Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Last year, Delaware enacted the Healthy Delaware Families Act (HDFA), adding Delaware to an expanding list of jurisdictions with a paid family and medical leave (PFML) requirement. The PFML program is not yet live, and the obligation to provide paid benefits under the program does not begin until January 1, 2026, with employer and employee contributions beginning January 1, 2025.
On July 11, 2023, the Delaware Department of Labor’s Division of Paid Leave (Division) published an initial set of rules regarding the program. This article emphasizes key portions of the rules for Delaware employers as they prepare to implement this new PFML program.
Covered Employers and Employees
The HDFA applies to employers with 10 or more employees in Delaware. Employers with 10 to 24 employees in Delaware, however, must comply with the law’s Parental Leave requirements only; employers with 25 or more employees in Delaware are subject to all PFML requirements. Per the rules, employers should determine whether they meet either the 10-employee or 25-employee coverage threshold by counting the number of employees over the preceding 12-month period. Covered employees include employees who primarily work at a worksite in the state of Delaware, meaning they work at least 60% of their work hours physically in Delaware, and who meet or are reasonably expected to meet the employee eligibility requirement of 12 months of service and 1,250 hours of service within the previous 12-month period. Any “reclassified” employees must be counted but employees who are covered by a waiver of coverage form are not.
- Reclassified Employees: Employers may “reclassify” individuals who work primarily at a worksite outside Delaware in certain circumstances, in order to: (a) continue to provide coverage for Delaware employees who are temporarily assigned to an out-of-state location; or (b) make eligible for coverage those employees who are telecommuting or who work on a continuing basis out-of-state when they would normally be located in the state of Delaware. In order to meet the reclassification requirements, a reclassification form must be signed by both the employee and the employer stating that, while the employee is not physically located in the state of Delaware, the employer and employee voluntarily agree to designate the employee as a Delaware-based employee for the purposes of paying payroll contributions into the PFML program and to be eligible for PFML benefits under the terms of the program. Once an employee is reclassified, the employee will remain subject to the PFML program until both the employee and employer voluntarily sign a form to declassify the employee.
- Waiver of Coverage: If both the employer and the employee agree that the employee was not hired to work on a permanent basis and/or was not expected to work at least 25 hours per week, so that they reasonably do not expect the employee to be covered by the HDFA, the employer may submit a waiver of coverage form through the Division’s online portal. Waivers of coverage will be effective in the quarter in which they are received by the Division. Employers must still report wage information to the Division for employees subject to a waiver, and if at any point the Division determines that the employee has worked for more than 12 months and has satisfied the 1,250 hours-of-service requirement during the preceding 12 months, the Division will revoke the waiver. Upon revocation, the employer (but not the employee) will be responsible for making the required payroll contributions for past quarters in which the employee qualified for coverage, and the employee will become immediately eligible for PFML benefits. If a waiver is cancelled voluntarily, the employer and employee will thereafter be subject to the payroll contribution.
Once an employer meets either the 10- or 25-employee coverage threshold, the employer will remain subject to the program for at least a 12-consecutive-month period. After 12 consecutive months with a covered employee count below either the 10- or 25-employee coverage threshold, the employer will no longer be obligated to comply with the applicable provisions of the HDFA. However, employers with 10 to 24 employees may voluntarily “opt in” to allow its employees to access PFML benefits for family caregiver leave, medical leave, or qualified exigency leave through the program. Employers must provide notice to employees who gain or lose coverage under the HDFA due to the change in their employer’s headcount.
Reasons for Use and Duration of Benefits
The rules classify PFML benefits into four different “lines of coverage”:
- Parental Leave: Leave authorized for time off within the first year after the birth, adoption, or placement through foster care of a child.
- Family Caregiving Leave: Leave authorized for time off in the event of a serious health condition (illness or accident) of a child, spouse, or parent.
- Medical Leave: Leave authorized for time off in the event of the employee’s serious health condition (illness or accident).
- Qualified Exigencies: Leave authorized for time off for qualified issues that arise in connection with a military deployment.
Employees are eligible to receive up to 6 weeks of PFML in a 24-month period to be used for Family Caregiving Leave, Medical Leave, or Qualified Exigencies. The 24-month period is the 24-month period that begins on the first day of the requested leave.
Employees are eligible for up to 12 weeks of PFML in an application year to be used for Parental Leave. The “application year” is the employer’s designated 12-month period for leave under the federal Family Medical Leave Act (FMLA). If employees are combining Parental Leave with another line of coverage, employees are eligible for a maximum of 12 weeks of PFML in an application year.
Employers with 10 to 24 employees may temporarily reduce the Parental Leave maximum benefit duration from 12 weeks to a minimum of 6 weeks for claims submitted prior to January 1, 2031. To qualify for this option, employers must notify the Division of their intention to do so by January 1, 2024, and they must notify their employees of this decision in writing no later than December 1, 2024.
Employees who are on a Family Caregiving Leave for a family member who dies must notify the Division of the date of the family member’s death within 72 hours of the person’s passing. The Division may then continue to pay PFML benefits until seven days after the death of the family member or the previously approved end date for the leave.
Employees who choose to return to work before the conclusion of their approved leave will continue to receive PFML benefits for one week after the payment period in which they return. Presumably, this means that the employee will be permitted to receive payment from both their employer and the Division for a one-week period, resulting in an overpayment of wages.
The Division will approve PFML benefits for leave taken on an intermittent or reduced schedule basis, but only when it is medically necessary and supported by documentation. PFML benefits are payable in increments as small as one workday. If an employee is approved for and takes intermittent FMLA in smaller increments (e.g., 2 hours), the employee will not be eligible for PFML benefits during that absence. The rules do not contemplate the possibility of taking Parental Leave intermittently.
Payroll Contributions and Amount of Benefits
Payroll contributions will begin on the later of: January 1, 2025, or the first day of the payroll period after the employer meets or exceeds the 10- or 25- employee coverage threshold. Payroll contributions will be submitted to the Division on a quarterly basis.
For 2025 and 2026, contributions will be based on the following percentages of wages: .32% (Parental Leave); .4% (Medical Leave); and .08% (Family Caregiver Leave/Qualified Exigencies). Beginning in 2027, the state will adjust the contribution rate based on consumer price index changes.
Employers must contribute 50% of the total contribution, but they may elect to contribute more. If an employer decides to contribute more than 50%, the employer must file a change with the Division through the online portal system and provide notice to all affected employees by December 15 of the year prior to the January 1 effective date the following year.
Contributions are calculated based on the employee’s FICA wages earned in Delaware, subject to the annual FICA limit.
PFML benefits will be calculated only on the basis of FICA wages earned within the state of Delaware. The online portal system will calculate an employee’s weekly benefits by taking the employee’s average gross weekly wages for the 52 weeks prior to the submission of the claims application and multiplying that average weekly wage by the benefit percentage (80%). If the result of the calculation is less than $100, the weekly benefit amount for that individual will instead be the average of the employee’s weekly wages. If the average of the employee’s wages is more than $900 (the current maximum benefit), the employee’s weekly benefit amount will be capped at $900. The maximum weekly benefit amount will increase annually based on consumer price index changes beginning January 1, 2028.
Employee Notice Obligations
Under the rules, employees generally can be required to provide employers with at least 30 days’ advance notice of a need for leave under the HDFA. If 30 days’ notice is not practicable, because of a lack of knowledge of approximately when leave will be required to begin, a change in circumstances, or a medical emergency, notice must be given as soon as practicable, considering all of the facts and circumstances in an individual case.
If the need for leave was clearly foreseeable to the employee at least 30 days in advance of the leave but the employee fails to give timely advance notice with no reasonable excuse, the employer may delay coverage until 30 days after the employee provides notice.
Coordination with Other Leave Programs
Employers will need to continue to navigate other leave programs, including the federal FMLA, short- and long- term disability programs, and other paid time off policies. However, this topic has been reserved for future rulemaking.
The Division noted that it had received numerous comments about that section, concluding that it was in the best interest of all stakeholders to review and discuss the coordination of benefits further at a future time. Therefore, we suspect additional rulemaking will be forthcoming on these issues.
As with most other PFML programs across the country, employers may opt to use a private PFML plan rather than the state’s PFML program. The private plan must be at least as generous as the public plan, offering the same rights, protections, and benefits as the public plan. Employers may require employees to contribute to the private plan, but not more than what employees would have contributed under the state plan. Employers may also opt for a hybrid approach – i.e., a private plan for certain lines of coverage only and the state PFML program for the remaining lines of coverage. Employers may purchase an approved insurance plan or may apply for a self-insured private plan.
For employers seeking private plan approval from the outset of the program on January 1, 2025, the opt-out form will be available on the Division’s online portal from September 1, 2024 through December 1, 2024. For all subsequent years, employers must seek private plan approval or annual renewal between October 1 and December 1, to be effective January 1 of the following calendar year.
Exemptions from Coverage for Pre-existing Policies
The Division also provided additional guidance about the HDFA’s unique “grandfathering” provisions. Employers that offered private paid time off benefit plans that were in place before May 10, 2022 may be exempt from compliance with the HDFA until December 31, 2029 if their plan is deemed “comparable” to the state’s public plan and they were made available to all employees.
As with private plans, a hybrid approach may be possible – i.e., employers may utilize a grandfathered policy for certain lines of coverage only and the state PFML program for the remaining lines of coverage. To qualify for this exemption, employees may not be required to contribute more to the employer’s grandfathered plan than what they would be required to continue under the state PFML program. Additionally, the grandfathered plan’s benefit percentages, maximum benefits, and benefit duration must be within 10% of the state PFML components:
- Benefit Percentage: Employees must receive at least 72% of their average weekly wages.
- Maximum Weekly Benefit: Employees must be eligible for a maximum weekly benefit of at least $810.
- Benefit Duration: Employees must be eligible for at least 10.8 weeks (54 days) of Parental Leave. For Family Caregiving Leave, Medical Leave, or Qualified Exigencies, employees must be eligible for at least 5.4 weeks (27 days) of leave.
For a Parental Leave exclusion, the grandfathered benefit must provide coverage for birth, adoption, and fostering of a child and offer those benefits regardless of the parent’s sex or gender or the parent’s marital status.
Any grandfathered plan cannot be altered unless the change improves the benefit offered to employees and is approved by the Division.
Short-term disability plans are eligible to be grandfathered as an exemption to the Medical Leave provisions of the HDFA. However, the Division notes that due to the number of short-term disability plans in the state, a high volume of grandfathering requests could threaten the solvency of the program. In that event, the Division may terminate grandfathered status for Medical Leave approved for all employers before December 31, 2029.
The Division has noted that the online portal will open for grandfathering applications on October 1, 2023, and it will close on January 1, 2024.
Next Steps for Employers
While the obligation to withhold and make contributions and the obligation to provide benefits under the HDFA are still a ways off, employers should consider now whether they intend to apply for a grandfathering exception or a private plan exception and be cognizant of the following key dates:
- October 1, 2023: Online portal opens to submit grandfathering applications
- January 1, 2024:
- Deadline to submit grandfathering applications
- Deadline for employers with 10 to 24 employees to notify the Division of their decision to reduce the Parental Leave maximum benefit duration from 12 weeks to a minimum of 6 weeks for claims submitted prior to January 1, 2031
- September 1, 2024: Online portal opens to submit private plan applications
- December 1, 2024:
- Deadline to submit private plan applications for the 2025 calendar year
- Deadline for employers with 10 to 24 employees to notify their employees of their decision to reduce the Parental Leave maximum benefit duration from 12 weeks to a minimum of 6 weeks for claims submitted prior to January 1, 2031
- December 15, 2024: Deadline to notify the Division and employees if the employer will contribute more than 50% of the total contribution amount
- January 1, 2025: PFML contributions begin
- January 1, 2026: PFML benefits are available
Employers are encouraged to review the Delaware Department of Labor website, which sets forth these key dates and provides additional details about the HDFA.