Paid Family Leave Is Coming to Delaware

Julia C. Riskowitz

On May 10, 2022, Governor John Carney signed into law the Healthy Delaware Families Act, which will make Delaware the 11th state in the country to offer paid family leave when the law goes into effect. Starting in 2026, the new law will guarantee 12 weeks of paid parental leave and six weeks of paid medical, caregiving, and military leave to qualified employees through a new state-run paid family and medical leave social insurance program.

Under the law, eligible workers will continue to receive up to 80 percent of their average weekly wage, up to a maximum of $900 a week in 2026 and 2027, while out on a qualified leave. Like the federal Family and Medical Leave Act, the Delaware paid leave law only applies to employees who have worked at least 1,250 hours in the prior 12 months and were employed by the company for a full 12 months prior to taking paid leave.

Employees who work at companies with more than 25 employees will be eligible for the paid parental, medical, military, and caregiver leave. Employees at smaller companies, those who employ between 10 and 24 employees, will be eligible for the 12 weeks of paid parental leave only. Companies who employ fewer than 10 employees are not required to participate in the paid leave program but can voluntarily join the program. Additionally, the law permits businesses to opt out of the social insurance program, if they have an established paid leave program that offers comparable benefits.

The paid leave benefits will be funded by a new 0.8 percent payroll tax on employers beginning in 2025. This 0.8 percent payroll tax is broken down as follows: 0.4 percent for personal medical leave, 0.32 percent for parental leave, and 0.08 percent for caregiver and military leave. Employers can pay the full payroll tax themselves or can deduct up to half of the tax contribution from each covered employee’s paycheck. For example, the full payroll tax for $1,000,000 of annual payroll would be $8,000. If an employer chooses to split the paid leave payroll tax with its employees, an employee earning $50,000 a year will pay $200 per year into the social insurance program.

Delaware Court Preserves McDonald’s Right to Seek Clawback of Ex-CEO’s Severance Benefits

Daniel L. Morgan

A recent decision by the Delaware Chancery Court in the clawback litigation between McDonald’s Corporation and its former CEO highlights the meaning and impact of a common contractual provision: the “integration clause.” Such provisions (sometimes also called “entire agreement” clauses) state that the contract at issue embodies the entire agreement of the parties and supersedes all prior agreements and understandings between them. The Delaware court rebuffed an effort by the former CEO to argue that the integration clause in his separation agreement precludes McDonald’s from asserting that the CEO’s false statements made while negotiating that agreement provide a basis for seeking repayment of severance benefits he received. The court’s opinion lays out the requirements that a contract must satisfy in order to prevent a party from using the other party’s deceptive or fraudulent statements made prior to entering the contract to seek repayment of the consideration provided. The case is McDonald’s Corporation v. Stephen J. Easterbrook.

Background of the McDonald’s Litigation

In 2019, McDonald’s Corporation parted company with its then-CEO, Stephen Easterbrook, finding that he had engaged in an inappropriate relationship with an employee. McDonald’s and Mr. Easterbrook negotiated and entered into an agreement that treated his separation as “without cause” and paid him significant severance benefits. Several months after Mr. Easterbrook’s departure, additional improprieties were brought to the attention of McDonald’s Board, resulting in McDonald’s filing a lawsuit to claw back the severance benefits previously paid. McDonald’s argues that it would not have agreed to the terms of the separation agreement if Mr. Easterbrook had not covered up the extent of his indiscretions.

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