Washington, D.C., Council Approves Expansive Paid Leave Bill

New law would be financed through an employer payroll tax

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The Washington, D.C., Council passed an expansive paid family leave bill on Dec. 20 that would provide some of the most substantial leave benefits in the country if it is enacted.

In a 9-4 vote, the city council approved the Universal Paid Leave Amendment Act of 2016 (Bill 21-415), which would provide private-sector employees eight weeks of paid leave after the birth or adoption of a child. It would also provide two weeks of sick leave for the employee's own illness and six weeks of paid leave to care for a family member.

All private-sector employees working in the District of Columbia would be eligible for the paid leave, including nonprofit workers. Self-employed workers may also opt in.

Christopher Humber, an attorney with Ogletree Deakins in Washington, D.C., said the law would add to an already difficult regulatory environment for employers in the nation's capital. Among other regulations, the District of Columbia already has a higher minimum wage, a wage theft act, and stringent wage payment and record-keeping rules.

If enacted, the bill would likely have some effect on the desirability of working in—or operating a business in—the District of Columbia, said Michael Chittenden, an attorney with Miller & Chevalier in Washington, D.C. "People may be more inclined to want a job in the city, and employers may want people to work out of their Maryland or Virginia offices if that's an option."

Humber noted that if it's possible, businesses should consider relocating to a neighboring state, like Virginia, which doesn't have many of the regulations that present challenges for employers in Washington, D.C.

The paid leave program would be financed through a controversial 0.62 percent payroll tax on employers and would provide up to 90 percent of income replacement to workers, depending on their weekly earnings.  

Still Pending

Washington, D.C., Mayor Muriel Bowser, who has yet to sign or veto the bill, has expressed her disapproval.

"Today, Chairman Mendelson and the Council passed a $250 million tax increase to mostly benefit residents of Maryland and Virginia," Bowser said in a Dec. 20 press statement. "It is wrong to raise District taxes to fund a costly, new government program that sends 66 percent of the benefits outside of the city and leaves District families behind."

It isn't clear if Bowser will veto the bill. She could also allow the legislation to become effective without signing it. If she does veto the bill, the D.C. Council will reconsider it and may approve the legislation by a two-thirds vote. The bill had the necessary majority in the Dec. 20 vote, but it's always possible that a council member could have a change of heart.

Employer Burden

The program would be funded by the government, so it wouldn't be directly paid for by employers, Chittenden explained. But employers will have to pay the 0.62 percent tax to fund the trust that the money will be paid through.

Chittenden said he doesn't expect employers to cut wages in response to the tax, but he wouldn't be surprised if employers take the tax into account when deciding how much to pay their employees.

He noted that the bill doesn't make any exceptions for employers that already provide paid family leave, and some businesses offer more generous benefits than the proposed law.

It remains to be seen how those businesses will respond if the bill is enacted, he said. They could integrate the law into their program or decide not to provide any additional benefits.

[SHRM members-only how-to guide: How to Develop and Administer Paid Leave Programs]

Humber said employers should be aware of hidden costs beyond the payroll tax. "There's the operational disruption that comes from employees taking leave and there's also a new set of possible legal actions." The bill includes an extremely broad anti-retaliation provision, he noted.

State-Run Programs

California, Rhode Island and New Jersey are the only states that have paid family leave programs so far, and a New York law will take effect in 2018.

"Employers should note that the states where paid family leave is available already had temporary disability insurance programs, and paid family leave became a part of that," said Patricia Anderson Pryor, an attorney with Jackson Lewis in Cincinnati.

It may be more difficult for states that don't already have that infrastructure in place to get a paid family leave program up and running, she said. Employers may shoulder more of the responsibility as more cities and states enact paid leave laws.

Chittenden noted that Washington state doesn't have a temporary disability program, and it hasn't been able to successfully administer a paid family leave insurance program that was established in 2007.

Washington, D.C., also doesn't have a disability insurance program and may face those infrastructural challenges.

There are still details that would need to be worked out, Chittenden said. But the good news for employers is that the potential new law wouldn't take effect for a few years, so they have time to plan. 

 

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