2025 Legislative Update

FOR YOUR PRACTICE | EMPLOYMENT LAW

2025 Legislative Update: Legislation Impacting Employers Throughout the State

BY FIONA ONG, ESQ.

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TYPICALLY, BUSINESSES IN MARYLAND face onerous new employment laws following the state’s annual legislative session. This, however, was an unusual year.

Perhaps distracted by budget concerns, the Maryland General Assembly was remarkably restrained in the labor and employment area this year. Only three laws were passed, despite a multitude of employment bills (e.g., increased minimum wage, increased salary level for overtime exemptions, expansion of the misclassification law to all employers, harassment reporting and training requirements). Moreover, two of the three new laws—a delay to the paid Family and Medical Leave Insurance program and clarification of the Parental Leave law—were actually positive developments for employers, while the third— expanded military protections—has little practical impact for most employers.

An 18-Month Delay for the Paid Family and Medical Leave Insurance Program As many Maryland employers know, in 2022, the General Assembly passed a law, over then-Governor Larry Hogan’s veto, to create a paid family and medical leave insurance program (FAMLI). The program will apply to all employers with employees in Maryland. It will provide eligible employees with 12 weeks of paid family and medical leave, with an additional 12 weeks of paid parental bonding leave when an employee has taken FAMLI leave for their own serious health condition (for a possible total of 24 weeks of paid leave).

Employees are eligible for FAMLI leave if they have worked for any Maryland employer, not just their current one, for 680 hours in the prior 12 months. While taking FAMLI leave, employees are guaranteed continued health care coverage and, with very limited exceptions, job reinstatement.

In addition to parental bonding leave, FAMLI covers reasons similar to those under the federal Family and Medical Leave Act (FMLA): the employee’s own serious health condition, to care for a family member with a serious health condition, to care for a service member who is the employee’s next of kin, or because of a qualifying exigency arising out of the deployment of a service member who is the employee’s family member.

However, there are several notable differences between the leave entitlements under the federal FMLA and FAMLI. Among them, FAMLI’s definition of “family member” is considerably broader than FMLA’s parent, child, and spouse. It also includes a legal guardian or ward, domestic partner, grandparent, grandchild, and sibling. Moreover, while military exigency leave is tied

Among other things, the Employment and Insurance Equality for Service Members Act expands employment protections for military personnel from just the U.S. Armed Forces and National Guard and Reserve to include all uniformed services and reserve components.

insurance fiasco during the COVID-19 pandemic, it recognized that it needed more time to set up this complicated program correctly. Under the most recent delay, contributions from employers and employees to fund the program will begin January 1, 2027, and benefits will begin some point thereafter, but no later than (and most likely close to, if not on) January 3, 2028.

Other important dates were also changed. The initial contribution rate (which cannot exceed 1.2% of an employee’s wages, up to the Social Security wage base ($176,100 in 2025)) will now be set by the Secretary of Labor on or before May 1, 2026. Thereafter, the Secretary will set the rate by November 1 each year, to take effect on the following January 1.

The legislation also proposes a new definition: “Anchor Date,” meaning the earlier of when an application for benefits is complete or when FAMLI leave begins. The wage rate for the employee, which is used to calculate their benefit amount, will then be based on the highest of the previous four calendar quarters immediately preceding the anchor date.

Finally, the legislation also provides for a possible annual increase in the weekly benefit amount tied to the Consumer Price Index.

One additional note: the MDOL has engaged in an extensive regulatory process over the past several years, and it finally released proposed regulations in two parts, last fall and earlier this year. However, following the passage of the implementation delay, those regulations have now been removed from the FAMLI webpage. Given these circumstances, it is possible, even likely, that the MDOL will issue a revised set of proposed regulations.

Frankly, most employers view the forthcoming FAMLI program with a great deal of trepidation. The contribution cost is effectively yet another payroll tax that increases the financial burden of

to the deployment of a service member, the deployment must be to a foreign country under FMLA, but not under FAMLI. This $2 billion program will be administered by the State and funded by contributions from employers and employees.

Contributions were originally set to begin October 1, 2023, with benefits starting January 1, 2025. The Maryland Department of Labor (MDOL) was directed to issue regulations to implement the provisions of the law.

Setting up the FAMLI program has been challenging, and the General Assembly passed legislation to delay implementation, first in 2023, then again in 2024, and at the request of the Maryland Department of Labor (MDOL), yet again this year. To the MDOL’s credit, and drawing lessons from its unemployment MARYLAND BAR JOURNAL | VOLUME 7 ISSUE 1 25

The only significant employment law to pass, the FAMLI delay, benefits Maryland employers, while the other new laws only have limited effect.

doing business in Maryland. For large employers, the sum total of these contributions is significant. For small employers, these contributions cut into increasingly narrow profit margins. And, as many employers woefully know, managing extended or unpredictable intermittent leave situations while keeping their business operations running can be incredibly complicated. Thus, this law brings no small amount of relief for employers, particularly in this turbulent economic climate.

A Clarified Definition of Employer Under the Parental Leave Act The federal FMLA, which provides up to 12 weeks of unpaid leave for various reasons, including parental bonding time, applies only to employers with 50 or more employees. To extend similar rights to employees of smaller employers, the Maryland General Assembly passed the Parental Leave Act in 2014, requiring employers with 15–49 employees in Maryland to provide eligible employees with up to six weeks of unpaid leave for purposes of childbirth, adoption, or foster care placement.

Although intended to cover those smaller employers to whom the federal FMLA did not apply, the language of the law created a situation where an employer could, in fact, be subject to both. Because FMLA coverage is determined by the total number of employees within the company, an employer with only a few employees in Maryland, but with more than 50 throughout the country, would end up being covered by both laws.

This legislation clarifies that the definition of “employer” under the Parental Leave Act does not include those who are covered by the federal FMLA. While this may be useful for those larger, multi-state employers with small operations in Maryland, it is important to note that the Parental Leave Act will effectively become moot once FAMLI, and its guaranteed 12 weeks of parental bonding leave for all eligible Maryland employees, finally takes effect.

(Somewhat) Expanded Protections for Service Members Among other things, the Employment and Insurance Equality for Service Members Act expands employment protections for military personnel from just the U.S. Armed Forces and National Guard and Reserve to include all uniformed services and reserve components. This means that, in addition to the Army, Navy, Air Force, Marine Corps, Space Force, and Coast Guard, the employment protections under Maryland 26

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law now also apply to the National Oceanic and Atmospheric Administration and the Public Health Service.

The law specifies that the expanded definition impacts certain existing employment protections: •

Permissible hiring preferences for eligible veterans (meaning one who received an honorable discharge or certificate of satisfactory completion of uniformed service), as well as the spouse of an eligible veteran who has a service-connected disability, the surviving spouse of a deceased eligible veteran, and the spouse of a full-time active member of the uniformed services.

•

Leave on the day that the employee’s spouse, (step) parent, (step)child, or sibling is leaving for, or returning from, active duty outside the United States as a member of the uniformed services.

•

FAMLI leave, once it takes effect, for certain family military leave reasons: to care for a service member with a serious health condition who is the employee’s next of kin, or for certain qualifying exigency reasons related to the deployment of a service member.

Realistically, the expanded definition will have minimal impact on most employers. The number of employees with family members working for the National Oceanic and Atmospheric Administration or the Public Health Service is likely not high.

Conclusion Employers may heave a sigh of relief with regard to this latest General Assembly session. The only significant employment law to pass, the FAMLI delay, benefits Maryland employers, while the other new laws only have limited effect. Employers should enjoy this brief respite, as it is likely the General Assembly will impose more burdens and obligations on employers in future legislative sessions. __________ Fiona Ong is a shareholder in the Baltimore office of Ogletree Deakins. She partners with managers and human resources to help them balance the needs of employers with the rights of employees in order to achieve business success.