2023 is already proving to be an interesting year in state and federal employment law, as we see protections and benefits for employees expanding on the state and federal level.
I. State Law Updates
Maryland’s governor signed into law three pieces of legislation that affect all employers in the state.
For the past few years, Maryland’s minimum wage has been steadily increasing towards a goal of reaching $15 per hour by 2025, with employers currently paying different rates based on the number of employees. The current state minimum wage rates are $13.25 per hour for employers with 15 or more employees, and $12.80 per hour for employers with fewer than 15 employees. After the approval of SB555, the minimum wage rate will accelerate to $15 per hour for all employers as of January 1, 2024.
Employers should be aware that if more than one minimum wage rate applies to any employee, the employee is entitled to be paid at the highest applicable minimum wage rate applicable to their hours worked. While the federal minimum wage rate is significantly lower than Maryland’s at $7.25 per hour, both Montgomery County and Howard County have minimum wage rates that are currently higher than the state.
What Employers Should Do Now: Employers should prepare to adjust wages effective January 1, 2024, for employees currently paid below $15 per hour. Employers with employees in Montgomery County and Howard County should review the minimum wage information on the Maryland Department of Labor (“DOL”) website for more information about applicable rates, located at Maryland Minimum Wage and Overtime Law - Employment Standards Service (ESS) - Division of Labor and Industry (state.md.us)
Since 2019, Maryland law has prohibited non-competition and conflict of interest provisions that restrict an employee making $15 or less per hour, or $31,200 or less per year, from becoming employed by another employer (or from becoming self-employed) in the same or similar business or trade. These restrictions apply whether the non-competition and/or conflict of interest provisions are contained in an employment agreement, a contract, or another similar documents and render such “agreements” null and void and against public policy.
Effective October 1, 2023, the wage threshold will no longer be based on a specific hourly rate or salary. Instead, such provisions will be prohibited for employees earning 150% of the state minimum wage - or less. Once the minimum wage rate increases to $15 per hour, the “low wage” threshold will adjust to $22.50 per hour based on the 150% computation (which calculates to $46,800 annually for an employee working 40 hours per week).
Because this adjustment takes effect October 1, 2023 (before the minimum wage adjustment), it will apply to the current two-tier state minimum wage system until December 31, 2023, increasing the current low wage thresholds relative to the applicable state rate: 150% of the large employer minimum wage rate of $13.25 per hour is $19.86 per hour; and 150% of the small employer minimum wage rate of $12.80 is $19.20 per hour.
As before, this law permits “employment contract or a similar document or agreement” prohibiting employees from taking or using client lists “or other proprietary client-related information.”
What Should Employers Do Now: Employers should review their non-competition and conflict of interest practices and determine which employees are protected under this law. Employers may wish to identify existing agreements with employees that will be null and void as of October 1, 2023, and enter into amended agreements preserving confidentiality and non-disclosure provisions, and prohibiting employees from taking or using client lists or other proprietary client-related information, to the extent permitted by law.
In 2022, legislation was passed creating a paid Family and Medical Leave Insurance (“FAMLI”) program to fund paid leave for employees through payroll contributions, similar to unemployment contributions. Under the FAMLI rules, contributions will be made by employees and employers with 15 or more employees, as well as self-employed individuals who opt-in to the program. Contributions were initially set to begin October 1, 2023, with FAMLI benefits becoming available as of January 1, 2025.
Due to amendments approved in the 2023 legislative session, both the duty to make contributions and employee access to benefits have been delayed: Contributions will start as of October 1, 2024, with benefits first becoming available as of January 1, 2026. The amendments also clarified that contributions will not exceed 1.2% of employee wages (although actual contribution amounts are yet to be determined), and that employers with 15 or more employees will be required to pay 50% of contributions, with employees paying the rest (employees working for employers with fewer than 15 employees will make the full contribution themselves).
Many issues remain uncertain in this program, and there is opportunity in the next legislative session for more changes to be made to the program due to the lengthy timeline for implementation. The DOL has not issued regulations explaining how this program will be implemented, and is now expected to do so in January 2024.
At the most basic level, as it is currently structured, FAMLI will allow employees who have worked at least 680 hours in the 12 months prior to the start of leave to take up to twelve weeks off work to care for a newborn child during the first year after birth, to care for and bond with a child placed with the employee for adoption, foster, or kinship care during the first year after placement, to care for a family member with a serious health condition, to care for the employee’s own serious health condition, to care for an ill or injured service member who is “next of kin,” or for qualified exigencies related to specific military deployment activities. In a benefit year in which the employee gives birth and requires time off work for their own serious health condition, the employee may take up to 24 weeks off.
Leave will be paid based on a state-determined benefits formula and will run concurrently with the federal Family Medical Leave Act, when applicable. Employees cannot be required to use accrued paid leave before taking time off under the FAMLI program; however they may use accrued paid leave to offset the unpaid portion of FAMLI leave. Leave rights will apply to all eligible employees in the state, regardless of the size of the employer. Alternatively, employers may satisfy the requirements of the FAMLI program through a private employer-plan providing paid leave benefits approved by DOL, however, the details of such alternatives are still unfolding.
Leave taken under the FAMLI program is job protected, with two exceptions. An employee taking leave may be terminated for cause (but only for cause) or, the employer may deny restoration (i.e., bringing the employee back to work after FAMLI leave) if “the denial is necessary to prevent substantial and grievous economic injury to the operations of the employer” and (1) the employer provides the employee with notice of its intent not to restore the employee after leave as soon as it determines economic injury would occur, and (2) if the leave has already begun, the employee remains out on leave after receiving the notice.
Leave taken under FAMLI will run concurrently with federal FMLA leave when both laws apply, which means that FMLA standards for job protection and other benefits will apply during concurrent periods. Employers should be aware that there are differences between FAMLI and FMLA, however. Notably - the definition of family member is broader than under the FMLA allowing FAMLI-qualified employees to take leave to care for more family members than just parent, spouse or child; employees will be able to take leave sooner under FAMLI than under FMLA due to lesser eligibility requirements for FAMLI; and employees may take more leave under FAMLI than FMLA if they have a child in the same benefit year in which they require time off for their own serious health condition. On the other hand, employees may only take up to 12 weeks of FAMLI leave to care for an ill or injured service member for whom they are next of kin, whereas FMLA would permit up to 26 weeks of unpaid leave for that purpose. Ultimately, employers will need to ensure that they are comparing all the similarities and differences in state and federal leave coverage when processing requests for leave, and to prepare their policies, procedures and staff accordingly.
What Employers Should Do Now: Several other jurisdictions have implemented programs similar to FAMLI, many of which have experienced changes and delays, including the District of Columbia. Given the long timeline remaining for implementation, and the likelihood of further changes, employers may wish to subscribe to newsletters through the DOL FAMLI website to keep abreast of updates. See Family and Medical Leave Insurance - About the Maryland Department of Labor for more information.
II. Federal Law Updates
On the federal side, there has been an important development in I-9 processing applicable to all employers, and two developments for working women.
All employers in the United States are required to verify each employee’s identity and eligibility to work in the United States by completing in-person physical inspection of the employee’s original documents. This inspection may be conducted by the employer or its authorized representative, but until the pandemic has always been required to be completed “in person” whether the employee worked at an employer worksite or remotely.
During the pandemic, in response to lockdown requirements and businesses converting to remote work, the federal Department of Homeland Security announced “temporary flexibilities” to I-9 processing requirements, permitting virtual inspection of documents establishing identity and work authorization rather than in-person review, pending the employer’s ability to complete in-person review.
While these temporary flexibilities were extended through the pandemic, DHS has now announced that they will end as of July 31, 2023, requiring employers to follow in-person physical review practices for new hires as of that date. Furthermore, employers who processed I-9s for employees using virtual inspection of documents while the temporary flexibilities were in effect must now complete in-person physical review of those employees’ documents by August 30, 2023.
As noted, employers may appoint an authorized representative to complete the in-person physical review, which may be useful for employees working offsite. However, employers should ensure that the authorized representative is trained in I-9 processing because the employer remains liable for I-9 compliance regardless of who conducts the review.
What Employers Should Do Now: Employers should prepare to revert to in-person physical inspection for all employees whether they work onsite or at remote locations, and to complete in-person inspection for employees hired during and since the pandemic by August 30, 2023. For more information on I-9 processing, see REMINDER - DHS Ends Form I-9 Requirement Flexibility | USCIS.
The Pregnant Workers Fairness Act (PWFA) takes effect June 27, 2023. Under this law, employers with 15 or more employees must provide reasonable accommodation to women due to known temporary limitations on their ability to perform the essential functions of their job based on a physical or mental condition related to pregnancy, childbirth or related medical conditions unless it would cause an undue hardship.
This law applies to “qualified employees,” defined as employees and applicants who “with or without reasonable accommodation, can perform the essential functions of the employment position,” specifically including those who are temporarily unable to perform an essential function, but who could perform the essential function in the near future and the inability to perform the essential function can be reasonable accommodated.
Employers are specifically required to engage in an interactive process to evaluate accommodation requests and cannot require an employee to accept an accommodation that is not decided upon through the interactive process. “Reasonable accommodation” and “undue hardship” will have the same meaning as under the Americans with Disabilities Act, as amended.
The law prohibits failure to accommodate in the absence of undue hardship, denying employment opportunities to a qualified employee if the denial is based on the need to make reasonable accommodation under PWFA, to require a qualified employee to take paid or unpaid leave if another accommodation can be provided, or to take adverse action against a qualified employee who has requested or used a reasonable accommodation under PWFA.
Maryland employers with 15 or more employees are already required to provide reasonable accommodation to women with disabilities caused or contributed to by pregnancy, childbirth, and related medical conditions. They should note, however, that the standard for eligibility for an accommodation under PWFA is lower than the current state law because employees may develop “known limitations” before they become disabled. This means that Maryland employers may be required to accommodate qualified employees under PWFA sooner than under the state Human Relations law.
What Employers Should Do Now: Review and amend their accommodation policies and procedures to include these new requirements; train Human Resources and management to recognize and address accommodation requests from job applicants and employees.
The PUMP for Nursing Mothers Act (“PUMP Act”), was signed into law on December 29, 2022, and took effect April 28, 2023. The PUMP Act augments previously existing provisions in the federal Fair Labor Standards Act (“FLSA”) requiring employers to provide non-exempt employees who are nursing with reasonable break time and private space to express milk for the first year after childbirth. Break time for non-exempt employees may be unpaid unless they are using regularly scheduled paid rest breaks to express milk or they are not fully relieved of their duties during the break. Exempt employees must be paid for breaks taken to express milk in compliance with FLSA salary basis requirements. Employers with fewer than 50 employees may be relieved of this obligation if it would cause an undue hardship. Employers should be aware that many cities, counties, and states have implemented their own laws addressing breaks and space to express milk which may provide greater benefits to employee than the PUMP Act. Maryland does not yet have a lactation breaks law, but Baltimore City does. [New and Amended Ordinances Affecting Baltimore City Employers]
What Employers Should Do Now: Review policies and procedures to ensure that your lactation breaks policy is up to date; train Human Resources and managers to respond to requests for break time and designate appropriate space.
This has been prepared by Tydings for informational purposes only and does not constitute legal advice.
Employment Law Updates 2023
June 27, 2023