The Maine Department of Labor has adopted the final rules for the state’s paid family and medical leave program, clearing the way for the new law to take effect when tax collections begin in January.

Starting next month, the state will impose a new 1% payroll tax, split evenly between employers and employees. Benefits will be paid out beginning May 1, 2026, to give time for the fund to build up a reserve. The law was originally passed in 2023 and signed into law by Gov. Janet Mills, but it has taken more than a year to put together the complex rules and regulations to launch the program.

Business groups, including the Maine State Chamber of Commerce, had objected to some of the proposed rules, including language saying businesses that offered their own private leave programs were not permitted to opt out of the tax collections until April 2026. But the Department of Labor changed that provision to allow businesses to opt out in 2025 if they could prove they were giving their employees an equivalent private paid leave benefit.

The fund created with the payroll tax revenue would be used to pay up to 90% of regular wages for up to 12 weeks for workers who are ill or need to take care of newborns or other family members, among other reasons. Employers with fewer than 15 workers are exempt from paying into the program, but workers at small businesses still will pay a 0.5% payroll tax and will be eligible for benefits.

Speaking on behalf of the Paid Family Leave Coalition, Destie Hohman Sprague, the executive director of the Maine Women’s Lobby, said she’s “thrilled” that the final rules are in place, and that they will help many Maine people. But she’s concerned about a provision that would allow businesses to claim an “undue hardship” and deny claims or require workers to give a notice so far in advance that it would be difficult to use the benefit. Barring an emergency, when the law goes into effect eligible workers will need to give their employers at least 30 days’ notice to claim the benefit.

“We will continue to have our eyes on this ‘undue hardship’ provision,” Hohman Sprague said. “We want to see the number and frequency of businesses claiming a hardship. We’re concerned this could open the door to unfair application of the law.”

The Maine State Chamber of Commerce had lobbied for changes to the “undue hardship” clause to make it easier for small businesses and seasonal employers to manage having fewer workers. In some cases, workers may be required to give more than 30 days’ notice to claim a benefit.

But Hohman Sprague said despite concerns about rules that could be exploited, Maine workers will benefit from the program.

“We know that no matter what, this is going to be a game-changing program for most workers and employers in Maine,” Hohman Sprague said.

Sen. Mattie Daughtry, D-Brunswick, rallies cheering supporters of paid family leave legislation in 2023 at the Maine State House in Augusta. Joe Phelan/Kennebec Journal

Patrick Woodcock, president CEO of the Maine State Chamber of Commerce, said that while the “undue hardship” changes are an improvement compared with the original proposed rules – which he said were too onerous – they still require businesses to prove they have such a hardship.

And Woodcock said while businesses offering an equivalent benefit would no longer have to pay into the program for 16 months before being exempted, they will still have to pay into a program they won’t be using for the first quarter of 2025.

“It is going to be taxing businesses that already have their own paid family and medical leave,” Woodcock said in an interview with the Press Herald.

In a statement, the chamber also pointed out that other states, such as Maryland, Oregon and Delaware, “revised their PFML implementation timelines to ensure their programs are launched effectively.” Oregon, for instance, delayed implementation by nine months.

The Department of Labor “should have the flexibility to implement the program unhindered by arbitrary statutory deadlines and on a timeline that works for employees, employers and ultimately the administrator of the state program,” Woodcock said in a statement.

Maine is one of 13 states, plus the District of Columbia, to have enacted paid family and medical leave. The federal government approved an unpaid leave program in the 1990s, allowing workers to take up to three months off without pay.

The Department of Labor received more than 1,600 comments about the proposed rules since this spring.

“We are excited to now have a final rule in place as we continue to stand up this program that will have such positive impacts for Maine’s workforce,” said Luke Monahan, director of the paid leave program.

The labor department will host webinars in December to walk employers through the process. For more information on paid leave, click here.