Small state, BIG impact: Delaware PFML offers challenges for employers 

Delaware’s Paid Family and Medical Leave program launches soon. For employers with 10 or more Delaware employees, contributions start on Jan. 1, 2025, and benefits start 12 months later. Some aspects of Delaware’s PFML leave mandate resemble other state laws, like up to 12 weeks of paid leave in a 12-month period and coverage for new child bonding, employee and family members’ serious health conditions and military exigencies. Like other states, a private plan option exists.

However, several differences make Delaware a PFML outlier. While the state is small, these differences are not.

Employee eligibility. In most states, eligibility is simply determined by earning a relatively small amount of wages in a specified base period. Delaware adopted two of the three federal FMLA standards: working at 12 months (not necessarily consecutive) for the current employer and at least 1,250 hours in the prior 12 months. The result is a waiting period that employers will need to track for PFML eligibility purposes. Part-time and seasonal employees may never reach those thresholds. For them, there is an uncommon waiver process – again managed by employers – so they can opt out of contributions.

Claims administration. An employer in Delaware’s public program will have more responsibilities than required by other states. The employer will have to verify that a leave application is for a qualifying reason, working within the state’s administrative system, LaborFirst. It gets more complicated if employees have out-of-state wages; employers must track this also. Essentially, employers become PFML claims managers in Delaware. One alternative is outsourcing PFML to a private plan (insured or self-insured). Many insurers have already been approved, but employer applications must be submitted by Dec. 1, 2024, to avoid the contribution requirement that starts in January. The Delaware Department of Labor refers to this outsourcing as the “TPA Handshake.”

Covered employers. Who’s in, who’s out? That can change as the workforce changes, based on a prior 12-month period. Employers under 10 Delaware employees are not covered but may opt in. Most employers with 10-24 Delaware employees need only comply with the parental leave portion of the law. Those with 25 or more must fully comply. The contribution difference between the two is more than double (0.32% vs. 0.8%); employers can have employees pay up to 50% of the contribution.

Differing leave amounts. Separate caps apply to each of the three categories of qualifying reasons:

• Parental leave: 12 weeks in a 12-month period
• Serious health conditions: six weeks in a 24-month period
• Military exigency: six weeks in a 24-month period

This variation may prove hard to communicate to employees and challenging to administer.

All employers with employees working in the state of Delaware must set up an account using LaborFirst and register with the state by Jan. 1, 2025. If not electing a private plan, payroll deductions must begin, effective on the same date. The first quarterly payment of contributions to the state is due on April 30, 2025. Employee notices are also required before January. The model notice is on the DDOL webpage, where more information can be found. See also this Mercer GRIST.