BY FIONA W. ONG, MARK J. SWERDLIN, AND DONALD WALDRON1

Introduction 

In 2022, the Maryland General Assembly passed the Time to Care Act of 2022 (SB 275/HB8), which set up a paid family and medical leave insurance program. The program will apply to all employers with employees in Maryland. It will provide 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. Originally slated for implementation in October of 2023, the Maryland General Assembly passed modifications in the 2023 session that delayed the required contribution and benefit payments to October 1, 2024, and January 1, 2026, respectively. The Maryland Department of Labor (MDOL) was directed to issue regulations to interpret and implement the Act by January 1, 2024. The MDOL has begun the regulatory process, and its actions provide some insight into what the MDOL might be thinking on a variety of topics of specific interest to employers.

The Regulatory Process

Normally, agencies can take well over a year to develop and issue regulations. Here, however, the MDOL’s newly created Division of Family and Medical Leave Insurance (FAMLI) has established an aggressive and rigorous process to meet the mandated deadline. This process consists of six phases, with each phase dealing with a different topic: Equivalent Private Insurance Plans (EPIP), Optional Self-Employment Plans (OSEP), Contributions, Benefits, Appeals/Enforcement, and Miscellaneous. 

Each phase begins with the MDOL’s FAMLI Division issuing a discussion document about the topic, soliciting input on particular topic issues. One week after the release of the discussion document, the MDOL holds a virtual public meeting where members of the public may provide their written or verbal input on the issues listed in the discussion document. Several weeks later, the FAMLI Division issues “draft” proposed regulations (which they have termed “Draft Outlines”), and stakeholders may provide written comments to the FAMLI Division. The FAMLI Division has stated that the feedback and input received during public meetings and in response to the draft rules will be considered in its development of the actual proposed regulations. The public will have another opportunity to offer comment on those proposed regulations, before the MDOL issues the final regulations. 

Of particular interest to employers, the MDOL has issued Draft Outlines for EPIPs and Claims thus far, as we summarize below. (They also issued one for self-employed individuals, which is not relevant to most employers). We note that these documents are preliminary and may drastically change after stakeholder comments are considered. Nonetheless, we can glean some indication of how the MDOL might interpret and apply the law. 

Equivalent Private Insurance Plans

A provision in the Act allows employers to forego participation in the State Plan by providing an Equivalent Private Insurance Plan (EPIP). While participation in the State Plan may be the easiest manner to satisfy the Act for some employers, it may not be for all employers. Many employers in Maryland already have their own paid leave programs, which may be quite generous. For such employers, they may be able to augment their existing programs to satisfy the Act and enable them to control the leave approval process, which would otherwise be managed by the State. Any EPIP will have to meet or exceed the standards of the State Plan regarding coverage, reasons for leave, duration and timing of leave (including intermittent leave), benefit amount and contribution amount. 

The FAMLI Division released its Draft EPIP Regulatory Outline on July 6, 2023, with written comments due by July 13. The following are some points of particular significance: 

• Coverage – Any EPIP must cover all employees eligible under the State Plan whose work is localized in Maryland. The FAMLI Division acknowledges the concerns of stakeholders about what exactly is an “employee” and what is “localized in Maryland.” These definitions are scheduled to be addressed in later phases of the process. These definitions will be particularly important to determine who qualifies for benefits. 

• Decisions, Approvals, and Reconsiderations – An EPIP program will have time constraints on approval, denial, and reconsideration of applications for benefits. An employer must let the employee know within five (5) business days if their application is incomplete and must render a decision of approval or denial within 10 business days. Each decision must be in writing, electronic or hard copy, and must include the amount of leave, reason for denial, and weekly benefit amount. Additionally, if the employee has worked less than 680 hours for the employer, the employer must provide a statement on how the employee may contact the MDOL for further information on their benefit amount. All denials must include the reason for denial, and all decisions must include an explanation of an employee’s right and process to reconsideration. 

• Forms and Notices – Written notices must meet all MDOL requirements. Any forms developed by the employer for use by employees and their healthcare providers must be submitted to the FAMLI Division for approval at least 30 days before use. 

• Employer Application Process for EPIP– All EPIPs must be approved by the Division before an employer is exempt from participation in the State Plan. EPIPs may be either through a commercially insured product or a self-insured plan. Commercially insured products must be approved by the MDOL. For self-insured plans, special requirements will be added such as proof of solvency, separate accounts, and recertifications. An approval for an EPIP application may take up to 60 days from the date of application to the Division.

• Proof of Solvency – Of particular concern, the FAMLI Division proposes that proof of solvency be established with a surety bond equal to one year of expected future benefits. The FAMLI Division proposed the following formula for calculating this amount: The product of the number of employees rounded up to the nearest 50 multiplied by 12 weeks multiplied by the actuarially determined event specific utilization rate multiplied by the maximum benefit amount. The FAMLI Division may review the bond annually to confirm the accuracy of the amount, and the employer may be required to adjust the bond amount accordingly. The FAMLI Division may also collect the bond if the employer’s EPIP approval is terminated, whether voluntarily or involuntarily. 

• Separate Account – The employer will have to create a separate account from other employee accounts for the collection and distribution of funds for the program.

• Voluntary Termination of EPIP – If an employer opts to go with an EPIP, it will be difficult to transition back to the State Plan. Any employer that is approved for an EPIP between October 1, 2024, and January 1, 2026, must remain with an EPIP until at least January 1, 2029. If the employer wishes to leave the EPIP and go with the State Plan, the employer must remit to the FAMLI Division any employee contributions in their possession and past due employer contributions back to October 1, 2024. An employer may not voluntarily terminate an EPIP unless it has been in its EPIP for at least one (1) year. If an employer chooses to terminate an EPIP, they must notify their employees in writing at least thirty (30) days before the effective date of termination. 

• Involuntary Termination of EPIP – The FAMLI Division will have broad discretion to terminate any EPIP. The FAMLI Division will have the power to investigate and/or terminate EPIPs for failure to pay benefits, failure to make timely determinations or reconsiderations, failure to not pay correct amounts, failure to maintain a surety bond, misuse of EPIP funds, failure to submit reports or any other failure of the EPIP to adhere to the standards set by the State Plan. Termination of an EPIP will be accompanied by a Notice of Termination and may result in civil penalties and/or collection of past-due mandatory contribution debt for a period of one year prior to the date of the Notice of Termination of EPIP approval. An employer may be able to request a higher-level review of the termination. 

• Temporary Provisions – In the event an EPIP application cannot be timely submitted, and the employer intends to opt into an EPIP, the employer may submit a Declaration of Intent (DOI) to the FAMLI Division. The DOI will allow the employer to be temporarily exempt from paying into the State Plan. While awaiting EPIP approval the employer will collect employee contributions and place them in an escrow account. The application for an EPIP must be made before September 1, 2025. If the application is denied or canceled, the employer will remit an equal amount as would have been collected if not for the DOI. 

Recordkeeping and Reporting – Any self-insured EPIP will require extensive recordkeeping to collect and maintain applications for benefits, payment dates and amounts, appeals and outcomes, premium contributions, and wage data. Documentation must be retained for at least 5 years. The employer must ensure that wage and hour data is submitted to the FAMLI Division on a quarterly basis, and other information, including extensive and detailed individual claims-level data, is submitted annually. 

Contributions

The FAMLI Division issued its Draft FAMLI Contributions Regulatory Outline on August 11, 2023, with written comments due by August 18. There is less of critical significance in this outline, with much of the information simply reiterating, or slightly expanding on the statutory language in a mostly logical way. However, the following may be of interest to employers:

• Employees are covered if they provide localized service in Maryland, and the FAMLI Division will model this regulation on the unemployment insurance localized service regulations. 

• If the employer fails to make the proper deduction of the employee’s portion of the premium, the employer will be considered to have elected to pay the employee’s contribution. The employer will not be able to recoup those payments from the employee. 

Claims

On August 11, 2023, the FAMLI Division issued their Discussion Document for Phase 5, Claims. The FAMLI Division outlined several areas of discussion for the August 18 Public Meeting that will have a significant impact on how narrow or expansive the Act becomes. Some of the more significant discussion points are: 

• Who is Covered – The Act currently defines a “covered employee” as one who worked at least 680 hours in the 12-month period immediately preceding the date the leave begins. The FAMLI Division is seeking input from stakeholders whether to define a “covered employee” as only an individual who worked 680 hours or more in a localized position in Maryland over the past twelve (12) months, or whether a “covered employee” could include a previous employee who is unemployed but met the 680 hours requirement in the past 12 months. The FAMLI Division may also require those 680 hours to be accumulated while paying into the program. Furthermore, there are employees who will be exempt due to their employer’s own EPIP and who then transfer to another employer that participates in the State Plan. The FAMLI Division might discount any hours worked while the employee was not paying into the program. 

• Family Relationships – The Act’s allowances for leave may be expansive if the FAMLI Division does not narrow their definitions of several terms in the Act. The Act allows leave for “kinship care” of an individual within the first year after birth. The FAMLI Division will have to decide whether to allow informal or formal kinship care for benefits. Formal kinship care is when social services places a child in the 24/7 care of a relative. Informal kinship care is when a relative provides care and custody of the child due to serious family hardship. It does not require full legal custody or 24/7 care. The parameters of the definition may drastically expand who can use leave under the Act. 

Additionally, the Act’s definition of “family member” includes a “domestic partner” of the covered individual. Id. The FAMLI Division is leaning towards modeling what is considered a “domestic partner” after definitions already found in Maryland Code. 

Further, the Act does not explain how to show proof of family membership. The FAMLI Division may require a signed certification, under the penalty of perjury, attesting to a familial relationship or it may require formal proof such as birth certificates or marriage licenses. 

Finally, the FAMLI Division may model what is considered a “serious health condition” after FMLA regulations. 

• Information Requirements – The FAMLI Division suggests that it might allow the use of FMLA forms in lieu of state forms where the leave qualifies for both. 

• Intermittent Leave – Leave benefits will be calculated by dividing the weekly benefit amount by the average number of hours worked per week by the employee for the employer during the qualifying period, and then multiplying by the number of hours used for intermittent leave. Intermittent leave cannot be taken in increments of less than 4 hours a day.

• Ability of Employers to Verify Claims by Employees – The unfortunate reality of programs like this is that some employees may look to take advantage of the program. Employers already struggle with employees who abuse FMLA and sick leave. With the incentive of paid leave, employers could face even more abuse of these programs. The Discussion Document for Phase 5 only suggests that the FAMLI Division may develop a process where employers or members of the public may submit a form to notify the FAMLI Division that an individual has submitted a fraudulent claim. Stakeholders with ideas on additional means of combating fraud should submit their ideas to the FAMLI Division. 

• Notice Requirements of Employees to Employers – Under the law, an employee may apply for FAMLI leave up to 60 days after the commencement of leave. If the employee can show “good cause,” applications may be approved for those beyond these notice requirements. The FAMLI Division is still determining what may constitute “good cause.” Likely, any showing of good cause may involve some degree of incapacitation, natural disaster, or prolonged departmental system outage. 

Looking Ahead

As the FAMLI Division goes through each phase of the Informal Regulatory Engagement Process, stakeholders should pay close attention to discussion documents, public meetings, and draft outlines. Participation in these preliminary discussions will dramatically shape how the FAMLI Division ultimately implements the Act. If you want to weigh in, now is the time to give your input to the FAMLI Division. 

1Fiona Ong and Mark Swerdlin are partners at Shawe Rosenthal LLP. Donald Waldron is a third-year law student at the University of Baltimore School of Law and law clerk at Shawe Rosenthal LLP.