The Maine State Chamber of Commerce and Bath Iron Works (BIW) have sued the Maine Department of Labor (MDOL) over their rules implementing the state’s new Paid Family and Medical Leave Program.

In the lawsuit, the Chamber of Commerce, which represents large businesses in Maine, and BIW, a subsidiary of defense contractor General Dynamics, allege that portions of MDOL’s recently announced rules contradict the law that established the new program.

Separately, BIW argues that the new program represents a violation of Maine businesses’ constitutional rights.

The emerging legal battle stems from a program that was the brainchild of Senate President Mattie Daughtry (D-Cumberland) and could have significant implications for businesses and workers statewide, who began paying the payroll tax to support the program on January 1.

Although Daughtry’s bill did not pass as introduced last session, Gov. Janet Mills (D) later signed a budget into law that included, among other things, legislation establishing the program with a starting appropriation of $25 million for the MDOL.

Employers and employees began contributing a new one-percent payroll tax to the state at the start of the year, sixteen months ahead of when benefits are scheduled to become available.

Beginning in the spring of 2026, Maine workers will be eligible to take up to twelve weeks of paid leave to care for a sick family member, as well as to bond with a newborn baby or newly adopted child. Also eligible for leave are those who are experiencing a serious health condition and are rendered unable to work for an extended period, and anyone serving as a caregiver for someone who meets the other conditions.

Click Here for More Information on the Paid Family and Medical Leave Program

Under this law, businesses who 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 are 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.

Consequently, many businesses and employees will be required to contribute hundreds of thousands of dollars to a program from which they will never benefit.

The lawsuit argues that the MDOL’s rules are contrary to the legislation approved by lawmakers and, therefore, are “arbitrary and capricious.”

In BIW’s separate argument, the company contends that the MDOL’s rules are also in violation of both the United States and Maine constitutions.

According to BIW, the collection of non-refundable contributions for a program from which they and their employees will never benefit violates the U.S. Constitution’s Fifth Amendment Takings Clause.

They also argue that it is in violation of the Maine Constitution’s Article I prohibition against taking “private property for public uses” absent “just compensation,” except for under circumstances when “the public exigencies require it.”

“The Rule harms Maine employers that will offer a private family and medical leave plan — like [Bath Iron Works] and the many [Chamber of Commerce] members of all sizes that will also offer a private plan — by requiring such employers to pay a non-refundable sum into a state-run program that their employees will not utilize or even be eligible to receive benefits from,” the lawsuit argues.

Although contributions to the program were required to begin on January 1, applications for exemptions may not be submitted until after April 1, meaning that contributions will be required for at least the next few months regardless of whether or not a private plan will ultimately be substituted.

“Not only will these employers be required to remit at least one quarter’s worth of premiums into the Fund, but they also will not be able to obtain a refund for anything paid into the Fund on behalf of their employees — even if they provide private plans that are at least the substantial equivalent of the state plan throughout the entire period,” the filing states.

According to the lawsuit, to avoid a penalty, BIW will need to pay roughly $620,000 worth of non-refundable premiums to the State through April 30. This same sum would need to be submitted by employees during this period.

“The portion of the Rule providing that any premiums paid into the Fund prior to the effective date of the exemption are ‘non-refundable’ directly conflicts with the Legislature’s clear mandate that an employer with an approved private plan ‘is not required to remit premiums under this section to the fund,’” the lawsuit contends.

As a result of this lawsuit, the plaintiffs would like to see the court declare that the MDOL committed “an error of law and acted arbitrarily and capriciously” by approving the now-enacted rules.

In addition to this, BIW would like to receive a determination that the rule, as it applies to them, represents a violation of their Fifth Amendment rights, as well as their rights under the Maine State Constitution.

“The Department of Labor’s rules implementing Maine’s Paid Family and Medical Leave Program 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 non-refundable sum into a state-run program that their employees will never utilize or benefit from,” the Maine State Chamber of Commerce said in a statement to the Maine Wire.

“We look forward to resolving this complaint and working with all stakeholders to ensure this Program is effective in delivering this important leave benefit for employees, employers, and Maine’s economy,” said the Chamber.

Filed on Monday, January 13, the case will now be considered by the Kennebec County Superior Court.