United States: Is Your Business Ready For The New York State Paid Family Leave Law?

On July 19, 2017, the New York Workers' Compensation Board (Board) adopted final regulations for implementation of the New York Paid Family Leave Law (NYPFLL), one of the most comprehensive family leave programs in the nation. We wrote in detail about the NYPFLL in a previous Alert

Starting January 1, 2018, paid family leave (PFL) becomes a mandatory benefit throughout New York State, providing job-protected paid time off to employees to (1) bond with a new child, (2) care for a family member with a serious health condition, or (3) address family matters due to a qualifying military exigency. All private employers (including those located outside New York State) with one or more employees in New York State are required to comply with the NYPFLL.

Below are some key highlights about this new mandatory benefit, as clarified by the Board's final regulations, and in its assessment of revisions made to the final regulations in light of public comment received (Assessment). Note that the regulations and Assessment leave many unanswered questions, and the Board has indicated it will be providing further guidance and examples "as they arise" to the frequently asked questions section of the official Paid Family Leave Law website.

How Do Employers Provide PFL Benefits?

PFL benefits are administered through New York State's statutory disability (DBL) insurance program and generally are intended to be implemented as a rider to an employer's existing statutory DBL policy, unless an employer elects to self-insure or is exempt from the law's coverage. Employers that currently receive DBL coverage through the State Insurance Fund or a private carrier must obtain PFL coverage through the same carrier (and thus waive the option to self-insure for PFL). Carriers had until July 31, 2017, to decide whether to offer PFL insurance riders or withdraw from offering DBL coverage as well as the PFL rider. As a result of some carriers withdrawing from the market, some employers may be forced to find new carriers for coverage within a short period of time. 

Employers that currently self-insure DBL benefits may also self-insure PFL, provided that they file a timely application with the chair of the Board with a statement of financial condition and satisfy other requirements including, but not limited to, submitting and maintaining an adequate security deposit and the submission of an Agreement and Undertaking for Paying Benefits as a Self-Insurer. An employer may not apply to self-insure for PFL benefits only.

Employee Eligibility for PFL

Employee eligibility for PFL is redefined under the final rules as follows: Employees with a regular work schedule of 20 or more hours per week after 26 consecutive weeks of employment, and employees with a regular work schedule of fewer than 20 hours a week after working 175 days, are eligible for PFL. The 175-day requirement applies only to days actually worked (and thus excludes weekends and holidays). Scheduled vacations and approved personal, sick and other paid time off count toward the thresholds for eligibility. Time off for short-term disability, however, does not count toward weeks of employment or days worked.

The final regulations provide that "such consecutive weeks may be tolled during periods of absence that are due to the nature of that employment, such as semester breaks, and when employment is not terminated during those periods of absence." The Board noted in its Assessment that this new section was added "to clarify that certain jobs, like professors, have built in breaks and that these do not restart the period of employment for purposes of eligibility for paid family leave."

Employee PFL Contribution Waivers

The final regulations further clarify that employers must allow employees the option to waive their right to PFL benefits (and thus relieve them of any obligation to make contributions through payroll deductions) where an employee's regular work schedule will not meet the minimum coverage eligibility threshold. The decision as to whether to execute a PFL waiver remains in the sole discretion of the employee. Within eight weeks of a change in an employee's regular work schedule that would require PFL coverage, any waiver will be deemed revoked. The employee will then be obligated to begin making contributions, including any retroactive amounts waived back to date of hire, once notified by the employer of this obligation.

Qualifying Conditions for PFL

As noted above, PFL is available to eligible employees during the first 12 months following the birth, adoption or fostering of a child, which includes children born, fostered or adopted in 2017, as long as the leave is taken within the first 12 months of the birth, adoption or fostering. 

The final regulations clarify that an employee may take PFL before the actual placement or adoption of a child if an absence from work is required for the placement for adoption or foster care to proceed, for example, to attend counseling sessions, appear in court, consult with his or her attorney or doctors representing the birth parent, travel to another country to complete the adoption, etc.  

PFL also is available to care for an employee's family member with a serious health condition. Covered family members under the NYPFLL include an employee's spouse, parent or child (consistent with the federal Family and Medical Leave Act (FMLA)), as well as an employee's domestic partner, parents-in-law, grandparent, grandchild, or the son or daughter of the employee's domestic partner (not presently covered under the FMLA).

Finally, PFL is available to address family issues and transition matters when a spouse, child, domestic partner or parent of the employee is on active military duty abroad or has been notified of an impending call or order of active military duty abroad.

PFL does not apply to an employee's own serious health condition or disability due to childbirth, which remains covered by the disability portion of New York's Workers' Compensation Law (WCL). Notably, the WCL does not provide for a period of employment-protected leave for disability, although the Americans with Disabilities Act and New York State and City human rights statutes require reasonable accommodation for disabilities, which may include a period of leave, and the FMLA and its reinstatement obligations may also apply. 

Amount of Leave and Benefits

Amount of leave and wage replacement percentages available under the NYPFLL will be phased in over a four-year period. Beginning January 1, 2018, eligible employees will be entitled to eight weeks of PFL within a 52-week period, at a rate of 50 percent of the individual's average weekly wage (up to 50 percent of the state average weekly wage). When the NYPFLL is fully implemented in 2021, employees will be entitled to 12 weeks of PFL within a 52-week period, at a rate of 67 percent of the individual's average weekly wage (up to 67 percent of the state average weekly wage). Employees may also take leave on an intermittent basis.

Under the NYPFLL, "average weekly wage" means, for purposes of computing the rate of payment of PFL benefits, the amount determined by dividing the total wages of the employee for the eight weeks or portion thereof immediately preceding the first day of PFL. The week the employee goes on leave should not be counted unless it results in a higher average weekly wage. 

The final regulations also clarify that, for purposes of converting the employee's average weekly wage to an average daily wage, the average number of days worked per week by an employee can take into account fractions of a day.

Funding for PFL Benefits

Employers may deduct the premium cost for the PFL insurance policy from employees through a payroll deduction, or choose to cover the entire cost of the PFL policy themselves. 

The superintendent of finance sets the maximum permissible employee payroll deductions to finance PFL benefits. For 2018, employee contributions are set at 0.126 percent of the employee's weekly wages, capped at 0.126 percent of the state average weekly wage, which currently is $1,305.92, resulting in a maximum deduction of $1.65 per week per employee. Employers have been permitted, but not required, to make employee pay deductions since July 1, 2017. Note that employee contributions are deducted from an employee's after-tax wages and, despite this fact, benefits paid for employees are taxable non-wage income that must be included in federal gross income.

Continuation of Benefits While on PFL

Employees who participate in their employer's health insurance plan are guaranteed continuation of health insurance coverage during the PFL period, as long as the employee continues paying the employee portion of any required healthcare premium contributions.

Job Protection, Reinstatement, No Discrimination or Retaliation

NYPFLL provides job protection for employees on PFL, similar to the FMLA. The Board stated in its Assessment that it plans to issue further guidance on the requirement for an employee to be "restored to a comparable position" upon return from PFL pursuant to Section 203-b of the WCL. Specifically, the Board indicated its plans to address whether and to what extent the "comparable position" standard tracks the meaning of the "same or equivalent position" reinstatement standard under the FMLA.

Unlike the FMLA, the NYPFLL currently does not provide any "key employee" exception to reinstatement.

Employees cannot be subjected to discrimination or retaliation for exercising their rights to PFL.

Enforcement

Claims-related disputes, including eligibility, benefit rate and duration of leave, arising under the PFL are subject to arbitration under Section 221 of the WCL. A request for arbitration must be submitted within 26 weeks of written notice of denial of the claim.

Applying for PFL Benefits

Employees are responsible for notifying their employer if they intend to apply for PFL benefits. Thirty days' notice to employers is required for foreseeable leave. If this is not possible due to the circumstances (e.g., such as an accident or unforeseen health emergency of a family member), the notification must be provided as soon as practicable. Employers may also require employees to provide notice as soon as practicable before each day of intermittent leave. Employers may waive notice requirements if they choose to.

Employees apply for PFL benefits by submitting a request for paid family leave and supporting documentation, such as certifications and proof of claim forms, each in the format to be prescribed by the chair, to the employer's PFL insurance carrier, but only after the employer completes the employer portion of the request for paid family leave. The carrier is responsible for processing claims and making benefits payments.

Notice and Posting Requirements

The final regulations require employers to update their employee handbooks and/or other written policies to include guidance on the PFL and employees' rights and obligations under the law, including on how to file a claim for PFL. In addition, employers must post a notice concerning the PFL (in a form to be prescribed by the chair of the Board, and which remains to be issued). 

Application of PFL to Unionized Workforces

Employers with unionized workers are not required to provide PFL where the applicable collective bargaining agreement provides paid family leave benefits at least as favorable as those mandated by the NYPFLL and such agreement does not allow employees to waive their rights to paid family leave. Although not specifically addressed by the NYPFLL or its implementing regulations, employee payroll deductions for purposes of funding PFL benefits and the interplay between the PFL and the employer's existing policies may be subject to collective bargaining.

Successor Employer

An employer who by operation of law becomes a successor to a covered employee, or who acquires by purchase or otherwise the trade or business of a covered employee, immediately becomes a covered employee and must maintain PFL benefits for the acquired employees.

Interplay of the NYPFLL and FMLA, New York City Earned Sick Time Act, State Disability Laws

FMLA

Starting in 2018, periods of federal FMLA leave and PFL for the same qualifying event will usually run concurrently; provided, however, that the employer has notified the eligible employee that the period of PFL is concurrently designated as FMLA leave and has provided the required FMLA notices and forms to the employee. If the employer fails to provide such notice, it will be deemed to have permitted the employee to receive PFL benefits without concurrently using the benefits available under the FMLA. 

The final regulations further confirm that leave taken for an employee's own serious health condition under the FMLA may not be counted against his or her PFL entitlement.

Under the NYPFLL, employees must calculate paid leave usage using a 52-week "look back" for each day the leave is to be used. As the Board's Assessment points out, the FMLA permits employers to use a similar rolling look-back methodology, along with a number of other options for calculating the 12-month period for employees' maximum leave under the law. For ease of administration of FMLA leave with PFL, employers may want to use similar rolling look-back methods for calculating employees' maximum leave entitlements under both the NYPFLL and FMLA.

Sick Pay

In its Assessment, the Board stated that "[i]f the rules governing an employee's use of sick time allow them to use the accrued time off to care for a serious [sic] ill family member"—which is the case for employees covered by the New York City Earned Sick Time Act (NYCESTA)—such time "falls within Section 380-6.2(a) of the... regulations" and an employee may elect to use such paid sick time concurrently with PFL and receive 100 percent of his or her salary during that period.

The Board reiterated, however, that "[l]eave for an employee's own illness does not qualify as paid family leave" under the NYPFLL, and, pursuant to Section 206(3) of the WCL, an employee would be precluded from receiving both PFL benefits and sick pay for the employee's own illness during the same period.

DBL

Employees cannot receive DBL and PFL at the same time. The leave benefits have to be taken in sequence. Thus, for example, while an eligible employee may opt to receive DBL and PFL benefits during a post-partum period, she may not receive both benefits at the same time.

And, if an employee qualifies for both DBL and PFL, the combined duration cannot exceed 26 weeks in a consecutive 52-week period (computed retroactively from the start of any leave). The Board noted in its Assessment that during the first year of PFL implementation in 2018, the 52-week "look back" period will extend back into 2017.

Use of Accrued Paid Time Off During PFL

An employer may permit, but cannot require, employees to use accrued vacation or other PTO so that the employee can earn a full salary during his or her leave. As written, neither the statute nor the current regulations or Assessment permit employers to compel employees to use available paid leave time toward the PFL benefit as permitted under the FMLA.

That said, an employer covered by the FMLA that designates time off for the same qualifying event as concurrent leave under both the NYPFLL and FMLA may charge an employee's accrued PTO in accordance with the provisions of the FMLA and its FMLA policy.

The final regulations clarify that when an employer offers, and the eligible employee exercises, an option to charge all or part of his or her PFL time to unused accruals or other paid time off and receive full salary, the employer may request reimbursement out of any PFL benefits due or to become due by filing a claim for reimbursement with the carrier prior to the carrier's payment of such benefits.

What Should Employers Do Between Now and January 1, 2018?

  1. To the extent you have not already done so, contact the insurance carrier providing your DBL coverage—whether a private carrier or the State Insurance Fund—to make sure PFL coverage is added to your policy.
  2. If self-insured for DBL and you want to also self-insure for PFL, consult with employment counsel immediately to assist in the preparation and submission of your approval application.
  3. In advance of January 1, 2018, prepare your payroll function or work with third party payroll providers to set up employee payroll deductions, to accumulate funds to pay for the premiums your carrier will charge for PFL coverage.
  4. Provide advance notice to employees of payroll deductions and provide ineligible employees (those who will not work 26 consecutive weeks or 175 days in a 52-week period) with the option of signing a waiver.
  5. Consult with employment counsel regarding necessary employee handbook policy revisions and additions required prior to January 1, 2018, including to address interplay between PFL, DBL, FMLA, NYCESTA and other leave policies.
  6. By January 1, 2018, display a poster regarding PFL coverage in your place of business, similar to the poster required for workers' compensation or DBL coverage. If insured by a third party, your insurance carrier will supply this poster.
  7. Begin training HR and others responsible for administering PFL benefits about employees' rights and obligations, as well as the employer's obligations under the law.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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