Maryland’s FAMLI Program: A Looming Burden For Small Businesses

CALIFORNIA, Md. — Small businesses are the foundation and beating heart of Maryland’s economy — family-run shops, local contractors, boutique firms, and small organizations that keep our communities strong.

Yet a new law threatens to place an unbearable strain on these very businesses.

The Maryland Family and Medical Leave Insurance (FAMLI) Program, set to start collecting funds from Maryland businesses Jan. 1, 2027, was designed with good intentions — to help workers manage family or medical needs without losing income.

The truth is, as a small-business owner, you’re already stepping up for your employees when family or medical needs arise, finding flexible, practical solutions that balance compassion with the realities of running a business. If your employees weren’t satisfied, they would leave.

And now, the state of Maryland is stepping in to dictate how these deeply personal situations should be handled — prescribing how your team and your business should be managed.

Here are a few notable elements of the FAMLI Program (as of this Oct. 20, 2025, writing):

• No Exemptions for Small Businesses: The program applies to all employers, regardless of size. Even the smallest businesses with just one or two employees are subject to the same requirements as large corporations.
• Extended Paid Leave Obligations: Employees may receive up to 12 consecutive weeks of paid leave for a qualifying absence approved by the state. Qualifying scenarios for employees currently include:
  • To care for or bond with a child of the covered individual during the first year after the child’s birth, or during the process through which a child is being placed with the covered employee through foster care, kinship care or adoption.
  • To care for themselves if they have a serious health condition.
  • To care for a family member’s serious health condition.
  • To care for a service member with a serious health condition for whom the covered employee is next of kin.
• Job Protection for All Employees: Both full-time and part-time employees are covered, and employers are required to hold the employee’s position during the leave period, even when business continuity is severely impacted.
• Low Eligibility Threshold: Employees become eligible for FAMLI benefits after only 680 hours (less than four months) of work for a Maryland employer. This threshold makes short-term and seasonal employees eligible for significant benefits without sustained tenure if they are hired to work longer than four months.
• No Credit for Existing Benefits: Employers that already offer paid leave, short-term disability, or other comparable benefits must have an existing self-insured plan in place as of July 1, 2026, and it must be submitted to and approved by the state as an alternate to the FAMLI program or any of its pre-approved equivalent private insurance plans (EPIPs).

But a small business that could be thriving — hiring local workers, supporting families and contributing to the strength of our community — could instead be forced to close its doors. Not because the owner lacks dedication or vision, but because the growing web of mandates and compliance costs has made it harder to operate than to succeed.

These are not faceless corporations; they are the corner bakeries, repair shops and family-run offices that keep our towns alive. When policies overlook the realities of running a small business, we risk losing more than just another storefront — we lose the heart of our local economy and the spirit of opportunity that built it.

Under FAMLI, employers and employees must contribute a shared payroll tax to fund the program through the Maryland Department of Labor.

For larger corporations with full HR teams, that’s just another line item. But for small, locally owned businesses — those with fewer than five, 10 or 20 employees — these costs represent real choices: fewer hires, cut hours or increased prices that hurt competitiveness.

It’s not just the money. The administrative burden of tracking eligibility, processing claims, managing overlapping leave policies and meeting quarterly reporting requirements will pull small-business owners away from what they do best — running their businesses and serving their customers.

Many small-business owners across Calvert, Charles, St. Mary’s, and counties across the state have all shared the same concern: How can we absorb another state mandate when we’re already struggling to stay compliant with dozens of others?

With small businesses of fewer than 20 employees making up 92.8% of all Maryland businesses, it’s time to let the state know that this program does more to destroy the backbone of our economy than to help it.

There’s still time for Maryland’s leaders to listen — to amend aspects of FAMLI or repeal it altogether before it devastates the small-business community. We urge legislators to consider the realities faced by those who create local jobs and fuel our economy.

At JAG Consulting, we stand beside Maryland’s small businesses, helping you navigate today’s compliance and workforce challenges so you can keep doing what you do best — driving your business forward while supporting your teams and your communities.

Reach out today regarding FAMLI or with any of your HR needs:
janellegardiner@consultjag.com