Nearly a year after Maine lawmakers and the Mills administration passed a paid family leave law, state regulators have proposed detailed rules to implement the program’s new payroll tax and benefits.
But the leader of the Maine State Chamber of Commerce is objecting to parts of how the law would work under the proposed rules. Employers who want to eventually opt out of the program by offering their own paid leave benefit still would have to pay into the fund for the first 16 months, he said.
The rules were released by the Maine Department of Labor this week, and the public has a chance to comment on them and suggest changes through July 8.
Patrick Woodcock, president and CEO of the Maine State Chamber of Commerce. Mark J. Ellis
The state plans to start collecting payroll taxes Jan. 1, 2025, to build up a fund that would be used to pay workers who qualify for paid leave. The program would not begin providing those benefits to workers until May 2026.
“This is the most significant regulatory bill in decades for the business community,” said Patrick Woodcock, president and CEO of the Maine State Chamber of Commerce.
The law imposes a 1% payroll tax, split evenly between workers and their employers, to provide a paid family leave benefit to qualified workers. The program would pay up to 90% of regular wages for up to 12 weeks for workers who are ill or need to take care of newborns or other family members, among other reasons.
Employers with 15 or fewer workers would be exempt from paying into the program, but their employees still would qualify for benefits and pay 0.5% of their wages into the program.
Larger employers also can opt out of the state-run system if they offer an equivalent private paid leave benefit, but the opt-out provision is one part of the rules that should be improved, Woodcock said.
He said that as proposed, businesses would have to pay into the system starting Jan. 1, 2025, but wouldn’t be able to opt out until benefits to employees start to be paid out in May 2026. That doesn’t provide any incentive for employers to develop private programs in the meantime, he pointed out.
“It really does not facilitate the development of a private marketplace, to have to meet this new obligation,” Woodcock said.
He said Maine should follow other states that have implemented paid family leave – such as New York and Massachusetts – by allowing employers to opt out when they are required to start paying taxes if they can show that they will be offering their employees an equivalent benefit.
But Cate Blackford, public policy director for the Maine People’s Alliance, a liberal group that advocated for the law, said the proposed opt-out rules for private plans are needed for “fund solvency” to build up the reserves needed to get the program running. The Legislature approved $25 million in start-up funding, but the payroll tax will fill the fund and cover the costs of the benefits in the long term.
“We won’t know if companies are actually opting out until they do, and it wouldn’t be fair for a bunch of employers to opt out and not pay in for a year and then join the state program,” Blackford said.
She also said the standards for qualified private plans are not yet finalized. Until that happens in 2025, there’s no way to determine which existing plans or future plans will be considered equivalent to the state’s program.
Blackford said the proposed rules seem like they will work well for Maine.
“On my first read-through, the rules feel thoughtful, practical and aligned with the intention of the law,” Blackford said.
Sen. Mattie Daughtry, D-Brunswick, who co-sponsored the bill with state Rep. Kristen Cloutier, D-Lewiston, said that one of the main goals of the rules is to “make the law work for everyone” including the interests of employers and workers. Daughtry said the intention of the law is to make sure that it’s not onerous for businesses to implement or for workers to claim benefits.
“Accessibility, affordability and simplicity were the key tenets,” said Daughtry, co-owner of Moderation Brewing in Brunswick.
Maine is one of 13 states, plus the District of Columbia, to have enacted paid family and medical leave. The federal government approved an unpaid leave program in the 1990s, allowing workers to take up to three months off without pay.
To comment on the proposed rules, go to www.maine.gov/labor/rulemaking.
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