The Maine Supreme Court has ruled against Bath Iron Works (BIW) and the Maine State Chamber of Commerce in their lawsuit challenging the rules adopted by the Maine Department of Labor (MDOL) when implementing the state’s new Paid Family and Medical Leave (PFML) Program.
Initially filed in January, the lawsuit brought by BIW and the Maine Chamber argues that the portions of the rules adopted by MDOL for the PFML Program contradict its establishing legislation.
Separately, BIW argued that these rules represented a violation of Maine businesses’ constitutional rights.
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Under the program’s establishing law, businesses that intend to provide a private alternative to the state’s program have the option of doing so. Applications must be submitted to and approved by the state, at which point contributions from both the employees and employer would no longer be required.
Due to the rules established by the MDOL, however, such exemptions were not able to take effect until several months after the start of premium collection, and the money paid by employers and employees in the meantime in order to maintain compliance with state law would not be refundable.
The Maine Supreme Court has now sent this case back to the Superior Court for further proceedings consistent with Tuesday’s opinion.
“We accept the report and determine that the Department’s rules do not conflict with the Act and do not constitute a take of private property for public use under either the Maine Constitution or the United States Constitution,” the decision said.
The Court goes on to argue that the MDOL’s rules concerning private plan substitutions are consistent with the statutory authority afforded to the Department by the PFML Program’s establishing legislation.
According to their interpretation, the law’s “plain language does not exempt employers from remitting premiums until the Department approves a substitute private plan.”
“The statute is unambiguous regarding whether the Department can require an employer to remit nonrefundable premiums int the fund while also delaying it from applying to substitute a private plan until the start of the second quarter of 2025,” the Court said. “Nothing in the statute mandates or even anticipates refunds for employers that eventually obtain an exemption from the requirement to remit premiums.”
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The opinion then goes on to explain why the Court believes that the rules are also consistent with the Maine and United States constitutions.
Key to their understanding of the regulation’s legality is the voluntary nature of opting to pursue a private plan substitution.
Although participation in the PFML Program itself is mandatory under the law, applying to substitute a private plan is optional. Consequently, the Court argues that the collection of nonrefundable premiums prior to a substitution being approved cannot be considered a “regulatory taking” because employers are voluntarily choosing the path of substitution.
All qualifying businesses in Maine are required to participate in the PFML Program — thus contributing monthly premiums to the fund well in advance of when the benefits are set to take effect — but employers may voluntarily choose to substitute a private plan.
From this perspective, the months during which employers who have secured a private plan substitution are not required to contribute to the state’s program are seen as a bonus not afforded to employers more broadly, whereas the plaintiffs in this case have framed being required to pay in at all as a negative that is experienced only by this subgroup.
The Court also found that there was “no identifiable property right or interest at stake” in this case that “could form the basis of a takings claim.” Referencing precedent from the U.S. Supreme Court, the opinion argues that the “mere ‘imposition of an obligation to pay money’ does not constitute an unconstitutional taking of property when it does not involve an identifiable property interest.”
“Moreover, that an employer can substitute a private plan for the PFML program does not create a corresponding property right in premiums that have already been remitted to the fund, particularly when employers who are not substituting a private plan must also remit premiums for the same period,” the Court said.
Due to the specificity of the requirements that a private plan must meet in order to be substituted for the state’s public plan, all eligible plans needed to be developed from scratch and subsequently be approved by the Department before businesses could purchase coverage.
Because of this, there was expected to be a gap between the launch of the program and the availability of private plans.
In light of this, the Court argued that the MDOL’s rules for the program are reasonable and “avoided administrative problems related to employers applying for the exemption before private substitute plans had been pre-approved.”
This case will be sent back to the Maine Superior Court for further proceedings consistent with Tuesday’s opinion.
