Paid Family Leave for the Self Employed

The Massachussets Paid Family Leave Law for Contractors and the Self Employed

For those who work outside of the W-2 system- self employed, solopreneurs, freelancers, independent contractors- you have lived for a long time outside of the usual safety nets available for traditional employees.  One such safety net is the availability of leave if you or a family member have a health problem, or if you give birth or adopt a new child.

Starting January 1, 2021, however, you may be able to take advantage of the new Massachusetts Paid Family Leave Act ("PFMLA").  This could happen in one of three ways:

1. If you are self-employed, you can choose to "opt in" to the program by making contributions to the PFML fund.  If you have made the required contributions for two of the last four quarters before you need leave, you should be eligible.
   
2. If you are working for someone else as an independent contractor and 50% or more of that company's Massachusetts workforce is paid on a 1099-MISC basis, you are a covered individual under the PFML.
3. If you are paid as a contractor but under Massachusetts law should be considered an employee, you may have a civil claim against your employer if you need but cannot access the paid family medical leave benefit

Many self-employed people already protect themselves with disability insurance.  This is still a valuable tool, especially if you are purchasing a long term disability policy, which will provide you much more coverage than the time-limited PFML. 

However, there are many things covered by PFML that will not be covered by a disability policy.  These include time off to care for a family member, parenting and bonding time if you adopt and/or are not the parent giving birth to a child, and certain benefits for military families that are simply not available in disability policies.

What Are the Benefits of Paid Family Leave?

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​As of January 1, 2021, family leave is available to bond with a child within the first 12 months of the child's birth or placement for adoption or foster care with the employee, to care for a family member who is a covered service member, or cover a "qualifying exigency" arising from a family member's active duty status or notification. Medical leave is available for a covered individual with a serious health condition.

Beginning July 1, 2021, family leave will also be available to care for a family member with a serious health condition. 

Family leave is limited to 12 weeks in a benefit year, similar to the federal FMLA.  Individuals may take up to 20 weeks for medical leave (for their own serious health condition), and up to 20 weeks.  Leave taken to care for a qualified service member may be up to 26 weeks.  All types of leave combined are limited to 26 weeks in a benefit year.

For example, you might take 12 weeks family leave after the birth of a child.  If in the same year you develop a serious medical condition, you would qualify for 20 weeks of medical leave, but in reality could only take 14 weeks in that benefit year before reaching the cap of 26.

Opting In to Paid Family Leave

As a self-employed individual, you can  opt in to this program by creating a Mass Tax Connect account (see instruction page from the Commonwealth).  You will have to make the required contribution, which is less than 1% of your earnings.  If your net income fluctuates, as it does for most self-employed people, you might want to consult an accountant to make sure you are correctly calculating your "income" for purposes of PFML contributions.

You will not be able to set this up immediately before a leave.  You are required to have paid in for two of the last four quarters before accessing the PFML benefits.  The regulations also require you to stay enrolled for three years.  Nonetheless, this may be a cost-effective way of hedging your bets in case you have a need to take some time off and protect at least a portion of your income.

Paid Leave for 1099 Employees

In certain circumstances, people who are paid by an employer on a 1099-MISC can access the PFML benefits.  The statute requires that 50% or more of the employer's workforce be paid in this way.  Once you reach that threshold, your employer is required to make contributions on your behalf as if you were an employee, and you have a right to apply for benefits.

Because of the 50% threshold, this is unlikely to reach all or most people in Massachusetts who provide services on a contractor or 1099 basis.  However, there are industries and businesses in which the use of contractors is so widespread that the 50% mark might be met easily.  Consider ride sharing services, marketing agencies that use freelancers, certain service industries that often rely on "gig" workers, for example.

If you think the company you work for might meet the 50% level, you should check whether they are making contributions on your behalf (you should see it as a deduction on your paycheck), and request that they begin doing so if those contributions are not being made.

Improper Classification as a Contractor and Family Leave

Though the PFMLA does not recognize all contractors as eligible for leave, there are other laws that protect you if you are paid as a contractor but really should be paid as an employee.  In fact, many people who are paid on a 1099 are not properly classified according to the Massachusetts three-part test.  If you are wrongly classified, you have a right to seek payment for your damages for that classification.

Historically, those damages have included your liability for self-employment taxes, and benefits that you did not receive that were available to W-2 employees in the company.  If you are blocked from receiving paid family leave because of your classification, that could be another kind of damage recoverable from your employer.

How We Can Help

We can help you navigate these issues and get clarity on your rights and obligations in the face of a need for leave that you may be facing.  You can use the button below to schedule a call back from a member of our team, or simply give us a call at  781-784-2322.

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