(The Center Square) — Maine is facing a legal challenge over its new paid leave law from business owners who argue that the rules for the payroll tax to fund the program are unfair to employers.
Under the Paid Family and Medical Leave, workers can take up to 12 weeks of paid leave a year, including for the birth of a child, a medical condition and caring for family members with serious health conditions. The state began collecting a payroll tax to fund the program this month, but the benefits won’t be available until next year.
The Department of Labor’s regulations to implement allowing employers who plan to offer comparable paid leave plans for their employees to apply for an exemption beginning April 1, if they meet the criteria.
But a lawsuit filed by the Maine Chamber of Commerce and Bath Iron Works argues that the regulations require employers to make “irrevocable” payments into the program through the first quarter of 2025, even if they plan to seek an exemption for offering a similar pay leave plan.
“Not only will these employers be required to remit at least 1/4 worth of premiums into the fund, but they also will not be able to obtain a refund for anything paid into the fund on behalf of their employees — even if they provide private plans that are at least the substantial equivalent of the state plan throughout the entire period,” lawyers for the plaintiffs wrote in the 20-page complaint, filed in Kennebec County Superior Court.
The state’s paid leave program was approved in 2023 as part of a state budget signed by Gov. Janet Mills and covers more than 90% of the state’s workforce.
Workers and businesses with 15 or more employees are required to contribute to the program and split the cost of a new 1% payroll tax. Employers with at least one employee will be required to submit quarterly premiums and may withhold up to 0.5% of employee wages to split the cost or cover it entirely, depending on the employer’s size, according to the regulations.
The chamber has previously called on state lawmakers to remove the tax on employees and employers under the existing PFML, arguing the rule requiring them to “pay for a system they will never” use is unconstitutional.
Republicans have filed an emergency legislation to defund the program, arguing that the payroll tax will hurt workers and employers when many are struggling with higher costs and the ongoing pinch of inflation.
“Mainers right now are struggling with high grocery costs, high electricity bills, high heating home costs and high gas prices,” state Rep. Joshua Morris, a Turner Republican, said in a statement. “Adding another tax and taking another cut from their paychecks weekly, without being able to access the benefits for another year, I think, is irresponsible.”