them temporary paid leave benefits even when not otherwise eligible for job-protected leave under the federal Family Medical Leave Act (FMLA). Funded with employer and employee payroll tax contributions set to begin Oct. 1, 2023, paid leave benefits will start Jan. 1, 2025. Private plans are an option as well.
The MTCA will apply to all employers with a single employee in the state. Only employers with 15 or more employees are required to contribute, as are employees. Self-employed persons may opt in. Generally, eligible employees may receive up to 12 weeks of paid leave in a 12-month period. This leave entitlement is expanded to 24 weeks for a parent if leave is needed to bond with a new child and for the employee’s own serious health condition during the same benefit year. The maximum weekly pay benefit is $1,000.
While rules will be developed in the coming months (which are expected to be consistent with the FMLA), the available key details are discussed below as well as next steps to help you prepare.
Background
Employees eligible for paid leave benefits
An employee is eligible for paid leave under the MTCA after working at least 680 hours (at a single or multiple employers in Maryland) over the 12-month period immediately preceding the date on which leave is to begin. Salaried, hourly, full-time and part-time workers meeting these threshold requirements are covered.
Covered employers and contributions
An employer is defined as a person or governmental entity (the State or a county) which employs at least one individual in the state. For those employers with a single employee working remotely in Maryland, the MTCA applies. An employer does not include an individual who is the sole owner of a sole proprietorship, LLC, C corporation or S corporation and is the only individual employed. Self-employed individuals may elect to participate.
Only employers with 15 or more employees (presumably company-wide), all employees and self-employed individuals participating in the program are required to contribute to the fund. Contributions begin Oct. 1, 2023.
The employers will be responsible for making payroll deductions from employee wages. An employer providing employees with a private plan is exempt from making payroll deductions and contributing to the fund. See below for additional information on private plan options.
The MTCA generally provides 12 weeks of paid leave but can provide up to 24 weeks of paid leave for parents
Beginning Jan. 1, 2025, paid leave benefits will be available to an employee taking leave from employment for the following reasons:
To care for a child during the first year after the child’s birth or after the placement of the child through foster care, kinship care, or adoption
To care for a family member with a serious health condition
Because of the employee’s own serious health condition
To care for a service member who is the employee’s next of kin
Because the employee has a qualifying exigency arising out of the deployment of a service member who is the employee’s family member
The MTCA definition of family member is broad and affords employees coverage in more circumstances than under the FMLA. A family member is defined as:
The employee’s biological child, adopted child, foster child or stepchild
A child for whom the employee has legal or physical custody or guardianship
A child for whom the employee stands in loco parentis, regardless of the child’s age
A biological parent, adoptive parent, foster parent, or stepparent of the employee or of the employee’s spouse
The legal guardian of the employee or the ward of the employee or of the employee’s spouse
An individual who acted as a parent or stood in loco parentis to the employee or the employee’s spouse when the employee or the employee’s spouse was a minor
The employee’s spouse
The employee’s biological grandparent, adopted grandparent, foster grandparent, or step-grandparent
The employee’s biological grandchild, adopted grandchild, foster grandchild, or step-grandchild
The employee’s biological sibling, adopted sibling, foster sibling, or stepsibling
If an employee takes leave and receives benefits under the MTCA, the leave runs concurrently with the FMLA to the extent it would also apply.
Generally, the MTCA provides that an employee can take family and medical leave in any combination not to exceed 12 weeks of paid leave in an application year. This leave entitlement may extend up to 24 weeks when a parent takes leave to care for a new child and leave is needed for the employee’s own serious health condition within the same application year.
Lockton comment: The Maryland law provides that an employee has up to 24 weeks of paid leave in an application year in two situations. First, the employee may take 12 weeks of leave to care for a new child and subsequently, during the same application year, receive an additional 12 weeks for the employee’s own serious health condition. Similarly, the employee may take 12 weeks for the employee’s own serious health condition and later that application year be eligible for 12 weeks of paid leave to care for a new child. Under the MTCA, all 24 weeks of leave would be job protected. Leave under the FMLA, however, would be exhausted once 12 weeks of leave is taken.
The MTCA affords employees broader use of intermittent leave than under the FMLA
The MTCA provides for intermittent leave for all qualifying conditions, unlike the FMLA which does not allow for intermittent FMLA following the birth or placement of a child absent the employer’s agreement. Consistent with the FMLA, the MTCA requires an employee to make a reasonable effort to schedule the intermittent leave so that it does not unduly disrupt the operations of the employer and an employee must provide the employer with reasonable and practicable notice of the reason for which the intermittent leave is necessary. Under the MTCA, an employee may not take intermittent leave in an increment of less than four hours.
Maryland employees must notify employers of the need for leave consistent with the FMLA
Under the MTCA, if an employee’s need for leave is foreseeable, the employer may require the employee to provide at least 30 days’ written notice before the leave begins. If the need is not foreseeable, the employee shall provide notice as soon as practicable and comply with the employer’s notice or procedural requirements for requesting or reporting other leave if those requirements do not interfere with the employee’s ability to use MTCA leave.
The MTCA affords employees taking paid leave greater job protection than the FMLA
It comes as no surprise that the MTCA protects employees from adverse actions (e.g., discharge, demotion or other discrimination) because the employee has:
Filed for, applied for, or received benefits or taken family or medical leave for which benefits may be paid under the MTCA
Inquired about the rights and responsibilities under the MTCA
Communicated to the person an intent to file a claim, a complaint, or an appeal under the MTCA
Testified or intends to testify or otherwise has assisted in proceeding under the MTCA
The MTCA expands job protection afforded employees under the FMLA. While an employee is on a paid leave covered by the MTCA, an employer may only terminate the employee “for cause.” We anticipate the forthcoming regulations will offer more information on this standard.
Under the MTCA, an employee may be denied job restoration if the denial is necessary to prevent “substantial and grievous economic injury” to the operations of the employer and the employer notifies the employee of the intent to deny restoration at the time the employer determines the economic injury would occur. The MTCA does not define this standard or specify what evidence the employer would need to provide to substantiate denying an employee job restoration.
Employer-provided leave must be exhausted before paid leave benefits
The MTCA requires that an employee exhaust all employer-provided leave that is not required to be provided under law before receiving paid leave benefits. The use of this employer-provided leave does not reduce any weeks of leave for which benefits may be paid. The current MTCA FAQs (opens a new window) confirm that paid sick leave available under the Maryland Healthy Working Families Act (MHWFA) is not used for the same purposes as paid leave under the MTCA. Further, since it is a leave required to be provided by law, it would not be exhausted. At this point, it is unclear whether PTO provided to satisfy an employer’s obligations under the MHWFA would fall into the category of an employer-provided leave that would need to be exhausted before MTCA paid leave benefits are received. We anticipate the regulations will offer more guidance on how this applies.
The amount of paid leave and continued fringe benefits
The MTCA benefit structure is similar to many state-paid family and medical leave laws in that it is “progressive” so that lower-income employees will receive a higher proportion of weekly wages. The weekly benefit amount depends on the employee’s average weekly wage (AWW) - the total wages earned by the employee over the last 680 hours worked divided by the number of weeks worked - when compared to the state AWW. An employee receiving unemployment or workers’ compensation benefits is not eligible for paid family benefits.
The formulas are as follows:
Employee’s average weekly wage is ≤ 65% of the state’s AWW: Benefit amount is 90% of the employee’s AWW
Employee's average weekly wage is > 65% of the state’s AWW: Benefit amount is 90% of the employee’s AWW up to 65% of the state AWW + 50% of the employee’s AWW > 65% of the AWW
The projected benefits beginning Jan. 1, 2025, are:
Minimum weekly benefit: $50
Maximum weekly benefit: $1,000
The Maryland Secretary of Labor will determine and announce increases by Sept. 1 of each year starting Sept. 1, 2025.
If an employee is receiving benefits or taking leave for which benefits may be paid, the employer must continue any employment health benefits in the same manner as required under the FMLA for the time period that the covered employee is absent from work or receiving benefits.
Lockton comment: Under the MTCA, it appears that an employer may be required to continue benefits for up to 24 weeks in those limited circumstances when an employee may take leave for the employee’s own serious health condition as well as to care for a new child since both periods would be covered by paid benefits.
Funding the MTCA through payroll contributions
The MTCA will establish a Family and Medical Leave Insurance Program funded by employers and employees. By June 1, 2023, the Secretary of Labor will set the total rate of contribution to be paid by employees and the rate for employers with 15 or more employees. This rate will apply to all wages up to and including the Social Security wage base. The percentages set may not vary between employees or employers. Contributions will begin at the specified rate starting Oct. 1, 2023, through Dec. 31, 2025.
Starting Dec. 1, 2025, and every two years after, the State will conduct a cost analysis and study and make recommendations regarding the appropriate total rate of contribution and the appropriate cost-sharing formula between employers and employees to fund the program. By June 1, 2025, and every two years after, the total rate of contribution and percentage of the total rate of contribution to be paid by employees and employers with 15 or more employees will be set and will begin immediately following Jan. 1.
It is the “intent of the General Assembly” that the State pay the required contributions of certain employers and low-earning employees
The MTCA calls for (but does not expressly require) the State to pay the required contribution to the fund for certain employers. These are identified as 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 a combination of those disorders or developmental disabilities.
In addition, the MTCA calls for the State to pay the contributions of a covered employee earning less than $15.00 per hour.
Lockton comment: With regard to low-wage earners, the statewide minimum wage will be $15.00 by July 1, 2026. Effective January 1, 2025, the Maryland minimum wage for large employers (those with 15 or more employees) will be raised to $15.00 per hour and effective July 1, 2026, the Maryland minimum wage increases to $15.00 for small employers.
The MTCA claims process
The Maryland Secretary of Labor is tasked with adopting regulations to establish claim procedures and forms. While more details are to come, here is what we know so far:
The Maryland Department of Labor will notify an employer within five business days after an employee files a claim
The State will approve or deny the claim and notify the employee and the employer of the determination within 10 business days after the claim is filed
An employee’s first payment of benefits will be received within five business days of claim approval with subsequent payments made every two weeks through the benefit period
Collective bargaining agreements
The MCTA does not diminish an employer’s obligation to comply with a collective bargaining agreement or an employer policy that allows an employee to take leave for a longer period of time than the employee would be able to receive benefits under the MCTA.
Additional obligations on employers
An employer is required to provide written notice to employees of their rights and duties under the MTCA at the time of hire and annually thereafter. Once an employee requests leave or when an employer knows that an employee’s leave may be covered by the MTCA, the employer has five business days to provide the employee with a notice that includes:
The right of an employee to receive program benefits
The procedure for filing a claim for benefits
An employee’s responsibilities with respect to providing notification prior to the commencement of leave and any penalties for failing to do so
The right of an employee to file a complaint for alleged violations of the MTCA
The right of an employee to job protection
A description of the prohibited acts, penalties and complaint procedures
The State will develop standard notices for an employer’s use. Check timetocare.net (opens a new window) for updates on available resources.
Willful acts by employers and employees in connection with the MTCA have consequences
An employee who willfully makes a false statement or misrepresentation regarding a material fact or willfully fails to report a material fact to obtain MTCA benefits is disqualified from receiving benefits for one year. If an employer willfully makes or causes to be made a false statement or willfully fails to report a material fact regarding a claim for benefits by an employee, the employer is subject to a civil penalty of up to $1,000 for each occurrence.
An employer may not willfully fail or refuse to pay contributions to the fund or take deductions from the wages of an employee to pay any part of the employer contributions.
The State may seek repayment of benefits from an individual who received benefits erroneously or as a result of willful misrepresentation by the employee or in the event a claim for benefits is rejected after the benefits were paid.
If an employer fails to pay the contributions due, the secretary may assess the amount of contributions and interest due; make an additional assessment in an amount not to exceed two times the contributions withheld as a penalty for failure to pay the contributions; and order an audit of the employer for the immediately following fiscal year to investigate and determine compliance with the MTCA.
Private plans
While many details are not yet known, it is clear that the MTCA affords employers the option of a private plan. What we know at this point is that an employer may satisfy the MTCA’s requirements through a private employer plan consisting of employer-provided benefits, insurance or a combination of both. The private plan must be offered to all employees and must meet or exceed the rights, protections and benefits of the MTCA.
A process will be established for employers to file a private plan with the Maryland Department of Labor for approval. An employer that provides covered employees with a private plan and the covered employees are exempt from contributions to the state fund.
Lockton comment: At this time, it is unknown whether cost sharing is available under Maryland’s private plan option. Many states permit employers to deduct employee contributions in an amount not to exceed the amount an employee would otherwise be required to contribute to the state paid leave fund.
Steps to take now
While regulations will likely not be available until 2023, employers can begin preparing by determining whether current paid leave policies and benefits will meet or exceed the MTCA requirements and potentially qualify as a private plan. If your current policy does not meet the MTCA standards, decide whether to make modifications to the current policy so you can seek the private plan exemption or plan to make the required payroll contributions.
Multistate employers should keep in mind that if private plan options are not utilized for mandated state paid family and medical leave programs, 2023 will be a busy compliance year with respect to payroll withholdings. In addition to Maryland’s Oct. 1, 2023, effective date for payroll withholdings, Colorado and Oregon are scheduled to have payroll withholdings begin Jan. 1, 2023.
Keeping up with these requirements is no easy task but we are here to keep you informed and updated on your obligations. If you have further questions, please reach out to your Lockton account team.
Download alert (opens a new window)Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's HR Compliance Consulting group are not privileged under the attorney-client privilege.
