July 2017 EMPLOYERS AND PAID LEAVE REQUIREMENTS: THE NEW YORK PAID LEAVE LAW While no federal law requires employers to grant paid leave to employees, a number of cities and states have enacted paid leave laws that apply to private employers. California, Rhode Island, Washington, New Jersey, the District of Columbia and now, New York, have adopted laws providing paid family leave for employees to care for sick or disabled family members, or to care for a new child. AUTHOR LISA CARLSON, JD Senior ERISA Attorney Lockton Compliance Services Back in 2016, New York passed a law expanding its nonoccupational disability law (NYDBL) to include paid family leave (NYPFL), which will take effect January 1, 2018. The cost of the new program is intended to be paid for by employee contributions. Notably, employers may begin to deduct employee contributions as of July 1, 2017, even though employees are not eligible to receive benefits until January 1, 2018. New York employers need to address these requirements fairly quickly if they have not yet done so. Employers that are out of compliance on January 1, 2018 may be fined by the state. Summary Beginning January 1, 2018, New York employers subject to the state workers compensation requirements must offer eligible employees paid family leave. Initially, workers will be entitled to no more than eight weeks of paid leave within a 52-week period, with a maximum weekly benefit of $648. However, leave entitlement increases over the following three years. By January 1, 2021, workers will be eligible to take up to 12 weeks of paid leave within a 52-week period, with a projected maximum weekly benefit of $864. Employees who meet eligibility requirements with their current employer as of January 1, 2018, will immediately be entitled to benefit from paid leave. NYFPL is funded via employee payroll deductions, which can begin as early as July 2017 but not later than January 1, 2018. L O C K T O N C O M P A N I E S
The Details In response to comments, modified regulations were issued in May. The following discussion includes changes that were adopted under those updated regulations. Funding Requirement First things first; eligible employees pay for NYPFL. The amount that must be deducted from eligible employees pay beginning on July 1, 2017 (or any time up to January 1, 2018), was just announced on June 1, 2017. The maximum employee contribution is 0.126 percent of an employee s weekly wage (up to and not to exceed the statewide average weekly wage). This translates to a maximum weekly contribution of $1.65 for 2018 coverage. By September 1 each year, a new maximum employee contribution rate will be established for each subsequent calendar year. Lockton Comment: For employees who commence payroll deduction but terminate employment prior to January 1, 2018 (the effective date for leave entailment), there is no current requirement that the employer refund any employee contributions for NYPFL withheld prior to that date. Guidance on this matter may be forthcoming. Employers will need to plan for appropriate employee payroll deductions as early as July 1, 2017. Some employers disability carriers may require that deductions begin that early, and it may be prudent to begin early deductions to fund selfinsured benefits. Lockton Comment: An employer could choose to pay the premium on behalf of its employees. Doing so, however, would make the NYDBL benefits taxable. One work-around would be to tax the employee on the employer s premium payment (impute income). 2
Employer Options for Providing NYPFL Coverage As mentioned above, similar to NYDBL coverage, an employer can self-fund or fully insure NYPFL benefits. Remember, self-funding generally requires approval from the state. Carriers offering NYDBL coverage are required to offer NYPFL benefits in addition to NYDBL coverage. It is unclear, however, whether an insurer is required to issue coverage for NYPFL benefits alone. Lockton Comment: Employer actions may be dependent on how the organization currently addresses NYDBL requirements: Employers Subject to the NYPFL The NYPFL applies to any private employer subject to the New York Workers Compensation Law, regardless of size. Public employers may opt into NYPFL but are not automatically subject to the law. For employers purchasing insurance for NYDBL (i.e., through the state or a private insurer), paid family leave will automatically be included in those disability policies, and the carrier will notify the employer of increased premium responsibilities. If the employer self-funds NYDBL, it may self-fund the NYPFL, as well, or purchase an insured NYPFL policy. Lockton Comment: Although this new benefit is not funded by the employer but rather directly by employees via payroll deductions, the new requirement is not without cost to employers. The NYPFL will add administrative cost to New York employers in relation to implementing, communicating and maintaining the program, and will likely create additional costs with the loss of worker time while employees are out on paid leave. If an employer self-funds NYPFL, it will be at risk if the employee contributions result in a shortfall due to higher than expected utilization of paid leave. Fully Insured NYDBL: Most employers will find it simplest to add NYPFL to their insured NYDBL policy for ease of administration and continued compliance. All insurance carriers offering NYDBL will have an NYPFL option. Employers Currently Self-Funding NYDBL with a Carrier TPA: For employers currently self-funding NYDBL and using a carrier TPA, some may find it useful to request their current carrier TPA to fully insure NYPFL so the employer has time to assess potential liability and identify administrative issues. While it is likely that the carrier TPA administering NYDBL would offer NYPFL to its self-funded clients, it is not 100 percent guaranteed. Self-Funded and Self-Administered: Some employers elect to both self-fund and self-administer NYDBL. Given some of the more onerous administrative requirements regarding NYPFL coverage and the unknown liability (e.g., Will the level of employee contributions deducted cover all benefits?), some self-administered employers may consider options such as fully insuring NYPFL, at least for the first few years, until the process and liability is better understood. However, it may be more difficult to find a carrier willing to insure NYPFL alone, particularly if the carrier is not acting as the employer s NYDBL administrator. 3
New York State Employees Entitled to Paid Family Leave Employees who work in New York and qualify for NYDBL coverage become entitled to paid family leave if they: Work 20 or more hours per week after 26 consecutive weeks of employment, regardless of the number of days worked per week. Work fewer than 20 hours per week after working 175 days. The benefit is calculated on the basis of a daily maximum. The maximum number of days of daily leave any employee can receive is based on the number of days per week the employee works. This is because the daily benefit amount is calculated by dividing the employee s average weekly wage by the average number of days worked as offered in the example to the right included in the updated regulations: An employee who works four days per week and has an average weekly wage of $800 per week will have a weekly benefit in 2018 of $400 per week. His or her daily benefit rate will be $100 per day (400/4). Optional Employee Waiver Employees are not permitted to waive NYPFL benefits except in one very narrow instance and only if allowed by the employer. Specifically, a waiver can be accepted when an employer and employee know, at the date of hire, that the employee s schedule will not allow him or her to become eligible for NYPFL benefits in a reasonable amount of time. However, once the employer becomes aware of a change in the employee s schedule that would result in the employee becoming eligible for NYPFL, the employer is required to notify the employee and begin required contribution deductions, including any retroactive deductions necessary to prevent the employer from paying for the coverage. Lockton Comment: A model waiver form is expected to be created for employers to use in these circumstances. The waiver rule is optional and seems to be more trouble than it is worth for most employers. If permitted, an employer would be required to closely monitor changes in schedules to assure that newly required contributions were properly assessed. 4
Leave Available Under the NYPFL Eligible employees can take NYPFL for the following reasons: To care for a family member (spouse, domestic partner, child, parent, parentin-law, grandparent or grandchild) with a serious health condition. To bond with their newborn or an adopted or foster child newly placed with the employee. To address certain exigencies that may arise when a family member (spouse, child, domestic partner or parent) is called to active military service. Lockton Comment: Note: NYPFL does not offer paid time for an employee in relation to a workers compensation leave or on account of the employee s own serious health condition. However, employees may be entitled to payment for leave due to their own serious medical condition under the NYDBL program and may be entitled to leave under FMLA. Amount of Leave and Benefit Payable The amount of leave available and benefit payable earned are phased in during a four-year period beginning January 1, 2018, as follows: Calendar Year Weeks of Leave Percentage of Pay* Estimated Maximum Pay 2018 8 50% $648 2019 10 55% $710 2020 10 60% $774 2021 and After 12 67% $864 *Percentages are limited to a maximum of the New York state average weekly wage; also note that tips are included in the definition of wages for determining NYPFL benefits. 5
Intermittent Leave Leave may be taken on an intermittent daily basis, but the number of days that can be taken is limited to 60 for employees working five days per week and is prorated for employees working fewer than five days per week based on their regular employment schedule. Lockton Comment: An important difference in intermittent leave between FMLA and NYPFL is that under the NYPFL, intermittent leave must be taken in daily increments (as opposed to smaller increments of time available under FMLA). Employee Notification Requirements An employee must notify an employer of the need for paid family leave 30 days prior if the leave is foreseeable. In addition, an employee is required to notify an employer before each day or each period of consecutive days that intermittent paid family leave is taken, even for the same purpose. New York expects to issue a specific form to be used by employees to request paid family leave (titled the PFL-1) that must be accepted by employers (although employers may also designate other appropriate means to request leave). Coordination With FMLA If the reason for leave is designated by an employer as FMLA and the employee is also entitled to NYPFL, the leave under each runs concurrently. The employee cannot stack FMLA and NYPFL leave during the same period resulting from the same condition (e.g., bonding with a newborn) to extend time on leave. If the employee declines to apply for payment under the NYPFL, the employer may count that period that he/she would otherwise have been eligible under NYPFL against the employee s maximum leave in a 52-week period. Generally, an employer cannot require (but may permit) an employee to use other paid time off instead of or during NYPFL, but updated regulations clarify that the use of paid time off accruals during family leave by employees under FMLA is governed by FMLA rules and would be permissible while the employee was concurrently taking FMLA. The combination of NYDBL and NYPFL coverage cannot exceed 26 weeks in a 52-week period. Lockton Comment: It will be important for employers to properly account for and provide notice to employees who are eligible for FMLA and who are also concurrently taking leave under the NYPFL. Employer Health Coverage Employers must continue to offer health coverage during paid family leave under rules similar to those provided to employees on FMLA. 6
Collectively Bargained Benefits The updated regulations clarify the rule proposed that, subject to prior approval, collective bargaining agreements (CBAs) for union workers could include rules related to paid family leave that differ from the NYPFL regulations. Under the clarification, rules for paid family leave in a CBA may include, but are not limited to the following: Employees are permitted to collectively bargain eligibility for paid family leave benefits through actual time worked at any employer covered by the CBA, but the requirement for receiving paid benefits must be at least as generous as is available under the NYPFL. If the CBA is silent, union workers are entitled to coverage under the NYPFL. The union may be responsible for all records for time and payroll deductions related to the administration of the paid family leave under the CBA and/or the NYPFL. Employer Notice Requirements Employers with employee handbooks must update them to provide written guidance on the NYPFL and instructions on how to receive benefits. If the employer does not maintain an employee handbook, a separate written notice must be provided. Employers must also post a written notice at the worksite. A form worksite poster is expected to be provided, but it has not yet been issued. Employer Penalties If an employer fails to provide paid family leave to eligible employees, the organization may be subject to a fine of up to 0.5 percent of the weekly payroll. In addition, employers may be fined an additional penalty of no more than $500. Employers failing to collect employee contributions will be liable for payments of benefits and may not collect employee contributions for that period. 7
Employer Action Steps 1. Determine if you are subject to the NYPFL requirements (you are likely to be if you have employees in New York). 2. Determine when to start deducting employee premiums. Some carriers may expect payment earlier than 2018. In addition, earlier deductions may help provide more stability in the fund to pay benefits. Remember, you can rarely collect retroactive premiums. There is very little guidance offered by the regulators with regard to the timing elected for taking deductions. 3. Contact your carrier if you haven t been told yet whether it is offering NYPFL coverage as well as NYDBL. Carriers are responsible for notifying employers by July 1 whether such coverage will be offered. Be aware, NYPFL is community rated. 4. Review self-funding practices and procedures. Administration may be quite different from NYDBL if you decide to self-fund NYPFL. 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 Compliance Services Practice are not privileged under the attorney-client privilege. 2017 Lockton, Inc. All rights reserved. kc:32350