After multiple rounds of rulemaking that saw more than 1,600 comments submitted by nearly 600 individuals and businesses, the Maine Department of Labor, on December 4, 2024, approved and published the final rules for Maine’s sweeping Paid Family and Medical Leave Program (Title 26 § 850-A et. seq.) that launches on January 1, 2025.

Initially signed into law by Maine Governor Janet Mills on July 11, 2023, L.D. 1964 created one of the nation’s broadest and most generous paid family and medical leave programs in the country by providing up to 12 weeks of paid leave per year to all eligible employees in the private and public sectors, except for federal government employees, regardless of employer size. Even self-employed individuals are eligible for paid leave under Maine’s law if they choose to opt into the program.

To fund Maine’s Paid Family and Medical Leave Program (PFML), the state will impose a 1% payroll tax split evenly between the employer and employee. The payroll tax will take effect on January 1, 2025, and employees can start taking leave on May 1, 2026.

Now that the Maine DOL has finalized the rules, here are the key components that employers should be aware of:

Covered Individuals

All public and private full- and part-time employees regardless of employer size (as well as self-employed individuals) who have earned at least six times the state average weekly wage in the first four of the last five completed calendar quarters immediately preceding the first day of an individual’s benefit year are covered by the law. In other words, using the current Maine average weekly wage of $1,144.67, so long as the individual has earned at least $6,868 in the year prior to taking leave, they are covered.

The only employees in Maine not covered are:

• Employees subject to the Railroad Unemployment Insurance Act;
• Incarcerated persons earning wages in a Maine correctional facility;
• Students earning wages as part of a federal work study program at any public or private higher education institution in Maine;
• Employees of the federal government including the U.S. Postal Service; and
• Individuals who volunteer for an employer.

The law defines “self-employed individual” as a “an independent contractor . . , a sole proprietor, a member of a limited liability company or limited liability partnership or an individual whose net profit or loss from a business must be reported to the [state].”

Covered Employers

All public employers (other than the federal government), private employers (regardless of size), and self-employed individuals are covered by the program. Note that although employers with fewer than 15 employees do not have to contribute toward the payroll tax, these small employers must still collect and remit to the state the employee’s portion of the tax on a quarterly basis. Eligible employees of small employers with fewer than 15 employees may still take paid family and medical leave – and can do so immediately upon commencing employment if they meet the financial eligibility test.

Private employers that offer equivalent or greater paid leave benefits may apply to the state for a waiver to avoid participating in the state’s program but must offer a substantially equivalent self-insured or fully insured paid family and medical leave plan.

Unionized Workforces

Private sector employees/employers subject to a collective bargaining agreement are subject to the law. However, the law does not apply to public employees/employers subject to a CBA in effect on October 25, 2023, until that CBA expires. In such a case, there will be no payroll tax nor benefits until the expiration of the CBA or May 1, 2026, whichever comes later.

Job Protection

So long as a covered employee has been employed for at least 120 days prior to taking leave, the employer must restore that employee to the same or equivalent position with the same or equivalent benefits, pay, and other conditions of employment. This requirement also applies to small employers. For example, if an employer has only one employee and that employee has worked more than 120 days, the employee can take 12 weeks of leave and the employer must hold that position open.

If an employee is on initial probation at the time that the employee begins leave, the employer may toll the employee’s probationary period during the period of the employee’s leave.

A covered employee who takes leave before working at least 120 days does not have the same job restoration rights. However, the law includes an express prohibition against retaliation for an employee exercising their right to paid family and medical leave, including an express prohibition against applying an attendance policy to an employee who takes PFML leave. As a result, employers may potentially face retaliation claims from employees who take leave during their initial 120 days of employment who do not return to the same or similar job after their leave. The final rules do not address this ambiguity.

Reasons for Leave

Eligible employees or self-employed individuals may take up to 12 weeks of paid leave for any of the following reasons:

• To bond with the covered individual’s child during the first 12 months after the child’s birth or the first 12 months after the placement of the child for adoption or foster care with the covered individual;

• To care for a family member with a serious health condition;
  
  • “Serious health condition” is defined as “an illness, injury, impairment, pregnancy, recovery from childbirth or physical, mental or psychological condition that involves inpatient care in a hospital, hospice or residential medical care center or continuing treatment by a health care provider.”
  • “Family member” is defined as “a biological, foster, step, or adopted child (regardless of age); grandparent; grandchild; sibling; spouse or domestic partner; or an individual with whom the covered individual has a significant personal bond that is or is like a family relationship, regardless of biological or legal relationship.”

• To attend to a “qualifying exigency,” which is defined as “a need arising out of a covered individual’s family member’s active duty service or notice of an impending call or order to active duty in the United States Armed Forces, including, but not limited to, providing for the care or other needs of the military member’s child or other family member, making financial or legal arrangements for the military member, attending counseling, attending military events or ceremonies, spending time with the military member during rest and recuperation leave or following return from deployment or making arrangements following the death of the military member”;

• To care for a family member of the covered individual who is a covered service member;

• To take safe leave, otherwise known as sexual assault victim leave; or

• Any reason set forth in Maine’s Family Medical Leave Requirements (26 M.R.S. § 843(4)), which includes leave in the following situations:
  
  • For the serious health condition of the employee;
  • For the birth of the employee’s child or the employee’s domestic partner’s child;
  • The placement of a child 16 years of age or under with the employee or the employee’s domestic partner in connection with the adoption of the child;
  • For the death or serious health conditions of certain family members in the military who died or incurred a serious health condition while on active duty; or
  • For the donation of an organ of the employee for a human organ transplant.

Additionally, the final rules state that a covered individual may take leave to care for an individual with a serious health condition with whom the individual has a significant personal bond. The rules explain that a significant personal bond is one that, when examined under the totality of the circumstances, is like a family relationship, regardless of biological or legal relationship. This bond may be demonstrated by, but is not limited to the following factors, with no single factor being determinative:

• Shared personal financial responsibility, including shared leases, common ownership of real or personal property, joint liability for bills or beneficiary designations;
• Emergency contact designation;
• The expectation to provide care because of the relationship or the prior provision of care;
• Cohabitation and its duration and purpose;
• Geographic proximity; and
• Any other factor that demonstrates the existence of a family-like relationship.

Types of Leave

Employees may take continuous leave, intermittent leave, or leave in the form of a reduced work schedule so long as the total aggregate leave does not exceed 12 weeks in a 12-month period. Unlike the FMLA, employer consent is not needed for intermittent or reduced-schedule bonding leave.

Notice Requirements

An employee seeking leave must apply no more than 60 days before the start of leave or no more than 90 days after the start of leave. The employee must provide notice in writing to the employer of his or her desire to take leave. However, there is no standard form. The written notice can be an email or a text message.

An employee’s notice must be done in a “reasonable” time in advance of leave. The final rules clarify that 30-days’ written notice “shall be presumed to constitute reasonable notice.” However, in the case of an emergency, illness or other sudden necessity, an employee shall make a good-faith effort to provide written notice to the employer of the employee’s intent to use leave as soon as is feasible under the circumstances. If the employee is incapacitated, notice may be provided by a family member or health care provider on behalf of the employee. The notice shall include the reason for leave, type of leave needed, actual or anticipated timing and duration of leave, and any other relevant information.

Leave Length

A covered individual may take up to 12 weeks of family leave and up to 12 weeks of medical leave in an application year, but may not take more than 12 weeks, in the aggregate, of family leave and medical leave in the same benefit year. “Benefit year” means the “12-month period beginning on the first day of the calendar week immediately preceding the first date of approved family or medical leave.”

Cost

The state will impose a 1% payroll tax, split equally between employers and employees. The 1% tax is based on total wages before taxes. The rules explain that wages include tips and gratuities, severance and terminal pay, commissions, and bonuses, but does not include remuneration for services performed by an independent contractor.

For employers with 15 or more employees, the employer must pay 0.5% and the employee can be required to pay 0.5% of total wages. However, the employer has the option of covering all or a portion of the employee’s 0.5% tax.

For employers with less than 15 employees, the employer does not pay a payroll tax. However, the employee can be required to pay the 0.5%. Again, however, the employer can cover that deduction if it so chooses. But an employer’s determination as to whether or not to deduct premiums from employees’ wages must apply to all employees, except as required for employees of separate collective bargaining agreements with the same employer.

Regardless of who pays, employers are responsible for collecting and remitting to the state the employees’ portion of the payroll tax on a quarterly basis. The penalty for failing to do so, assessed by the Maine DOL, is 1% of the employer’s total quarterly payroll.

Benefit Amount

The Maine PFML Program uses a two-tiered system based on the state average weekly wage. The state average weekly wage (SAWW), which is currently $1,144.67, is set annually on July 1^st.

• Tier 1 = The portion of the covered individual’s average weekly wage that is equal to or less than 50% of the SAWW is replaced at 90%
• Tier 2 = The portion of the covered individual’s average weekly wage that is more than 50% of the SAWW is replaced at 66%
• Benefits are capped at the SAWW ($1,144.67 as of 7/1/24)

Under this formula, lower wage earners receive near full income replacement while higher wage earners’ benefits are capped as illustrated below:

Note also that benefits received under the PFML program are not considered taxable income under Maine law. IRS guidance is still pending as to federal tax consequences.

Process for Application and Approval of Benefits

The rules state that an individual applying for leave may, but is not required to, provide the following information and documentation:

• Proof of personal identity;
• Identifying information about all employers participating in the Fund from which the applicant is seeking leave;
• Proof of identity of family member if the applicant is applying for paid family leave;
• Information regarding the existence of a significant personal bond, if applicable:
• Reason for leave;
• Proposed scheduling of leave, including the first day of missed work and the expected duration of leave;
• A waiver signed by the employer that the proposed schedule of leave is not an undue hardship, if applicable;
• Documentation, to include the anticipated duration of leave, from a health care provider of the applicant’s own serious health condition if seeking medical leave;
• Documentation, to include the anticipated duration of leave, from a health care provider of the family member’s serious health condition if seeking family leave; and
• Other information and documentation reasonably requested by the state.

The state will notify the employer in writing of an applicant’s claim for leave within five business days after receipt of a claim. Within 10 business days thereafter, the employer must submit any information to support a claim for undue hardship. The state will render a determination within 10 business days after receipt of the information from the employer. If a claim is denied, the applicant can appeal within 15 business days from the date the decision is issued.

Calculating Employee Roster Size

The final rules clarify:

[f]or the purposes of determining premium liability, any employer that employed 15 or more covered employees per that employer’s EIN on their established payroll in 20 or more calendar workweeks in the 12-month period preceding September 30th of each year will be considered to be an employer of 15 or more employees for the calendar year thereafter. This count includes the total number of persons on establishment payrolls employed full or part time who received pay for any part of the pay period. Temporary and intermittent employees are included, as are any workers who are on paid sick leave, on paid holiday, or who work during only part of the specified pay period.

The Maine DOL published additional guidance separate from the rules further explaining that to determine the locality of wages earned in Maine, and thus, whether an employee counts toward the 15-employee threshold, four factors must be taken in sequence to determine whether employment is reportable in Maine. These factors are:

• Place Where Work Is Performed: If the employee performs all work in Maine, or if the work outside Maine is incidental (temporary or minor), then Maine law applies. If this does not apply, continue to next factor.
• Base of Operations: If the employee performs work in Maine and other states, if the base of operations is in Maine, Maine law applies. The base of operations is the primary location from which the employee starts work and returns regularly. If this does not apply, continue to next factor.
• Place from Which Service Is Directed or Controlled: If the employee performs some work in Maine and the service is directed or controlled from Maine, Maine law applies. This refers to the place of general authority rather than direct supervision. If this does not apply, continue to next factor.
• Place of Residence: If none of the above criteria apply, and the employee performs work in Maine and other states, and resides in Maine, then Maine law applies. If none of the above apply, the employment is not reportable in Maine.

Undue Hardship

Employers may claim undue hardship within 10 business days of being notified of a claim. “Undue hardship” means “a significant impact on the operation of the business or significant expenses, considering the financial resources of the employer, the size of the workforce, and the nature of the industry that cannot be overcome with the amount of notice given.” An employer’s determination of undue hardship shall be considered reasonable if:

• The employer provided a written explanation of the undue hardship to the employee, demonstrating, based on the totality of the circumstances, how the absence of the specific employee and the specific timing/duration of the employee’s requested leave will cause significant impact on the operation of the business or significant expenses;
• The employee retains the ability to take leave within a reasonable time frame relative to the proposed schedule; and
• The employer has made a good-faith attempt to work out a schedule for such leave that meets the employee's needs without unduly disrupting the employer's operations.

However, the rules also provide that “[i]f medical leave is requested, the employer’s proposed schedule must be sufficient to accommodate the healthcare needs of the employee in the judgment of the employee’s healthcare provider.” This seemingly gives veto power on an employer’s claim of undue hardship to an employee’s medical provider.

Relationship to Other Leaves

The final rules state that the 12 weeks of aggregate leave taken under the state law will be reduced by any leave taken under the FMLA or its state equivalent (the Maine Family Medical Leave Requirements) that was not taken concurrently with leave under this law in the 12-month period preceding the start of leave. In other words, an employee cannot take 12 weeks of FMLA and then 12 weeks of Maine PFML for 24 weeks of protected leave in a given 12-month period.

Double Dipping Permitted

The final rules state that there is no reduction of PFML benefits for “[w]ages received from any other employer from whom the covered individual is not on leave.” As such, employees can take 12 weeks of paid leave from one employer while working for another employer with no offset or reduction in benefits from the state.

Similarly, there will be no reduction in state PFML benefits for the simultaneous receipt of short-term disability benefits offered by an employer to the extent that the payments combined do not exceed the individual’s typical weekly wage.

Private Plans

Although the payroll tax takes effect on January 1, 2025, employers cannot apply to opt out of the state plan until April 1, 2025. That means Maine employees and employers will have to pay at least one quarter of premiums for a program they may never use. However, employers must refund employee withholdings made prior to the private plan being approved within 30 days from the approval of the substitution and failure to do so may result in a revocation of the private plan substitution.

Whether self-insured or fully insured, an employer may apply for a private plan exemption if the private plan is “substantially equivalent” to the state plan. “Substantially equivalent” means, at a minimum that:

• The plan must provide for family leave and medical leave to be taken for: the covered individual’s own serious health condition; safe leave; a qualifying exigency; bonding leave; to care for a family member who is a covered service member; to care for a family member with a serious health condition; and for any other reason set forth in 26 M.R.S. § 843(4);
• The plan must provide leave to care for a family member and must account for all definitions of family listed in §850-A(19);
• The plan must allow for at least 10 weeks of aggregate leave per benefit year;
• The plan must allow a covered individual to take intermittent or reduced-schedule leave,
• The cost to employees of the plan may not be greater than the cost charged to employees under the state law; and
• The plan must provide an internal reconsideration process for denial of family leave benefits or medical leave benefits.

Notwithstanding the above elements as set forth in the rules, the Maine DOL has also cautioned that the following may not be substantially equivalent:

• A plan which provides benefits only for the covered individual’s own serious health condition, such as a short-term or long-term disability plan; and
• A plan which consists of leave benefits provided pursuant to employer policy and which are subject to change at the employer’s discretion; and
• A plan that consists of leave benefits that need to be accrued (such as sick, vacation, or paid time off) that does not provide full coverage of benefits regardless of time with the employer or availability of accrued time.

The Maine DOL holds the right to withdraw approval of a private plan if any of the terms and conditions are violated. Approvals are only valid for three-year periods.

Additionally, self-insured plans must provide a surety bond to the state.  

Governing Authority

The Maine DOL and the newly created PFML Authority will oversee the state’s program. The Authority is a 15-member body responsible for advising on the administration of the PFML program. Eleven of the 15 members are appointed by the governor for three-year terms. By statute, members must come from various business, human resources, and legal backgrounds.

Poster Requirement

Employers must post a workplace notice of the benefits available under the program. An employer must also issue written notice to each employee within 30 days of the start of employment that includes an explanation of benefits as well as information on employees’ rights and obligations. A poster is available from the Maine DOL here. Notice must also be given 14 days prior to any change in employee contribution amounts.

Fraud Protection

The penalty imposed on individuals who take paid leave based on false statements or misrepresentations is a one-year disqualification from the program and potential that the administrator will seek repayment of the benefits received. However, fraud must be “willful” and there is no indication that committing fraud will result in any criminal prosecution.

Effective Date

Employers and employees (as well as self-employed individuals who elect coverage) must start paying the payroll tax beginning January 1, 2025. Covered individuals can start taking paid family and medical leave on May 1, 2026. 

What Can Employers Do to Prepare?

Employers should begin reviewing their leave policies and payroll practices to prepare to comply with the impending new law. Employers should review the final rules and contact counsel to ensure compliance.