How Will Expanded Family Leave Affect California Employers?


By Toni Vranjes May 3, 2016

Lower-income workers in California stand to benefit from several recent legislative developments: the higher minimum wage and now also a broader paid-family-leave program.

A new law, A.B. 908, will increase the benefits available through paid family leave. Through this program, workers who need to take time off for family reasons can receive partial wage replacement. The new law will provide a boost for all participants in the program, but it will especially help lower-income workers.

Employers could feel the impact in a few different ways—and businesses in San Francisco should pay especially close attention.

Implications for California Employers

The paid-family-leave program, which was started in 2004, allows employees to temporarily step away from the workplace to care for a new baby or a sick family member. Through paid family leave, they can receive benefits for up to six weeks per year. The program is administered by the California Employment Development Department (EDD).

On April 11, Gov. Jerry Brown signed a new law that bumps up the benefits of the existing program. It boosts the rate of partial wage replacement from 55 percent to either 60 percent or 70 percent. The rate will rise to 60 percent for higher-income workers and to 70 percent for low-wage employees.

“It creates a more progressive scale in the provision of benefits to employees,” observed Daniel Waldman, a Ford & Harrison attorney who practices in San Francisco and New York City.

In addition to the rate change, the law takes away the current one-week waiting period for benefits. The legislation, authored by Assemblymember Jimmy Gomez (D-Los Angeles), will go into effect on Jan. 1, 2018.

From a financial standpoint, employers aren’t directly affected, noted Wendy Lane, a Los Angeles attorney at Greenberg Glusker. Rather, the benefits are funded through state disability insurance withholdings from employees’ wages.

But businesses still might feel the impact in a number of ways, including some indirect effects.

Once the changes are implemented, employees may be more inclined to take unpaid leave because of the richer benefits, said Christopher Olmsted, a San Diego attorney at Ogletree Deakins.

In addition, workers may be more likely to take unpaid leave because of the elimination of the one-week waiting period, Olmsted said.

According to Lane, A.B. 908 doesn’t require employers to create a leave-of-absence policy or guarantee reinstatement rights, other than those already required by law. These existing mandates include the California Family Rights Act (CFRA) and the federal Family and Medical Leave Act (FMLA).

For certain businesses, the new law could have a direct impact. Some employers make reference to the state paid-family-leave program in their handbooks, and those companies will need to update their policies, according to Olmsted and Waldman.

Meanwhile, San Francisco employers need to be aware of the interplay between the city’s paid leave law and the state law. Under the San Francisco law, companies must give new parents six weeks of fully paid leave. The San Francisco ordinance will apply to companies with 50 or more employees as of 2017, and to businesses with 20 or more workers by 2018.

Businesses will need to pay the difference between the person’s pay and the benefits provided under California law, according to Waldman. So, for instance, if an employee receives 70 percent in partial wage replacement through the state program, the employer must pay the remaining 30 percent.

Why California Increased Benefits

The aim of A.B. 908 is to make the paid-family-leave system fairer for low-income workers. A March 2 Assembly Floor analysis found that the 55 percent wage-replacement rate is too low because it prevents many workers from using the program.

“This situation is even more dire for a low-wage worker, who is more likely to live paycheck-to-paycheck,” the report stated.

The inequities were highlighted in a 2015 report conducted on behalf of the EDD. The analysis found that the wage-replacement rate has been just one of the problems facing low-income workers. Another hurdle has been the one-week waiting period for benefits, according to the report.

One factor working in favor of higher earners: company policies that supplement the partial wages. According to the report, some high-income employees said their employers had specific policies allowing for other paid time off, like vacation time or sick time, to be used along with the state benefits.

Now, state leaders are optimistic that the new law will allow more people to take advantage of the program. According to the Assembly Floor analysis, the new law will make paid family leave “a real option for low-income working families, allowing them to use benefits they are paying for.”

Toni Vranjes is a freelance business writer in San Pedro, Calif.


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