New York State Paid Family Leave Benefits Law

Authors: David Gallai, Rachel M. Kurth, Chana Ben-Zacharia* Publication | September 12, 2017
New York State Paid Family Leave Benefits Law

Last year, New York State passed the Paid Family Leave Benefits Law (PFLBL), which is meant to expand on the scope of coverage of the Family and Medical Leave Act (FMLA) by requiring New York State employers of any size to provide job protected paid leave to all eligible full- and part-time employees. Eligible New York State employees will be entitled to benefits under the PFLBL beginning on January 1, 2018, but employers will need to begin preparing for compliance sooner. The PFLBL is an extension of New York State's Disability Benefits Law, so it operates in a similar manner to the short-term disability insurance benefits required of New York State employers. This article discusses the key features of the PFLBL and next steps employers should take now to prepare their staff and systems to comply with the new law.

Paid Family Leave Benefits Law

What employers are covered? All New York State employers with one or more employees are covered under the PFLBL.

What New York State employees are covered? Full-time employees (regularly scheduled to work 20 or more hours per week) are eligible for paid leave after 26 consecutive weeks of work, regardless of how many hours they worked. Part-time employees (regularly scheduled to work less than 20 hours per week) are eligible for paid leave after the 175th day of work, regardless of how many hours they worked. Regulations issued under the PFLBL provide only for limited exclusions.

How much PFLBL leave is available, and what will employees be paid during PFLBL leave? The amount of leave for which employees are eligible, and the amount of pay for such leave, will be phased in as follows:

Year

Number of weeks of leave per year

Amount of benefit payment, as a % of the lesser of employee's average weekly wage and the NY State average weekly wage

2018

8

50%

2019

10

55%

2020

10

60%

2021 and after

12

67%

This schedule may be delayed by the New York State Superintendent of Financial Services (the "Superintendent"). The New York State Average Weekly Wage is currently $1,305.92 per week, and is determined annually by the Superintendent based on the average weekly wage paid in New York State during the previous calendar year.

For what reasons can employees take PFLBL leave? Employees can take PFLBL leave to:

  • care for a family member due to the family member's serious health condition;
  • bond with the employee's child during the first 12 months after the child's birth (or placement, for adopted children); and
  • attend to certain obligations arising because the spouse, child or parent of the employee is on active military duty.

Under the PFLBL, employees cannot take leave to care for their own serious health conditions. However, such leave may be covered under New York State's short-term disability or workers' compensation insurance laws.

How will PFLBL leave be financed?  PFLBL leave may be funded entirely by employee contributions, which may be deducted directly from employee pay. Employers may choose to cover the PFLBL contributions themselves instead of deducting contributions from employee pay. The maximum weekly employee contribution amount for coverage beginning January 1, 2018 is 0.126% of the lesser of the employee's weekly wage or the New York State average weekly wage, which is currently set at $1,305.92 (i.e., the maximum employee contribution is currently $1.65 per week). The maximum contribution amount may change annually. Employers have been permitted to collect weekly employee contributions via payroll deduction since July 1, 2017, but employees cannot begin to take PFLBL leave until January 1, 2018. Employers must allow employees who are not eligible for PFLBL leave (e.g., employees scheduled to work less than 26 weeks or 175 days in a year) to file a waiver to exempt themselves from making PFLBL contributions.

Is there PFLBL insurance and how much will it cost?  Employers must either carry PFLBL insurance or be self-insured by January 1, 2018. Every New York State insurance carrier that provides short-term disability insurance policies must also offer PFLBL coverage, so PFLBL coverage may be added to existing short-term disability insurance policies for an additional premium. The PFLBL insurance premiums will be set at the same rate as the employee contributions, meaning that, beginning January 1, 2018, the premium rate for PFLBL benefits will be 0.126% of the lesser of the employee's weekly wage or the New York State average weekly wage. If employers collect any surplus of employee contributions above the annual PFLBL insurance premium, the surplus must be promptly returned to the employees. For employers covered by an insurance carrier, employees may file their PFLBL claim directly with the insurance carrier, and the insurance carrier will make the final decision regarding leave approval.

What are the employer's obligations during and after the employee's PFLBL leave? Employees are permitted to continue their health insurance during PFLBL leave on the same terms and conditions as while actively employed, including continuing to pay any employee contributions to the cost of health insurance premiums. Employers generally must also reinstate employees to the same or comparable positions when employees return from PFLBL leave.

Do employees need to provide notice before taking PFLBL leave? Yes. If the leave is foreseeable (e.g., an expected birth), employees must give employers 30 days' notice before the leave begins. If the need for leave is unforeseeable, employees must give employers notice as soon as practicable under the circumstances. In order to request leave, employees can either submit a standard form that the Workers' Compensation Board will create (Form PFL-1), or they can use an alternative notice method that the employer institutes. Even though employers can implement their own notice procedure, employers must still accept the Form PFL-1.

Can employees use vacation time instead of PFLBL leave? Yes, if the employer permits. Employers may offer employees who have accrued but unused vacation or personal leave the option to choose whether to charge their paid time off as vacation or personal leave and receive their full salary or to not charge the time off and receive PFLBL benefits (which will be a lesser amount). However, employees cannot be required to take vacation time instead of, or concurrently with, PFLBL leave.

Are employers required to issue written guidance on the PFLBL? Yes. Employers must update their written policies, or adopt new policies, to include written guidance on the PFLBL, which must discuss employee rights under the PFLBL and information on how to file a claim for PFLBL leave. Employers must also post a notice regarding the PFLBL in plain view, similar to the posting required for workers' compensation and short-term disability insurance coverage; for employers who are fully insured for PFLBL, this notice will be provided by the insurance carrier.

Can PFLBL leave be taken intermittently? The PFLBL contemplates that leave may be taken in weekly or daily increments, but does not address whether leave may be taken in any other increments (such as hourly).

How will the PFLBL interact with the FMLA and other leave laws? Employees who qualify for both FMLA and PFLBL leave must use leave under both statutes concurrently (however, if an employer fails to properly designate the PFLBL leave as FMLA leave, then the employee will be deemed to have used PFLBL leave but not FMLA leave). If an employee is eligible for leave under both the FMLA and the PFLBL, but the employee declines to receive PFLBL payments (perhaps electing to use accrued paid time off instead), employers may still designate the leave as both FMLA and PFLBL leave. Employees may not stack leave under both laws to take more than 12 weeks of FMLA leave or receive paid leave in excess of the PFLBL phase-in schedule entitlement. Employees may not concurrently receive New York State short-term disability benefits and PFLBL benefits.

Are there any penalties for non-compliance? Employers that do not provide PFLBL leave will be subject to a fine of up to 0.5% of the employer's weekly payroll, plus an additional fine of up to $500. Employers that do not insure for PFLBL benefits will be treated as self-insurers and liable to pay for any PFLBL leave taken.

How does the PFLBL interact with union contracts? A collective bargaining agreement can provide rules that differ from the PFLBL, as long as those rules are approved by the Chair of the Workers' Compensation Board.

What are the New York State tax implications?  The New York State Department of Taxation and Finance has issued guidance on the tax implications of PFLBL contributions and benefits (which guidance was developed in consultation with the Internal Revenue Service). This guidance provides that PFLBL premiums will be deducted from employees' wages on an after-tax basis, and that employers should report employee contributions on Form W-2 (using Box 14 - State disability insurance taxes withheld). With respect to PFLBL benefits received by employees, the amount of the benefits will be taxable to the employee, and taxes will not automatically be withheld from benefit payments (though the guidance indicates that employees may be able to request voluntary tax withholding from the benefit payments).

Next steps for employers to take now

The PFLBL does not go into effect until January 1, 2018. This gives New York State employers the opportunity to use the remainder of 2017 to prepare their staff and systems to comply with the new law.

Update policies: Employers should update their paid time off, leave of absence, and/or family and medical leave policies, or adopt new policies, to comply with the PFLBL before January 1, 2018. These policies must include the employee's rights under the PFLBL and information on how to file a claim for leave.

Review CBAs: Employers should review any collective bargaining agreements covering their employees to assess what impact, if any, the PFLBL may have on those contractual obligations. Employers should also consider whether to include terms related to the PFLBL in CBAs to be negotiated in the future.

Obtain PFLBL insurance or apply to become self-insured: Employers must either be self-insured or covered by a PFLBL insurance carrier by January 1, 2018. As a practical matter, employers who are already insured for short-term disability insurance will likely want to add PFLBL insurance to the same policy with the same insurance carrier. If they have not already done so, employers who plan to be fully insured should contact their short-term disability insurance carriers to obtain a PFLBL rider. If an employer wants to become self-insured for PFLBL benefits, the employer must apply with the Chair of the Workers' Compensation Board on a form prescribed by the Board by September 30, 2017. The application must show the employer's ability to pay the PFLBL benefits and must include the most recent certified, independently audited financial statement and copy of Form 10-K, if applicable. If the Chair approves the application, then the employer must post a security deposit in an amount prescribed by the Chair and execute a contract stating that the employer will pay all PFLBL benefits.

Update time-tracking and payroll functions: Employers should update or implement a time tracking system that will allow them to track the amount of accrued and available PFLBL leave for each employee. The time-tracking system should also be able to track other leave, such as FMLA leave, separately, as accrual and availability for other types of leave may differ. Employers must also develop procedures or systems to track employee eligibility for PFLBL leave separately from tracking eligibility for other types of leave.

Begin payroll deductions if employee contributions are required: Employers should first decide if they will use employee contributions to finance PFLBL benefits or if employers will cover the insurance premiums themselves. If employers decide to use employee contributions to cover the premiums, they may begin deducting PFLBL contributions from employee pay as soon as practicable, even though employees cannot begin taking PFLBL leave until January 1, 2018. Those employers should prepare their in-house payroll functions or contact their outside payroll service providers to implement payroll deductions for PFLBL leave. Prior to deducting PFLBL contributions from employee pay, employers should notify employees of the PFLBL and the corresponding payroll deductions.

Comply with written waiver obligations for ineligible employees:  Employers that require employees to make PFLBL contributions must allow employees who are not eligible for PFLBL leave to file a written waiver of exemption from making PFLBL contributions. The PFLBL regulations require that the employer maintain a copy of any executed waiver agreement throughout the employee's employment with the employer.

Please contact us with any questions. We would be happy to assist your company with preparing for compliance with the PFLBL.


* Chana Ben-Zacharia, a summer associate at the Firm, assisted with the drafting of this legal update.

Contacts

David  Gallai

David Gallai

New York
Rachel M. Kurth

Rachel M. Kurth

New York