On the Horizon: Federally Mandated Paid Leave

By Lisa S. Lewis

Paid family leave, as legislative policy, is trending. Indeed, support for some form of federally required paid family leave, in particular, has swelled to the point where it’s now probably wise for employers to skip the question of “if,” treat it as one of “when,” and focus on the “what and how.” This article briefly looks at some sources that may be helpful in answering the last question— what federally mandated paid family leave might look like and how it may be implemented.

State Paid Family Leave Laws Currently On the Books

States are often said to act as testing grounds for policies to be adopted at the federal level. If true in the context of paid family leave, then employers can look to the state laws requiring such leave to get a preview of what they might reasonably expect to see in a federal framework.

Currently, three states—California, New Jersey, and Rhode Island—offer paid family leave. Further, New York, Washington, and the District of Columbia have enacted paid family leave laws that will be phased in over the next few years. Here are some of the basic features of these state laws.

  1. Method and Source of Funding – Social Insurance Model

Each of the state family leave plans are administered through the state’s disability insurance program, which pays replacement wages to employees during their leave.  As a result, employers do not have to pay employees’ salaries while the employees are on leave. The states’ programs distinguish between leave for an employee’s own medical care or disability—which includes pregnancy but not bonding with a child after birth—and family care leave, which covers bonding with a new child after birth, adoption, or foster care. The source of funding depends on the type of leave taken.

Family care leave in California, Rhode Island, New York, and New Jersey is or will be funded exclusively by employee-paid payroll taxes; in Washington, family leave will be funded jointly through employee and employer payroll contributions. Leave for an employee’s own disability is exclusively employee funded in California and Rhode Island, but is dually funded (by the employee and employer) in New Jersey, New York, and Washington. The District of Columbia’s program will be funded by employers only, regardless of the type of leave taken.

  1. Coverage – Private Employers of Any Size

Unlike with the FMLA and its state law equivalents, the state paid family leave laws enacted thus far uniformly cover all private sector employees, regardless of size. To ease the potential burden on small businesses, Washington, the only state where family leave (in addition to disability leave) is dually funded by the employee and employer, exempts employers with 50 or fewer employees from the employer contribution. None of the other laws contain similar exemptions.

  1. How Much Leave

The maximum amount of paid family (not disability) leave an employee may take under the state laws varies from four to 12 weeks: Rhode Island offers four weeks, California and New Jersey offer six weeks; D.C. will offer eight weeks; Washington will offer 12 weeks; and New York will start with eight weeks in 2018 and gradually increase to 12 weeks by 2021. Further, employees are not required to take their family leave all at once. California, New York, D.C. and Washington allow leave to be taken in one-day increments, and New Jersey allows for incremental leave with an employer’s approval.

  1. How Much Money

Each state uses a slightly different method to calculate the amount of “wage replacement” benefits paid to employees while on family leave. In general, however, the weekly benefit rate is 50-70% of an employee’s weekly wage, up to a maximum amount set by the state each year. For example, this year in California, the typical weekly benefit is 55% of a worker’s weekly wage, up to a maximum weekly benefit of $1,173.

  1. Employee Eligibility Requirements

The employee eligibility requirements likewise vary from state to state but generally, the laws require a minimum amount of time worked or money earned during a qualifying period. For example, in New Jersey, an employee must have worked 20 calendar weeks in covered New Jersey employment or earned at least 1000 times the state minimum wage during the 52 weeks preceding the leave. In California, an employee must have earned at least $300 from which deductions were withheld during a 12-month base period prior to the leave.

In addition to state laws, another source for answers to the “what-to-expect” question of federally mandated leave is, of course, the federal government itself. To that end, the remainder of this article focuses on the proposals from players within the federal government.

Paid Family Leave Proposals at the Federal Level

It’s an oft-repeated bit of trivia: The United States is the only developed country that does not guarantee some form of paid family leave. The Trump administration and legislators from both parties have expressed a desire to shed that distinction. Their proposals vary significantly but nonetheless provide a glimpse of the potential foundations from which a final policy might emerge.

  1. President/ Ivanka Trump’s Plan

In his budget proposal to Congress earlier this summer, President Trump called for the establishment of a national paid parental leave program, a cause that has been heavily promoted by his daughter, Ivanka Trump. The Trump plan would require all employers to offer six weeks of leave to both mothers and fathers after the birth or adoption of a child and would be administered through state unemployment insurance programs.

Despite the significant publicity the Trump plan has received, the proposal itself is light on specifics. For example, it does not include details on eligibility requirements or benefit calculations but states only that leave would be administered through state unemployment programs. Currently, each state administers its own unemployment insurance program within guidelines established by federal law. Despite the federal parameters, states enjoy significant discretion in determining eligibility requirements as well as the amount of benefits and the length of time they are available to claimants. If paid family leave benefits are administered with the same discretion as unemployment benefits, eligibility for family leave could vary significantly state to state under the president’s plan. On the other hand, it’s possible that the plan would requiring greater uniformity in the administration of family leave benefits than with unemployment benefits. Without clarification on this point, the plan is subject to interpretations that yield significantly different leave programs.

In any event, the proposal seems unlikely to go anywhere. Even as an outline, it has faced resistance from both parties, as either doing too much or too little. Further, to date, the Trump proposal has yet to find a legislative sponsor willing to push it as a bill. Legislators from both parties have, however, introduced their own proposals this year.

  1. The FAMILY Act

The FAMILY Act, introduced by Senator Kirsten Gillibrand (D-NY), would provide benefits dually funded through an employee-paid payroll tax of up to 0.2 percent with an equal employer match. The fund would be administered by a new federal Office of Paid and Family Leave. Under the FAMILY Act, an individual does not need to be currently employer to receive benefits; rather, to be eligible, an individual must have some earned income from employment in the-12 month period immediately preceding his or her application for benefits.

  1. The Strong Families Act

From across the aisle, Senator Deb Fischer (R-NE) introduced the Strong Families Act, which would give a tax credit to incentivize employers to offer up to 12 weeks of paid family and medical leave. The proposal is a substantial departure from the Trump plan, the FAMILY Act, and the state leave laws, all of which employ a government-run insurance fund financed by payroll taxes to pay replacement wages to employees on covered leave. Further, unlike those plans, employer participation under the Strong Families Act would be optional: the act merely seeks to encourage employers to provide paid family leave but does not require them to do so. Additionally, unlike the FAMILY Act, only individuals who are employed and otherwise eligible for FMLA leave would be eligible to receive paid family leave under an employer’s policy.

In sum, federally mandated paid family leave is on the horizon. For employers who are curious as to what the law will entail and what it may mean for them, there are plenty of places to look.

Lisa Scatamacchia Lewis, Associate
Ogletree Deakins – Memphis
lisa.lewis @ogletreedeakins.com