Hunton Employment & Labor Perspectives

Closures of schools and day care centers during the COVID-19 pandemic have put heightened focus on the child care challenges faced by working parents.  The California legislature is aiming to address these challenges by introducing a bill that, if passed, would require employers to provide subsidized backup child care benefits to employees. While this may help working parents, it also would place additional burdens on employers, many of whom are already over-taxed by the increased costs and depressed revenues caused by the pandemic.

By one estimate, parents with minor children make up one-third of American workers, and hundreds of thousands of them have exited the workforce due to school closures or the loss of some form of child care.  This is so despite the unprecedented availability in 2020 of extended family leave benefits under the Families First Coronavirus Relief Act (“FFCRA”) and California state and local laws for precisely this purpose.

A bill recently introduced in the California Assembly makes California the first state to consider a legislative solution to the child care gap.  AB 1179 proposes a child care subsidy as a new form of employee benefit. This is not a leave benefit, or a job-protection benefit, but rather a fund to be used for emergency child care needs.

The bill would apply only to the largest employers – those who employ 1000 or more employees (including the state, its political subdivisions, and its municipalities, to include charter cities), but companies who already provide equivalent benefits would be exempted.  The bill also would not apply to workers whose collective bargaining agreements provide similar benefits, to construction industry employees covered by collective bargaining agreements that provide hourly pay of not less than 30% of the state minimum wage, to certain airline employees, and to government retirees who receive state retirement benefits.

Backup childcare benefits would accrue in a similar manner as California’s paid sick leave hours. The bill proposes that employees accrue one hour of paid backup childcare benefits for every 34 hours worked. The accrued benefit hours would carry over from year to year, but employers could limit the use of this benefit to 60 hours in any one year of employment. Alternatively, employers could forego the accrual method and provide a “bank” of 60 hours of backup child care at the beginning of each year of employment (whether calendar year or another twelve-month period).

Backup childcare funds could be disbursed in one of several ways, all of which appear likely to create an administrative burden. Employers could pay child care providers directly, upon receipt of an invoice detailing the number of hours used for those services. They could reimburse employees who provide proof of such payments.  Or, employers may contract with a licensed child care provider and make payments to that organization for hours used by employees.

Employers also would have options as to the method of calculating the value of each benefit hour. One option is to calculate the employee’s regular rate of pay for the week in which the benefit is used. Another is to simply divide the employee’s total wages (excluding overtime premiums) by the total hours worked in the 90-day period preceding the use of the benefit.  Or, employers could use the same method they use to calculate wages for other forms of paid leave, such as intermittent FMLA/CFRA leave.  For purposes of these calculations, exempt employees would be assumed to work a 40-hour workweek.

The bill proposes recordkeeping and notice requirements similar to those in the paid sick leave law, including a requirement that employers include in wage statements, or an attachment to wage statements, the number of benefit hours available to the employee.  Accrued child care hours would not be paid out upon termination, but would be reinstated if an employee is rehired within one year of the date of separation.

The bill’s proposed effective date is January 1, 2022. It rests on the assumptions that only seven percent of companies offer any backup childcare as a net benefit, that the cost of providing this benefit would likely be less than $50 per employee, per year, and that even prior to the pandemic, the average working parent missed eight days of work a year due to childcare issues.  The bill has not yet been referred to committee or been the subject of hearings or debate, so it remains to be seen if these assumptions will be challenged by stakeholders, and if the concept of a backup childcare benefit can gain traction in California or elsewhere.  Nevertheless, this is a bill to watch by California employers this year.