Family and Medical Leave Compliance Update – February 2020
Every month, Lincoln puts together the latest compliance news related to family and medical leave laws and regulations – helping you keep track of the important deadlines, compliance considerations and links to additional information.
Family and medical leave
Paid leave programs for state employees
Family and Medical Leave Act (FMLA)
January 16, 2020: The United States Department of Labor (DOL) updated and revised its joint employer regulations under the Fair Labor Standards Act (FLSA), with an effective date of March 16, 2020. Joint employment is important in determining employer coverage and employee eligibility under the FMLA. The analysis for determining joint employment under the FMLA is the same as under the FLSA. In the final rule, the DOL:
- Specifies that when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee
- Provides a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee
- Clarifies that an employee’s “economic dependence” on a potential joint employer does not determine whether it is a joint employer under the FLSA
- Specifies that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely; and provides several examples applying the Department’s guidance for determining FLSA joint employer status in a variety of different factual situations
January 22, 2020:The DOR released important information on how to report PFML Wages for the 4th Quarter 2019 Paid Family and Medical Leave Return. This applies to all employers participating in the Commonwealth's PFML program. This reporting requirement does not apply to employers that have received an exemption from both the family and medical leave programs or are considered excluded employment. Employers who have only received an exemption for one leave plan must still submit a return for the non-exempted plan. According to the DFML:
When reporting 2019 PFML contributions, please report fourth quarter wages only in both the PFM Eligible YTD Wages and Wages This Quarter boxes on the MassTaxConnect return. For the calculation to be correct, do not report actual 2019 year-to-date wages in the PFM Eligible YTD Wages box.
The reason for reporting only fourth quarter earnings in the PFM Eligible YTD Wages box is that contributions were not withheld for the first three quarters of 2019, so the Social Security annual wage cap should only be applied against fourth quarter wages.
This will only be necessary for this first PFML reporting, as contributions were not withheld on all 2019 wages. When submitting future returns, you will report the actual YTD wages in the appropriate box.
Important information about the timing of reporting: If you have both W-2 employees and independent contractors, but you outsource only W-2 payroll services to a third party:
If your company outsources only W-2 payroll services to a third party, and handles reporting for your independent contractors (whose payments are reported on 1099-MISC) internally, there are some rules to follow when filing returns. It’s very important that the reporting be done in a specific sequence for it to be processed correctly.
First, the payroll service, filing on behalf of your salaried employees (W-2s), must file before you file on behalf of your “covered contract workers” (1099-MISCs covered under the PFML Statute). Next, when you file on behalf of your covered contract workers, you must identify your filing as an amendment to the return already filed by your payroll service. Please follow this sequence to be certain the information is properly recorded.
January 31, 2020: Employers will need to complete their quarterly report and submit contributions for the calendar quarter (October - December) through MassTaxConnect by January 31, 2020.
Tax considerations: The tax treatment of PFML contributions for both state and federal purposes is governed by federal tax law. The Commonwealth has requested guidance from the Internal Revenue Service (IRS) on this question and others related to the tax implications of PFML contributions and benefits. Until IRS guidance is issued, individuals and businesses are urged to consult with their own tax advisors on these questions. Based on its own review of federal rules and following consultation with the Massachusetts Department of Revenue, the DFML anticipates that the IRS will conclude that employee contributions should be withheld from after-tax wages. A definitive rule for proper tax treatment of contributions will be available once IRS guidance is issued.
January 21, 2020: New Jersey passed a new law (AB 1449) that amends certain rules around Temporary Disability Insurance (TDI) claims involving organ or bone marrow donation. This law is effective May 20, 2020. Organ or bone marrow donation is already covered under TDI. However, the following changes were made by this bill:
- Job protection is provided to employees who take TDI for organ or bone marrow donation
- The one-week waiting period for TDI for organ or bone marrow donation has been removed
January 31, 2020: Vermont vetoed a bill (H. 107) that would have established the state’s PFML program for all employees. The bill would have provided employees with up to 12 weeks of PFML, funded by payroll taxes shared between employees and employers. In the Governor’s veto message, he objected to raising a $29 million payroll tax on all Vermont workers, and outlined concerns that the bill did not account for all costs to establish and administer a new state benefit and bureaucracy. The Governor is promoting a voluntary PFML program that is anchored on the state employee workforce, with voluntary coverage available for Vermont employers and individuals at a rate comparable to the state rate.
January 7, 2020: The Governor signed an executive order providing paid family leave for state employees, effective on March 1, 2020. The paid family leave program provides up to twelve workweeks of paid leave for Tennessee state executive branch personnel who meet eligibility requirements for Family Medical Leave Act (FMLA): 12 months of service in the last 7 years and 1,250 hours worked in the previous 12 months. Covered reasons for paid family leave mimic that of the FMLA: own serious health condition, birth of employee’s child, adoption, foster care, qualifying exigency, care for covered service member with an injury/illness, and care of spouse, child, or parent with a serious health condition. The state’s Department of Human Resources will draft policy guidance for the program’s implementation.
January 22, 2020: The Governor signed an executive order, called the “Families First Act,” providing paid parental leave for state employees, effective on July 1, 2020. The paid family leave program provides up to eight workweeks of paid leave for Idaho state executive branch personnel for the birth or adoption of a child. This does not apply to other state elected officials, independent commissions, legislature, and judiciary, but they were encouraged to adopt comparable policies. The state’s Division of Human Resources will draft policy guidance for the program’s implementation.
Effective January 1, 2020: Full-time employees of the House of Representatives and the Senate started receiving up to three workweeks of paid parental leave for the birth of the employee’s child, adoption or foster care.