Payroll Deductions for New York Paid Family Leave May Begin on July 1, 2017

Payroll Deductions for New York Paid Family Leave May Begin on July 1, 2017

June 27, 2017

Action Required

In the spring of 2016, New York enacted a comprehensive paid family leave (PFL) benefit within its 2016-2017 budget bill. The PFL benefit is a brand-new part of New York’s disability benefits law.

The requirement to provide the PFL benefit will be effective on January 1, 2018. Updated regulations were recently released on May 24, 2017, and the New York Department of Financial Services published the employee contribution rate on June 1, 2017. We expect final regulations governing the new PFL benefit to be released soon. Employers with employees in New York should not wait, however, to begin preparing for January 1.

This Compliance Alert will provide a short overview of the new mandated PFL benefit and several recommended action items for employers to whom this law applies.

HIGHLIGHTS

Not only is the PFL benefit a new integral part of New York’s disability benefits provisions, PFL will also be an important supplement to the federal Family Medical Leave Act (FMLA).

An employee may use PFL in three situations:

  1. to care for a family member, including children, parents, grandchildren and grandparents, and spouses or domestic partners, with a serious health condition;
  2. to bond with a newborn or a newly-placed adoptive or foster child; and
  3. for qualifying exigencies (determined by the FMLA) that arise because the employee’s spouse, domestic partner, child, or parent is on active duty or is ordered to active duty in the U.S armed services.

Although PFL must be made available to eligible employees beginning on January 1, 2018, the full extent of the benefit will not become available until 2021 due to its gradual implementation:

CA 20170627.2

EMPLOYEE ELIGIBILITY

Under the updated regulations, eligibility for PFL depends on an employee’s regular work schedule and the duration of their employment by a “covered employer.” The definition of “covered employer” is the same for both PFL and New York’s disability benefits requirement: those who employ one or more individuals on each of at least thirty days in a calendar year in New York State. The updated regulations discuss two classes of eligible employees:

  • Employees who work 20 or more hours per week must have worked at least 26 consecutive weeks for a covered employer. The 26-week period may include any regular paid vacation or other leave of absence if the employee returns to work after the leave.
  • Employees who work fewer than 20 hours per week must work at least 175 days to be eligible.

For both classes of employees, New York’s Workers’ Compensation Law provides that work performed outside the state of New York is included in the duration calculation. The updated regulations provide that employees who won’t satisfy the duration requirement for PFL eligibility may file a waiver that will release them from the PFL payroll deduction. But if an employee’s work schedule changes and they become eligible, the waiver they filed is revoked and they become obligated to make the PFL contributions, “including any retroactive amounts due from date of hire.”

In addition, employees must be covered by the disability benefit provisions of the Workers’ Compensation Law to be eligible for PFL. Some individuals are specifically excluded in the updated PFL regulations, including volunteers and certain workers for religious, charitable, or education institutions; employees covered under special state funds; and independent contractors.

PAID FAMILY LEAVE BENEFIT COMPONENTS

The chart above shows the specific PFL benefit that eligible employees will be entitled to receive. Although the final regulations may be different, the updated regulations include these other key components:

  • Like FMLA, employers must maintain the existing health benefits of employees who are on PFL. Employees on PFL are still responsible for their normal contributions to their employer’s health insurance premium, and their health insurance coverage may be dropped if their payment is more than 30 days late. Upon the employee’s return to work, health insurance coverage must be reinstated.
  • The PFL law prohibits retaliation by employers and their agents against employees who seek or obtain PFL. Returning employees must be placed in their own or a comparable position with comparable terms and conditions of employment. Although employees on PFL may not accrue seniority or other similar rights, employers are not permitted to take away any benefit accrued prior to the PFL period.
  • Eligible employees must provide notice to their employers of their need for PFL “as soon as practicable,” and such notice must be sufficient to make the employer aware of the reason for PFL and the anticipated timing and duration of the PFL. Like FMLA, the updated regulations allow for intermittent PFL, and an employer may require notice before each day of intermittent PFL.
  • In general, employers will provide the PFL benefit either (i) by insuring through the New York state fund; (ii) by obtaining an approved policy from an authorized carrier; or (iii) by self-insuring. To streamline administration, employers may consider choosing an approach that corresponds to their compliance with the mandated disability benefit.
  • The statute and updated regulations intend for employee payroll deductions to fund the contributions for this insurance; the updated regulations do not address when an employer wants to fund the contribution itself.

Other significant matters discussed in the updated regulations include the mechanics of PFL benefit payment, the minimum amount of pay, the impact of this new benefit upon collective bargaining agreements, the interactions between an employee’s use of PFL and FMLA, and the interactions between PFL and New York’s mandated disability benefits.

EMPLOYER CALL TO ACTION

If you are a covered employer, you have several responsibilities under the updated regulations for PFL. Prior to January 1, 2018, we recommend that you:

  • Ask your payroll provider about their administration of this employee charge. As a reminder, you may begin taking employee payroll deductions for the PFL benefit on July 1, 2017.
  • Consider issuing a communication to your employees prior to beginning payroll deductions.
  • Review and update your internal policies or employee handbook with the assistance of legal counsel to provide employees with written information about the PFL benefit, including employees’ rights, their obligations, and the applicable claim-filing procedures.
  • Display a poster that outlines employees’ PFL rights and responsibilities. We anticipate the NY Workers’ Compensation Board will publish a model for employers to use.
  • Work with your HCW consultant to decide whether you will obtain a policy from an approved insurance carrier or apply to self-insure. We can work with your current New York disability benefits law carrier to determine the right type of policy for you.

For more information about PFL in New York, visit New York’s dedicated PFL website.

CONCLUSION

The New York Paid Family Leave benefit may be a significant addition to some employers’ compliance burden. But thoughtful steps taken now will greatly ease the difficulty of its implementation. Should you have any questions about this Compliance Alert, please contact your HCW consultant or client manager at (919) 403-1986.