Maryland’s Family and Medical Leave Insurance program is approaching a critical implementation milestone, with contribution requirements set to take effect on January 1, 2027.
The FAMLI program requires employers and employees to share the cost of contributions that will fund paid leave benefits for qualifying events, including serious health conditions, bonding with a new child, and military deployment-related needs.
The contribution rate is capped at 1.2 percent of wages up to the Social Security wage cap, with the current rate set at 0.9 percent, adjusted annually.
FAMLI defaults to a 50/50 contribution split, meaning employers and employees would each be responsible for 0.45 percent of the current 0.9 percent contribution rate.
Critically, the law permits employers to cover the employee’s share of contributions in part or in full, and that discretion is where significant labor relations risk begins to emerge.
Under Section 8(a)(5) of the National Labor Relations Act, employers are required to engage in good-faith negotiations with unions over wages, hours, and other terms and conditions of employment, including benefits.
Unionized employers that implement the default 50/50 payroll deduction without first providing the union advance notice and an opportunity to bargain risk an unfair labor practice charge under that provision.
The financial remedy for such a violation is considerable, as employers could be required to refund affected employees their share of contributions retroactively, effectively forcing the employer to bear 100 percent of the contribution until the violation is resolved.
Employers also have the option to implement an approved Equivalent Private Insurance Plan instead of participating in the state plan, though an EPIP must provide employees with all the same benefits and rights as the state plan.
Since employers already face bargaining obligations over the contribution split, legal advisers suggest they could notify unions of any intended EPIP implementation at the same time to streamline the process.
The deadline for filing a Declaration of Intent for an EPIP is November 15, 2026, making prompt action essential for employers considering that route before contributions begin.
Unions are widely expected to advocate for employers to absorb some or all of the employee share, making early and transparent engagement with union representatives a strategically sensible approach.
Employers are advised to provide advance written notice to unions of their intent to implement the 50/50 split with sufficient lead time to allow unions to request bargaining if they choose to do so.
If a union requests bargaining, the employer must provide a genuine opportunity for the union to advocate its position on contribution allocation, though there is no obligation to agree with the union’s proposed terms.
Unionized employers should also prepare for potential grievances framing the payroll deduction as an unauthorised wage reduction, and should calendar all critical dates as the January 2027 contribution deadline approaches.