Paid Family Medical Leave: The High Cost of the “Grand Bargain” for Employers - Pt. 4

Co-Authored by Amy Condon, Esq.

Part 4: Still unanswered PFML questions and issues

This last article in the four-part serious outlining the problems associated with Massachusetts’ Paid Family Medical Leave law (“PFML”) discusses several unsettled issues with the potential to cause significant problems for Massachusetts’ employers.

PFML Unresolved Issue 1: Can Employers Prorate Salaries for Exempt Employees on Intermittent (or Reduced Time) PFML?

Unlike the Federal Family Medical and Leave Act (“FMLA”), it is not clear whether the PFML law allows an employer to prorate an exempt employee’s salary when taking intermittent (or reduced time) PFML leave.[1] Section 9(c) of the PFML law states that “[a]ny negative change in the … pay or other terms or conditions of employment of an employee which occurs any time during a leave taken by an employee under this chapter … shall be presumed to be retaliation under this section.” M.G.L. ch. 175 § 9(c). In other words, so long as an employee works during a week that he/she also takes intermittent PMFL leave, the plain reading of the statute precludes prorating the employee’s salary for the missed time. Moreover, an employer may also need to pay a temporary employee to cover the days the previously full-time employee takes PFML leave – imposing additional costs on the Company.

This possible statutory flaw is exacerbated by the PFML regulations governing disbursements, which do not address whether the Department of Family and Medical Leave (the “Department”) can reduce an exempt employee’s weekly benefit amount for regular pay. Section 2.12(6) of the PFML regulations allow for a reduction in the weekly benefit amount for: (1) government payments such as unemployment or workers’ compensation; (2) federal or state temporary or permanent disability benefits; (3) permanent disability benefit policies offered by an employer; (4) an employer temporary disability policy that, combined with the PFML weekly benefit, exceeds the employee’s average weekly wage; or (5) an employer’s paid family or medical leave policy that, combined with the PFML weekly benefit, exceeds the employee’s average weekly wage. There is no available deduction for an employee receiving their full salary along with the prorated PFML weekly benefit.

To further complicate matters, it appears that the employer could also receive a reimbursement from the Department because the employee is receiving his/her full pay. Section 2.12(6) of the PFML regulations requires that the Department reimburse an employer who makes “payments to a covered individual during a period of family or medical leave that are equal to or greater than the amount required under this subsection … .” Thus, as drafted, the Department could pay double the weekly benefit amount for exempt employees on intermittent or reduced PFML – first to the employee and then the employer.

PFML Unresolved Issue 2: Can Employers Prorate a Bonus or Commission for Employees on Intermittent (or Reduced Time) PFML?

Similarly, it is unclear if employers can prorate bonuses and commissions of employees on intermittent PFML – which is permissible under FMLA in some states.[2] Consider, for example, a full-time sales employee who unilaterally decides to work a permanent three-day-per-week part-time schedule under the PMFL’s intermittent leave provision.[3] Like all full-time sales personnel, this employee receives a bonus based on sales goals in the employee’s designated region. Because the PFML statute prohibits any change in an employee’s pay during a leave, and does not specifically provide that an employer may prorate compensation, it is likely that the employer must pay the reduced schedule employee a full bonus/commission, so long as the employee is meeting performance goals during the time worked.[4] And, as noted above, the employer is likely to have additional costs in light of hiring a temporary employee to cover the days the previously full-time employee takes PFML leave, whose efforts helped the employee reach those goals.

PFML Unresolved Issue # 3: Does the Definition of “Benefit Year” Prohibit Consideration of Eligible PFML Leaves that Occur Before the Employee Actually Seeks PFML Leave?

While the PFML regulations infer that the Department will consider all employee leaves taken within the 12 months before a PMFL leave request as time spent on PFML (so long as the leave is PFML eligible), the statutory definition of a “Benefit Year” appears to prevent such consideration. As stated by the law, a “Benefit Year” is:

the period of 52 consecutive weeks beginning on the Sunday immediately preceding the first day that job-protected leave under this chapter commences for the covered individual.

See M.G.L. ch. 175M § 2.02 (emphasis added). The word “commences” connotes that a PMFL leave has begun, as opposed to a leave being PMFL eligible. Indeed, the PFML statute goes on to state that “[l]eave taken under this chapter shall run concurrently with” FMLA leave. Id. at §2(h)(2)(i) (emphasis added). Thus, should an employee only seek FMLA leave directly from the employer, the Department (or an employer with a private plan) may be prohibited from unilaterally designating the leave as a PFML leave.

Practically speaking, an employee can request a 12-week FMLA leave through the employer, then after the FMLA is exhausted, request an additional 26 weeks of PFML. Such a scenario provides an employee 38 weeks of leave within the timeframe used to calculate FMLA leave.

PFML Unresolved Issue #4: Can an Employer Stop Medical Benefits for an Employee’s Non-Payment of Premiums While on PFML?

Similar to FMLA regulations, if an employee fails to pay the employee portion of the health insurance contributions while on PFML, an employer should be able to terminate the employee’s health insurance until the employee pays what is due. Unfortunately, the plain language of the PFML law and regulations appear to prevent such employer action. Section 2.16 (1) of the regulations provides that for the duration of an employee’s PFML, the employer must continue to provide for, and contribute to, the employee’s health insurance benefits as if the employee was continuously working during the leave. The regulations further provide that the employee “shall” remit the employee portion of health insurance benefits “in accordance with the employer’s uniformly-applied policies or practices.”

Under the FMLA, if an employee’s health insurance payment is more than 30 days late, the employer may discontinue the employee’s health coverage provided that the employer does not have a policy allowing for a longer grace period, and provided the employer gives the employee notice of the cancellation at least 15 days before the health benefits will lapse.[5] Unlike the FMLA regulations, both the PFML law and regulations are silent as to whether an employer may discontinue health insurance benefits for an employee’s failure to pay the employee-share of the premiums. In light of the PFML’s strong anti-retaliation provision which provides that “any negative change in the seniority, status, employment benefits, pay or other terms or conditions of employment” which occurs during a PFML leave, or during the six-month period following the leave, will be presumed retaliation, the lack of guidance creates an untenable position for employers, and creates possible liability under the law should an employer unilaterally discontinue an employee’s health insurance coverage for the employee’s failure to pay the premium.

PFML Unresolved Issue #5: When do an Employer’s Private Plan Obligations to Former Employees End, and Can Employees Choose Between an Employer’s Private Plan and the State Benefits?

Should an employee resign, and begin a position with a new employer, the original employer with a private plan should no longer be responsible for providing benefits to the former employee, even if the employee files for benefits within 26 weeks of separating from employment. Regrettably, the PFML law and regulations are not clear on when an employer’s obligations end should an employee obtain other employment. Section 2.01 of the regulations states that a “covered individual” includes a former employee who has worked within Massachusetts, has met the financial eligibility test to qualify for unemployment benefits, and who has been separated for employment for not more than 26 weeks when starting PFML leave. Because the definition does not distinguish employers who have private plans, and those who do not, the language entitles a former employee to benefits under a former employer’s private plan even if the employee left for another job for a short period of time before again resigning.

Another unexpected conundrum presented to employers is that the PFML law and regulations do not expressly prohibit an employee from opting for the state benefits instead of their employer’s private plan. The regulations clearly state that, should an employer file and receive a private plan exemption, the employer is then relieved from the obligation to remit contributions to the state. The same limiting language is absent from the regulations for employees. Thus, while it is reasonable to assume that employees who work for an employer with a private plan will file claims and receive benefits through the private plan the employee apparently has the leeway to file for benefits from the state. This guidance gap leaves employers to manage a difficult situation where employees are using two different systems to file PFML claims and receive benefits.

Conclusion

These are but a few of the unanswered questions resulting from the PFML’s hurried and impulsive enactment and implementation. The PFML law and regulations have left employers to speculate about what is to come when administering leave, and what impact the law will have on their operations and finances. While all can agree that providing employees with both time off and wage replacement to care for themselves or loved ones is a large step in the right direction, those responsible for implementing this program must also ensure that employers are not left to manage the impossible with an unreasonable risk of legal liability. As we near PFML implementation in 2021, stay tuned for updates, and hopefully clarification, on some of the more challenging aspects of the PFML program.

[1] Reduction of an exempt employee’s salary is permitted on intermittent FMLA. 29 CFR § 825.206. See also https://webapps.dol.gov/elaws/whd/flsa/overtime/cr3.htm.

[2] For example, the Second Circuit earlier this year held that employers can prorate bonus payouts so long as a company considers FMLA absences and non-FMLA absences the same for goal-based bonus. Clemens v. Moody's Analytics, Inc., 770 Fed. Appx. 10 (2d Cir., May 3, 2019).

[3] Article II in this four-part series goes into this problematic factual scenario in more detail.

[4] There is language within the regulations that suggest that PMFL leave periods are not treated as credited work time for purposes of accruing benefits, but the language is too generic to address prorated bonus payments.

[5] See 29 CFR 825.212.