All Maryland employers with at least one employee must offer paid family and medical leave through a state-run insurance plan starting next year, or actively opt out with a state-approved plan.

State lawmakers designed the statewide insurance plan in 2022 to keep workers from having to choose between their health and families, and their paychecks. Mandatory state registration for employers opens this fall.

But some employers worry the program will penalize those already offering benefits, drive up costs and overly burden small businesses that can’t afford the state’s plan.

The program will hurt companies that have spent years investing in leave and other benefits, said George Tunis, founder and CEO of Pocomoke City-based manufacturer Hardwire, which makes body and vehicle armor for the military and law enforcement agencies.

“For a small business like Hardwire, which already provides paid leave and supports employees during life’s challenges, Maryland’s FAMLI program creates significant additional administrative burdens and costs,” Tunis said in an email. “The state has effectively put in place another mandatory payroll deduction that reduces employee take-home pay.”

Most workers in Maryland will see deductions in their paychecks for Maryland’s Family and Medical Leave Insurance program starting Jan. 1, 2027, and all employers with 15 or more workers must contribute. Employees can start taking benefits a year later, on Jan. 1, 2028, after initial contributions create a trust fund.

Tunis questioned replacing employer-managed benefits with a government-run system that opens itself to “fraud, waste and abuse.”

But advocates say it’s long past time for the state to step in to ensure paid coverage for all workers. About 60% of workers in the state have no family or medical leave, or none that is paid, according to Maryland Family Network.

“Life can be extraordinarily unpredictable,” said Lisa Klingenmaier, the group’s deputy director of public policy. She said the law, part of a “national movement,” gives workers facing serious health conditions time to care for themselves or family members and “not have to worry about making rent or putting food on the table.”

Maryland has joined a dozen states and Washington in passing a statewide paid-leave program. It covers up to 12 weeks per year with benefits of up to $1,000 per week for an employee to care for an ailing relative, spend time with a newborn baby or take care of their own serious health conditions.

Paid benefits would have made a world of difference to Terrie White, a Northeast Baltimore home healthcare and cleaning agency employee who has been out of work without benefits for months because of heart surgery and knee problems. She exhausted unemployment benefits and relies on her adult children for financial help.

When Maryland’s insurance plan takes effect, “a lot of families will benefit and be able to pay their bills and pay their rent and put food on the table,” White said. “When I get back in the workforce, it will help me.”

The Maryland Department of Labor, the program’s administrator, said it has been preparing employers through seminars, email updates and information about the program on its website.

The requirements have alarmed some small businesses, said Glenn Arrington, founder of Bel Air-based Group Benefits Strategies, a boutique brokerage agency that helps small-business clients with payroll as well as choosing and maintaining employee benefits.

He said some of his clients object to added costs that will eat into profits. Others view the program as forcing workers, including part-timers, to pay for benefits they’re unlikely to use rather than giving them an option for coverage.

“It’s a good benefit, but they’re forcing people to do it,” Arrington said. “It’s not a choice. A lot of these small-business owners operate on small profit margins. And they rely on every employee, so when someone goes out, it’s hard to pick up the slack.”

Carmen Demarco, a co-owner of Barcocina in Fells Point, said he notified employees of the upcoming requirement after attending a presentation at a Fells Point Main Streets meeting. The restaurant’s owners have not determined whether the restaurant will join the state plan or continue offering paid leave through a private plan. Either way, he expects that his costs will likely increase but it’s unclear by how much.

“I’m more in the mode of getting through a pretty busy summer,” he said.

The state in 2023 announced the initial contribution rate of 0.90% of covered wages. Employers with 15 or more workers will be required to split that rate with their employees. Businesses with fewer than 15 employees are not required to contribute but must withhold a portion of their pay; 0.45% of an employee’s covered W2 earnings will go to the state to fund the program. The rate can increase or decrease based on factors such as the number of participants.

Klingenmaier, who also served as campaign manager for Time to Care, a coalition that pushed for the law, said the program will benefit very small employers, of fewer than 15 workers, who can offer the benefit to their workers but will not be required to contribute. And participation by nearly all employers statewide will keep costs affordable, she said.

When state labor department registration opens, employers will have the chance to opt out by proposing insurance rates and benefits offered through a commercial carrier or self-insurance. Those with 50 or more employees already offering paid family and medical leave need to show their benefits would be equal to or better than the state plan.

Some business leaders say Maryland workers already benefit from a framework of state and federal leave protections, such as the state’s sick and safe leave law, federal family and medical leave, Maryland parental leave and other voluntary employer-provided leave. And some say the leave requirement comes at a time when taxes, regulations and costs of housing, energy and other factors have made it harder for the state to attract, keep and grow businesses and workers.

Mary Kane, president of the Maryland Chamber of Commerce, said the program amounts to another layer of requirements with costs for workers and employers.

The chamber “is concerned that those costs and compliance requirements will add to the economic pressures already facing Maryland workers and employers, at a time when affordability and competitiveness are already major challenges,” she said in an email.

Kimberly Prescott, president of Prescott HR, a Columbia-based consulting firm that has worked with employers to put FAMLI requirements in place, hopes state lawmakers will revisit and amend the policy to more closely mirror the existing federal Family and Medical Leave Act.

FMLA, for instance, applies to private employers only if they have at least 50 employees, unlike the state insurance program. The state law has broadened FMLA’s definition of “family member” from spouse, child and parent to extended relatives.

Unlike under federal law, workers are eligible to take leave if they have worked at least 680 hours in jobs based in Maryland in the four quarters before they apply or leave begins, including current and previous employers.

A worker “can go on leave as soon as they get to their new employer,” Prescott said. “I find that untenable. …From a planning perspective, there’s no way to anticipate when someone will go out,” because they can count hours worked for a previous employer.

“I find it to be very challenging to be an employer in Maryland,” she said, adding that many employers likely know the change is coming but don’t yet understand the implications.

An analysis by the Maryland Department of Legislative Services shows the expected cost of the FAMLI program to the state’s economy has more than doubled since the law was enacted in 2022. The price is now projected to reach $1.8 billion in fiscal year 2027 alone.

Chamber officials say workers and employers in Maryland will shoulder those costs while facing higher taxes, increased fees, rising energy costs, workforce challenges and a growing regulatory burden — making it harder to attract investment, create jobs and support wage growth.

On the flip side, too many workers who fall ill and are left without a paycheck end up losing their housing or ability to pay for medicine, Klingenmaier said. Even if workers are currently offered medical or family leave, it might be unpaid or less comprehensive than that required by the state.

“Without the statewide program, there will continue to be Marylanders losing housing, losing pay and racking up debt,” she said.

One IT worker leaving his Harbor Point job for the day last week said he has no medical or family leave and little paid time off. When health or other emergencies arise, the father of two said he needs to take an unpaid leave of absence.

“It’s hard, especially with kids during the school year, when they get sick, and trying to get time off,” said the worker, who identified himself as Aaron and declined to give his last name because of concerns about losing the current job. “Prices are only going up. Kids are going to get sick, and you want to be there for your family.”

Mary Miles, who runs Dimples Bar & Grill in Locust Point with her husband and daughter, has no employees now but expects to hire as many as 10 for a second location opening later this summer in Fells Point.

Miles said she is in favor of paid benefits for employees, but “when lawmakers create laws, they have businesses in mind like Walmart and Amazon — and don’t think about the teeny, tiny small businesses that already have small margins of profit.

“We are all for anything that’s going to support the employees,” she said, “but we struggle with how that will affect us.”

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