• Paul Peter Nicolai

Paid Time Off Is Changing

Updated: Nov 13, 2019

US protected family and medical leave has centered on three types of personal life changes: leave for new parents, leave for those caring for an ill family member, and leave for an individual’s serious health conditions. The federal FMLA offers job protection for eligible workers who take family and medical leave. This leave is unpaid. 2017 tax legislation includes incentives to employers to voluntarily offer paid family and medical leave to employees. While many private employers do offer some type of paid leave, mandated paid family leave protections have failed to pass in congress over the last few years. The states are implementing required paid family leave laws to address this gap.

Federal Law

The US is only one of a handful of the 193 United Nations members that do not offer national paid maternity leave. It is the only country in the OECD that does not do so. FMLA requires certain employers to provide its employees with 12 weeks of unpaid leave and job protection for qualified medical and family reasons, which include pregnancy complications, childbirth, or care for a covered family member, such as a newborn. This federal requirement is imposed only on companies with 50 or more employees and for qualifying employees based on work hours and time employed. This means a significant number of US employees are ineligible to take medical or family leave at all. Many who are eligible cannot afford to do so because they will not be paid.

While employees can access and apply paid employer leave to this time, this is voluntary. According to a March 2018 survey, 16 percent of private industry employees had access to paid family leave. This was more prevalent among professional and technical occupations and industries, high-paying occupations, for full-time workers and workers in large companies.

Currently pending federal proposals include:

The New Parents Act which would allow new parents paid parental leave in exchange for delaying or reducing their future Social Security benefits. Advocates say the bill will not increase the tax burden and offers flexibility and freedom to an already existing program. The proposal is not likely to be adopted.

The FAMILY Act has picked up the most momentum among recent paid leave policy proposals. It would guarantee 12 weeks of partially paid leave for employees who are new parents, caring for an ill family member, or experiencing personal health issues. It would allow employees nationally to earn 66 percent of their monthly wages funded by a payroll tax paid by both employees and employers. It is modeled after similar policies in several states.

Trends in the States

California, Connecticut, the District of Columbia, Massachusetts, New Jersey, New York, Rhode Island, Washington and Oregon have all passed some form of paid leave insurance. Program eligibility typically requires a minimum period of employment in the state and some minimum earnings or contribution into the fund. Programs are funded through payroll tax receipts.

California, New Jersey, and Rhode Island have all passed paid family leave insurance programs that currently pay cash benefits to eligible workers engaged in qualified caregiving activities ranging from four weeks to six weeks.

California’s paid leave offers up to six weeks of partial pay when taking time off to bond with a new child entering the family through birth, adoption, or foster care placement. Partial payment ranges from 60 percent to 70 percent of wages from the months prior to the claim, depending on the employee’s income level. Benefits range from $50 to a maximum of $1,252 per week and may be reduced by other paid income benefits available such as paid sick time or vacation. It also extends to employees caring for a seriously ill child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner.

Although California’s paid family leave insurance provides monetary benefits, job protection for employees who take time off is provided by the FMLA and California state leave law. California also offers partial pay for up to 52 weeks of time off for an employee’s own disability or medical condition. California paid leave insurance is currently funded by employee contributions only. While all private-sector employers are covered under the law, only some public employees are covered. California has extended its paid family leave eligibility from six weeks to eight weeks beginning July 1, 2020. Further changes are likely to come; its most recently signed law requires the governor to propose further benefit increases by November 2019.

New Jersey’s paid family leave insurance recently extended coverage from six to 12 weeks starting July 2020 and will also offer expanded coverage for intermittent leaves. The payment is capped at 85 percent of a worker’s average weekly pay, up to a total benefit cap of $859. Employees are eligible to apply this time to the state’s more generous family leave as well as other types of previously unpaid protected state leave.

All three states fund paid leave insurance through employee payroll contributions. Rhode Island provides for specific protections for employees who use the benefits under the family leave insurance law, while the other states rely on FMLA or state leave law protections from retaliation for use of the benefit.

District of Columbia, Massachusetts, New York, and Washington have implemented family leave insurance but are not yet paying benefits. New York began phased implementation in 2018, while Washington State and the District of Columbia saw legislation in 2017 with benefits to be paid starting in 2020. The Massachusetts law was signed in 2018, but benefits will not be paid out until 2021.

The District of Columbia will offer eight weeks for parental leave, six weeks for family care leave, and two weeks for an employee’s own serious health condition. Massachusetts and Washington State will each offer 12 weeks of paid family leave, including paid benefits for an employee’s own serious health condition. Massachusetts will offer up to 26 weeks for care of a qualified military service member. New York’s program phases in benefits gradually over a number of years, increasing the payout and duration over time, with the ability to make adjustment based on fiscal conditions. When New York has fully implemented its program in 2021, it will offer a maximum benefit of 12 weeks of pay.

In the District of Columbia, paid leave insurance is funded completely by employers at a rate of 0.62 percent of wages. Massachusetts and Washington State provide for funding contributions paid by both employees and employers. New York is funded by employee contributions at a rate that varies based on income. Massachusetts and Washington State do not require employers of smaller companies (fewer than 25 and 50 employees, respectively) to pay the employer portion of insurance contributions for paid leave.

Massachusetts will offer a benefit rate of up to 80 percent of wages for employees paid 50 percent or less than the statewide weekly wage average. The District of Columbia and Washington State will offer up to 90 percent wage replacement for its lower-income employees on leave.

Connecticut intends to offer up to 12 weeks of paid family leave under the insurance plan to eligible employees, funded by employee payroll tax contributions. An additional two weeks may be available to qualified employees related to childbirth. Contributions will be set at a maximum rate of 0.5 percent of the employee’s wages starting in 2021. Connecticut plans to offer benefits of up to 95 percent of a private sector employee’s average weekly wage rate to a maximum benefit of $900 per week starting in 2022.

Oregon is the most generous law on the subject to date. Combined employer and employee payroll contributions are set to begin in 2022, with benefits paid beginning in 2023. Oregon will offer up to 12 weeks paid for qualifying leave, and the maximum low-income employee benefit will be paid 100 percent of their wages for time off subject to a benefit cap of $1,215 per week. Oregon’s law also offers employees job security when they take paid leave under a broad range of already-existing state protected leaves, including employees welcoming a new baby, caring for an ill relative, or dealing with their own health condition, as well as victims of domestic violence.

Oregon was the first state to include victims of domestic violence in its paid leave legislation. New Jersey has recently included domestic violence victims in an amendment to its law. Oregon also extends benefits to both full-time and part-time employees. Because state law expands the definition of “family member” from just blood relatives to include nontraditional family dynamics, the paid leave is similarly broad.

Implications for Employers

While there is disagreement about how paid leave should be funded, how long it should be offered, and who it should be offered to, most agree this is an issue central to family life and one on which the United States is behind when compared to other countries.

The costs of paid family leave to businesses are being weighed against the interests of employees seeking to balance family life, health needs, and the need to continue supporting themselves and their family. Leave laws and compliance will become increasingly complex. Business leaders must stay current on the status of mandated paid leave laws in their state and locality.

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