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New York Paid Family Leave Law – A Comprehensive Breakdown for Employers

Beginning on January 1, 2018, New York employers will have to provide paid family leave to their employees. This post provides a comprehensive overview for employers to better understand their obligations under New York’s new Paid Family Leave law (PFL) and its accompanying regulations (which are available here and here), including implementing new policies and administering claims.

  1.      Please remind me, what does this law do again?

Beginning January 1, 2018, PFL will provide, when fully implemented, employees in the state of New York with up to 12 weeks of job-protected paid family leave to:

  • care for a family member (including a child, parent, grandparent, grandchild, spouse or domestic partner) with a serious health condition;
  • bond with the employee’s newborn or newly-placed adoptive or foster child during the first 12 months following birth or placement; or
  • address any qualifying exigency relating to a spouse, domestic partner, child or parent who is serving on active military duty.

PFL will be funded by employee contributions by way of payroll deductions, and, when fully implemented, an eligible employee will be entitled to income replacement of up to 2/3rds of the state average weekly salary.

PFL applies to employers with employees working in New York for 30 or more days in a calendar year. Employees who work from home in New York are covered even if the employer is located out of New York State.

The following employees are eligible for PFL:

  • employees whose regular employment schedule is 20 or more hours per week and have been employed by the employer for at least 26 consecutive weeks; and
  • employees whose regular employment schedule is less than 20 hours per week and have worked at least 175 days for the employer;

Employees who will not meet either of the above criteria must be allowed to opt out of PFL. The form for doing so is available here.

  1.      What are my obligations to secure PFL insurance overage?
  • You should obtain PFL Insurance as soon as possible or by a date that will ensure effective coverage as of January 1, 2018.
  • Assuming you already have disability leave insurance (DBL) (as required by New York State Law), you should check with your carrier because in most circumstances, the carrier will provide a rider to that policy for PFL coverage. In some cases, you will have to look to a new carrier if your current carrier does not offer this type of insurance.
  • In securing this coverage, you will provide the carrier with payroll information so that the carrier can provide an accurate premium quote.

a.  For example, if the employee makes over $67,907.84 (which is the current SAWW of $1,305.92 x 52 weeks), you must only report to your carrier up to that capped amount for purposes of allowing the carrier to provide an accurate quote for the premium.

b.  The PFL wage deduction rate of 0.126% will be applied to the total adjusted wages you provide to calculate the PFL premium amount. You must then pay these premiums to your carrier to receive PFL coverage.

  • PFL premiums need to be paid together with DBL premiums. DBL contracts are often paid annually in advance, which means you will pay for both benefits upfront and only recoup the PFL portion gradually through payroll deduction over the course of the year. It is up to the insurance carrier how to bill the premiums. In some cases they require quarterly payment in arrears, which helps from a cash flow basis.
  • As an alternative, you may self-insure and pay employees’ wage replacement out of your own pocket.
  • Employers exempt from providing PFL coverage may provide voluntary Paid Family Leave by completing the forms available here.
  1.       How is the law financed by employees?
  • You are not required to deduct from employees’ wages, but you are permitted to do so in order to fund the increased cost of maintaining PFL insurance for your employees.
  • The maximum employee contribution in 2018 is 0.126% of an employee’s wages, up to an annual maximum of $85.56.
  • You will keep the money you collect in deductions to offset the cost of increased premiums or out-of-pocket payment of claims if self-insured. As you may do with your STD deductions, you should consider pooling this money in a separate account although there is no specific requirement under the PFL that you do so.
  • You may not collect more than the allowable maximum contribution for PFL through payroll deductions. If you do, you must return the excess amount to the employee.
  1.       What are my obligations to inform employees of their PFL rights?

You must be proactive in making your employees aware of their right to take PFL. This includes:

  • Updating your handbook and displaying the PFL-120 Notice of Compliance (which you can obtain from your insurance carrier) in the workplace(s).
  • Employers who maintain employee handbooks must include information regarding PFL in their handbooks; employers who do not have handbooks must provide written guidance to employees concerning their right to take PFL and the process for doing so.
  • We also strongly suggest that employers notify employees in a separate communication about the new deductions to their paychecks.
  • Employers should also provide employees with a Statement of Rights for Paid Family Leave when you learn they are taking a leave that would qualify under this new law, which is similar to the requirement to provide such a notice when they may be eligible for disability benefits.
  1.      What do employees have to do to claim paid family leave?
  • If an employee has a foreseeable need for leave, s/he must give 30-days’ advance notice so you can plan for the absence. In notifying you, the employee should indicate whether s/he is seeking continuous or intermittent leave. You can require leave to be taken in full-day increments, but may permit smaller increments.
  • If the event giving rise to the need for leave was not foreseeable, the employee must notify you as quickly as possible. If the employee fails to do so without unusual circumstances justifying the failure, you can delay or partially deny the employee’s request.
  • To request paid family leave, an employee must complete and submit the applicable Paid Family Leave forms, which are available here, along with any necessary supporting documentation, as follows.
  • First, an employee must complete a Form PFL-1 (Request for Paid Family Leave) with any leave request.  In completing this form, the employee must sign and date Section A and then provide it to the employer to complete Section B.  The employer will then return the completed form to the employee within three (3) business days.
    • For an employee requesting leave to bond with a newborn, or a newly-adopted or-fostered child, the employee must complete a Form PFL-2 (Bonding Certification).
    • For an employee requesting leave to care for a family member with a serious health condition, the employee must first have the care recipient or his or her authorized representative complete a Form PFL-3 (Release of Personal Health Information) and provide that completed form to the care recipient’s health care provider. The employee must then have the care recipient’s health care provider complete a Form PFL-4 (Health Care Provider Certification For Care Of Family Member With Serious Health Condition) and return it to the employee.
    • For an employee requesting leave to assist family members due to another family member’s active military duty or impending active duty abroad, the employee must complete a Form PFL-5 (Military Qualifying Event).Second, depending on the purpose of the leave, the employee must complete additional forms.
  • Third, after completing the forms (along with any supporting documentation), the employee must submit them to the insurance carrier (except the Form PFL-3, which is only provided to the health care provider).  The insurance carrier will then accept or deny the employee’s claim for leave within eighteen (18) days.
  • The carrier or self-insured-employer must accept certification and proof of claim forms, but they may also accept certifications in another format that complies with the requirements of sections 380-4.2, 380-4.3, 380-4.4 of Part 380, Title 12 of the New York Codes, Rules and Regulations. Again, you will be able to work with carriers to understand the set of forms that will be utilized to administer claims properly.
  • It is incumbent on the employee to submit a completed request for PFL to the carrier. No benefits are required to be paid until the completed request for PFL, together with any necessary certifications or proof of claim documentation, has been submitted to the carrier.
  1.      How does the employee receive payment?
  • Within 18 days of filing a complete claim for benefits, the insurance carrier (or you, if you self-insure) must pay the employee or deny the claim or provide an explanation of the denial.

a.  Payment to the employee is made by the carrier and must be by check, direct deposit, or debit card.

b.  If the carrier gives employees a choice of method of payment, it must contact the employee upon receipt of a PFL claim and may require the employee to choose between direct deposit or debit card as the method of payment, unless the employee certifies the need for payment by check.

c.  If the employee fails to make a choice, the carrier can choose to pay by either debit card or check, but must allow the employee to later change from this default.

d.  If the carrier uses methods of payment other than check, it must provide employees with a written notice that identifies the following:

1.      A plain language description of all of the employee’s options for receiving payment of benefits;

2.     A statement that the carrier or self-insured employer may give the employee the choice between receiving benefits by debit card or direct deposit, but cannot prohibit the employee, upon the employee’s certification that it is necessary, from receiving benefits by check;

3.     A statement that the employee may not be charged any fees for services that are necessary for the employee to access his or her benefits in full; and

4.     If offering employees the option of receiving payment via debit card, a list of locations (current at the time the carrier or self-insured employer provides the list to the employee) where employees can access and withdraw wages at no charge to the employees within reasonable proximity to their place of residence or place of work.

  • The employee is entitled to receive a payment from the carrier (or self-insured employer) equal to the lesser of a certain % (i) of the employee’s average weekly salary; and (ii) the State Average Weekly Wage. Currently, the SAWW used for 2018 is $1,305.92, but it will be updated annually. The % used for calculating the benefit will gradually increase through 2021 as follows:
Year Paid Leave Weeks Max % of Employee Avg. Weekly Wage Cap % of Current SAWW
2018 8 50% 50% ($652.96)
2019 10 55% 55%
2020 10 60% 60%
2021 12 67% 67%
  • An employee’s average weekly wage is generally determined by adding his or her wages for the eight weeks prior to the start of the PFL, and dividing the total by eight. But consider consulting the technical definition in the statute for more information – Section 355.9(a).
  1.      When an employee goes out on PFL, what are my obligations?
    • You must allow the employee to continue their health insurance.
    • You may require that employees continue to pay their regular health insurance premium contributions.
    • You must protect and, upon return, reinstate the employee to her same job or to a comparable position subject to the usual exceptions (i.e. the job no longer exists, etc.). Comparable position means same or equivalent as set forth under FMLA.  If you do not reinstate the employee and the employee wants to file a complaint, he or she must first complete this form.

    8.        How are PFL benefits taxed?

Benefits paid to employees will be taxable non-wage income that must be included in federal gross income. Importantly, the tax on PFL benefits will not automatically be withheld from benefits, but an employee can request voluntary tax withholding. Premiums are deducted from an employee’s after tax wages. With regards to reporting, employers should report employee contributions on a Form W-2 using Box 14 – state disability insurance taxes withheld.  There is guidance on the tax issues available here.

  1.      How does PFL intersect with other types of leave?
    • If you already offer a paid family leave program that fulfills or exceeds the requirements under this law, employees will receive only those benefits provided under that program. The provisions of the PFL law are a foundation; but you may exceed the minimum benefit required by the law.
    • If your program does not meet or exceed the PFL law in all respects, you must ensure that the employee still receives the remaining benefits under the law. For example, if your paid parental leave policy provides for 6 weeks of paid family leave at 100% pay, such benefit would not suffice to totally replace benefits under PFL. In that scenario, the employee would be entitled to an additional 2 weeks (in 2018) at the state-mandated 2018 50% income replacement rate.
    • Since PFL only covers family and military leave, and not an employee’s own serious health condition, an employee could take FMLA or other leave intended for his or her own serious health condition in addition to the maximum leave provided under PFL. For example, an employee could take 12 weeks of FMLA for back surgery, but then an additional 8 weeks of PFL leave to bond with the child.
    • If the PFL leave request also qualifies for leave under FMLA, you may notify the employee and the leaves may run concurrently.  An employee may elect, but is not required, to substitute any accrued paid time off (i.e. vacation, PTO, parental leave) to receive full salary during the period of paid family leave.
    • If the employee so chooses to exercise his/her option to use accrued paid time off during PFL to receive his or her full rate of pay while on PFL, you can then submit a request to your insurance carrier for reimbursement of the PFL benefits. You would have to file a claim for reimbursement with your carrier prior to the carrier’s payment of family leave benefits to the employee in order to obtain that reimbursement.
    • At this time, the implementing regulations remain silent on the interplay between PFL and the New York City Earned Sick Time Act (“ESTA”), which provides up to 40 hours of sick leave, at full pay, to certain employees in New York City. However, in an “Assessment” released by the Workers’ Compensation Board, it confirmed that the employer could provide the employee with the option to use ESTA sick time where s/he qualifies under both laws (like it may for vacation, PTO, and parental leave), in order to receive full payment for the missed time. In that case, the ESTA and PFL time would run concurrently and the employee would receive 100% pay. and the employer would seek reimbursement.
    • The employee cannot qualify for short term disability and PFL at the same time, so if they were using PFL benefits, they would not be entitled to benefits under your short term disability plan or the state short term disability plan at the same time. However, the employee may qualify to take both sequentially. If that is the case, the combined total disability leave and PFL in any 52-week period may not exceed 26 weeks. In other words, the employee cannot get the full 26-week disability benefit plus the maximum PFL entitlement.

Mintz Levin’s Employment Labor & Benefits Practice stands ready to help you as you work to meet your obligations under this new law.

This post has been updated to account for additional guidance from the WCB.

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Alexander K. Song is a Mintz Associate whose practice focuses on all aspects of executive compensation, including drafting of equity and incentive compensation plans and award agreements. Alex also handles employment, change-in-control, and severance arrangements for executive officers.