Hunton Employment & Labor Perspectives

Several new and expanded paid family leave programs signed into law this month present employers with administrative challenges and concerns about business productivity.

California

California’s Paid Family Leave (“PFL”) program, which took effect in 2004, was the first of its kind in the nation. Funded by employee contributions to the State Disability Insurance program, and administered through that program, PFL in California provides employees with partial wage replacement (currently 55%, up to a weekly maximum of $1,104 in 2015) for a period of up to six (6) weeks in order to bond with a new child, or to care for a parent, child, spouse or domestic partner with a serious health condition. This wage-replacement program does not guarantee job protection, so normally it is taken concurrently with job-protected leave under the federal Family and Medical Leave Act (“FMLA”) or its California analog, the California Family Rights Act.

On April 11, 2016, California expanded the benefits available under its PFL program. Beginning in 2018, the state will provide 70% wage replacement for the six-week PFL period to workers who work at or close to the minimum wage. Workers who earn up to $108,000 annually will be entitled to 60% of their salary during that leave period. Because PFL is funded by employee payroll contributions, this change should not have a financial impact on employers, at least in the short term. However, in all likelihood, the increased benefits will enable more employees to take longer periods of leave, which impacts employers who must find and train replacement labor, while still managing to restore absent employees to their former or equivalent positions.

City of San Francisco

Also this April, the San Francisco Board of Supervisors unanimously approved local legislation intended to supplement California’s PFL program. The San Francisco ordinance will require employers to privately fund the percentage of salary not available under the state PFL program in the event of birth or adoption of a child. (Currently that percentage is 45%, but with the expansion of state benefits, San Francisco benefits presumably will correspondingly decrease.) Employees who work eight hours or more per week and spend at least 40% of their work week within San Francisco boundaries will be eligible for leave. New employees become eligible after 180 days of employment. The ordinance goes into effect on January 1, 2017 for businesses with 50 or more employees, and will expand to cover businesses with 35 or more employees beginning in July 2017, and to businesses with 20 or more employees beginning in July 2018.

New York

On April 4, 2016, New York became the fourth state (after California, New Jersey and Rhode Island) to create a paid family leave program. New York’s Family Care Leave “(FCL”) program (incorporated into the state budget [S.6406-C, A. 9006-C, Section SS]), offers the most generous benefits of any such program in the country: up to twelve (12) weeks of wage replacement, at up to two-thirds of an employee’s average weekly wage, together with job protection analogous to that afforded by the FMLA. The law is scheduled to take effect on January 1, 2018.

To be eligible for FCL, employees must have been employed for twenty-six or more consecutive weeks. (Section 203.) Paid FCL may be used in New York to bond with a new child (including adopted and foster children), to care for a family member with a serious health condition, or to address legal, financial and childcare issues arising from the military service of an immediate family member (analogous to the unpaid “military exigency” benefits of the FMLA). (Section 200 (15).) There is no waiting period; leave may be used on “the first full day when family leave is required.” (Section 204.)

New York’s FCL program offers an additional layer of protection to employees in that it specifically prohibits retaliatory action against employees who avail themselves of FCL benefits, rather than indirectly providing such protection through the FMLA or analogous state laws. (Section 203-A.)

The law broadly defines the family members for whom care may be needed. For instance, a biological or legal parent-child relationship is not necessary; “parent” includes an individual who “stood in a parental relationship” to an employee, meaning that the person “assumes the obligations incident to parenthood for a child and actually discharges those obligations.” The definition of “family member” includes domestic partners and their siblings and parents. “Sibling” means a brother or sister related through half blood, whole blood, adoption or a step-sibling. (Section 200 (16)-(21).)

Leave entitlements will be phased in over a four-year period. The length of permissible leave increases from up to eight weeks per year in 2018, to ten weeks in 2019 and 2020, and reaches the maximum of twelve weeks in 2021. Likewise, the dollar amount of benefits will increase over four years, and will be capped in relation to the statewide average weekly wage (as determined by the state Department of Labor). In 2018, an employee will receive 50% of his or her average weekly wages up to a cap that is equal to 50% of the statewide average weekly wage. This amount will increase over the following three years to 67% of an employee’s average weekly wages, up to a cap of 67% of the statewide average weekly wage. Any of these increases may be delayed by the Superintendent of Financial Services based on the impact of the program on employer costs, business stability, the insurance market for family leave coverage, and the overall stability of the program. (Section 204(2).)

New York FCL reinstatement rights are the same as those provided by the FMLA: upon return from, an employee must be restored to his or her position, or to a comparable position with comparable benefits, pay and other terms and conditions of employment. (Section 203-B.) Also like the FMLA, the law asks employees to provide thirty days’ notice of the need for FCL, but recognizes that not all such leave can be planned and notice should be given as soon as practicable. It sets forth the type of proof needed to establish the event giving rise to the leave. (Section 205(5).) FCL may be taken intermittently or on a reduced leave schedule in increments of one full day or one fifth of the weekly benefit. (Section 204(2).)

The FCL law creates a presumption that FCL leave will run concurrently with FMLA leave; employers may provide otherwise. (Section 206(4).) Employers are not required to permit more than one employee to use the same period of family leave to care for the same family member. (Id.) Employers also may choose whether to charge all or part of the family leave time to accrued but unused vacation or personal leave, in which case employees will receive their full salaries. In no event can FCL extend more than 12 weeks. (Section 205(2)(C).)

New York’s generous FCL program may be part of a national trend towards a broader safety net for workers with families, similar to the steady expansion across the country of paid sick leave laws. Employee advocacy groups argue that paid family leave laws cost employers little to nothing, because they merely expand a pre-existing disability insurance system, and are funded largely by employee contributions to state insurance funds. Such arguments fail to acknowledge the administrative costs of such laws, as well as the reduced productivity associated with increased employee absences, including costs for replacing absent workers or retraining others to fill in for absent workers. Paid family care programs therefore merit continuous study and analysis of their financial impact, particularly on small employers.