The Maine State Chamber of Commerce and Bath Iron Works have filed a lawsuit against the Mills administration challenging how the state is implementing a new paid family and medical leave program.

The lawsuit focuses on the fact that a 1% payroll tax — which is split evenly between employer and employee — took effect this month while companies will not get the opportunity to opt out until after April 1.

The lawsuit contends that the gap in time is harmful to companies — such as BIW and others — that are now required to pay into the state’s program even though they plan to offer an equivalent benefit to their workers and not rely on the state-funded program. Companies that have or plan to create equivalent leave programs cannot apply to opt out until April, and then will have to continue paying the tax while the applications are reviewed.

The lawsuit was filed in Kennebec County Superior Court in Augusta on Monday and lists the Department of Labor and Labor Commissioner Laura Fortman as defendants.

“The rule is silent on how long the (Department of Labor) can take to review the application, and it does not establish any deadline by which DOL must take action on an application,” the lawsuit states. “The rule thus allows an indefinite period of time to process an employer’s application for exemption from premiums.”

The rule does not allow for refunds for employers who are later granted an exemption from paying into the program.

Advertisement

For BIW, that represents a $620,000 payment into the system that will not be refundable even if the Department of Labor were to quickly approve BIW’s exemption request, the suit states. BIW doesn’t offer an equivalent paid leave benefit now, but intends to do so, the suit said.

David Hench, a spokesperson for BIW, said in a statement that “the regulations implementing this law have not honored the language of the law.”

“This lawsuit does not seek to block the law, its implementation or the benefits it provides, but simply seeks to correct the deficiency of the rule with respect to employers choosing private insurance,” Hench said.

Cate Blackford, public policy director for the Maine People’s Alliance, a progressive advocacy group that lobbied for the law, said the measure went through an “extensive” vetting, including input from many business interests, both before the law passed and while the rules were being devised.

The $620,000 for BIW “sounds like a big number,” she said.

“That is one half of 1% of their payroll for four months,” Blackford said. “That’s a massive number for most of us, but that’s actually a really small number for them.”

Advertisement

Katie Clark, spokesperson for the Maine State Chamber of Commerce, said that the labor department’s rules are “contrary to the legislation enacting the program, harming employees and employers alike by requiring employers that intend to offer a private family and medical leave plan to pay a nonrefundable sum into a state-run program that their employees will never utilize or benefit from.”

An earlier draft version of the rules would have required employers to pay into the program for the first 16 months without being permitted to opt out. But after complaints by the chamber and others, the state shortened the time before accepting opt-out applications to the first three months of the year.

In order to give time for the fund to build up, employers and employees began paying into the paid family leave program this month, while benefits will begin to be paid out to eligible workers starting in May 2026.

Jessica Picard, Maine Department of Labor spokesperson, said the department is “unable” to comment on pending lawsuits.

The law was originally approved in 2023, and the Maine Legislature gave the Mills administration until December 2024 to devise the rules for the program. The rules were revised in 2024 to make them more business-friendly, but the chamber still objected to certain provisions.

The measure was shepherded through the Legislature by Senate President Mattie Daughtry and . Kristen Cloutier of Lewiston, both Democrats.

Advertisement

Daughtry and House Speaker Ryan Fecteau issued a joint statement saying that the rules were crafted after hearing much input from companies and workers.

“The rules regarding employer contributions were themselves a compromise,” Daughtry and Fecteau wrote. “Rather than requiring employers to contribute five quarters ahead of Mainers being able to access the program, they now are only required to contribute for one quarter.”

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.

Picard, in a statement and speaking generally about the program, said that “in the long-term, this program will support businesses by supporting the recruitment of employees and helping to retain those employees, ultimately contributing to stronger businesses and a stronger economy.”

Related Headlines

Join the Conversation

Please sign into your CentralMaine.com account to participate in conversations below. If you do not have an account, you can register or subscribe. Questions? Please see our FAQs.