Colorado Gears Up for Paid Family and Medical Leave Program

​Colorado employers may want to begin preparing for the implementation of Colorado's new state-run Paid Family and Medical Leave Insurance (FAMLI) program. While Colorado voters approved Proposition 118 nearly two years ago, which set the path for implementation of the FAMLI program, employers and employees will not feel its effects until Jan. 1, 2023. However, employers may want to begin educating themselves and their employees now on its requirements, as compliance will require cooperation across multiple departments.

FAMLI provides Colorado employees with 12 weeks of paid family and medical leave funded through a payroll tax paid half by employers and half by employees. Employees who take leave for pregnancy or childbirth complications may receive up to 16 weeks of FAMLI leave.

The FAMLI program will operate similar to Colorado's unemployment insurance program and will be run by the state through the newly created Division of Family and Medical Leave Insurance (FAMLI Division), within the Colorado Department of Labor and Employment (CDLE).

Since FAMLI's enactment, the FAMLI Division has been drafting regulations that provide guidance on specific provisions of the act. FAMLI rules related to premiums were finalized on Jan. 1, followed by rules on local government participation on Jan. 14. Rules related to benefits and employer participation were announced on Aug. 26.

The FAMLI Division recently released proposed rules for private plans.

Coverage Requirements

All Colorado employers that employ at least one employee in Colorado or that paid wages of $1,500 during a calendar quarter must participate in the program by providing paid family and medical leave. However, employers with fewer than 10 employees do not have to pay the employer share of the premiums. These employers must only collect the employee's share of the premiums and ensure they are submitted to the state.

When calculating the number of employees, employers must count all employees companywide who were employed during 20 or more workweeks in the previous calendar year. The number of employees employed by an employer will not affect an individual's right to FAMLI leave.

Employees are covered if they earn at least $2,500 in wages subject to premiums during the employee's "base period." Base period is defined as "the first four of the last five completed calendar quarters immediately preceding the first day of the individual's benefit year." Wages are calculated based on earnings from all current employers.

Employees covered by FAMLI may use leave for the following reasons:

• to care for a child following birth adoption, or placement through foster care;
• to care for a family member with a serious health condition;
• to care for the employee's own serious health condition;
• to take qualifying exigency leave, meaning the employee's family member is in active duty military service or has notice of an impending call to active duty;
• to take safe leave, which includes time to obtain a civil protection order, receive medical or mental health care for themselves or a family member, secure their home from a perpetrator, or seek legal assistance for domestic violence, stalking, sexual assault, or abuse-related issues.
  

The term "family member" includes a child, parent, spouse, domestic partner, grandparent, grandchild, sibling or any other individual with whom the individual has a significant personal bond that is like a family relationship.

Applying for and Taking Leave

While on leave, employees may receive up to 90 percent of their average weekly wage for the portion of wages that totals up to 50 percent of the state average weekly wage or less. For the portion of employee wages that exceed 50 percent of the state average weekly wage, employees may only receive 50 percent of their average weekly wage. In 2024, the maximum weekly benefit is capped at $1,100. Thereafter, the maximum benefit amount will be capped at 90 percent of the state average weekly wage. An employee must be permitted to take leave in increments of one hour, but will not receive benefits under the act until the employee accumulates at least eight hours of FAMLI leave. Employees may take continuous leave, intermittent leave, or leave on a reduced schedule.

Employees must make a reasonable effort to schedule FAMLI leave so as not to unduly disrupt the operations of the employer. When the need for FAMLI leave is foreseeable, an employee must notify the employer 30 days before the date the leave will begin. When the need for leave is not foreseeable or providing 30 days' notice is not possible, the employee must provide notice as soon as practicable. Employers may require the notice to contain the anticipated start date, duration and frequency of the leave.

The employee may apply for leave with the FAMLI Division up to 30 days prior to the benefit start date. The FAMLI Division will notify the employer of the benefits application within five business days. When the need for leave is not foreseeable, or submitting an application prior to the start of leave is not practicable, employees may submit an application up to 30 days after leave has begun. If an employee submits an application more than 30 days, but no more than 90 days, after leave has begun, the employee must establish good cause for the delay. The regulations provide detailed guidance on what documentation must be submitted to the division based on the reason for the leave.

Calculation and Payment of Premiums

While employees cannot begin taking FAMLI leave until Jan. 1, 2024, employers must begin remitting premiums on Jan. 1, 2023. In 2023 and 2024, premiums will be 0.9 percent of the employee's wage, with the employer and employee each paying 0.45 percent. Beginning in 2025, the director of the FAMLI Division will adjust the premium based on the total amount of premium contributions and the cost of administration during the prior year, up to a maximum of 1.2 percent of each employee's wages. Employers may choose to pay a larger percentage of the premium, up to the full amount. Employers may not deduct more than the maximum allowable employee share of the premium from wages for a pay period.

An employee's wages are subject to premiums if the employee's work is performed in Colorado, or the employee works inside and outside of Colorado, but the services performed outside of the state are incidental to the work performed inside the state.

Employers must have a process in place for collecting premiums and submitting them to the CDLE. Premiums will be due quarterly by the last day of the month immediately following the end of the quarter. The division will provide notice to employers of their expected premium on the first business day of the month the premium is due.

Covered employers must submit wage reports to the division. The division will use these reports to calculate an employee's average weekly wage for purposes of determining an employee's wage replacement benefit. Failure to timely submit wage reports may result in a $50 fine per employee.

May Employers Opt Out?

Employers that offer their own paid leave program, which is equal to or more generous than the benefits provided through FAMLI, may apply for an exemption. A private plan must provide all the same protections, rights, and benefits to employees as the act.

Employers may begin applying for exemptions through the CDLE in November, but must apply for an exemption no later than Oct. 31, 2023, for a plan with an effective date of Jan. 1, 2024. While the FAMLI Division has not yet released finalized rules for private plans, the recently proposed rules suggest that employers would be required to pay both the employer's and employee's share of premiums to the FAMLI Division beginning on Jan. 1, 2023, pending the approval of the private plan. Once the plan is approved, the employer may submit for reimbursement, so long as the plan's effective date is no later than Jan. 1, 2024.

How Does This Affect Other Types of Leave?

FAMLI was enacted to supplement other forms of required leave under Colorado and federal law. FAMLI will not replace other forms of leave an employee may be entitled to, including sick leave under the Healthy Families and Workplaces Act (HFWA). Because employees may take FAMLI leave in increments of as little as one hour, an employee may choose whether to use FAMLI leave or leave under the HFWA.

An employer may not require employees to use accrued sick time or vacation time prior to receiving FAMLI. However, an employee may use any accrued vacation, sick, or other time off to supplement the employee's pay to make the employee whole, so long as the aggregate amount does not exceed the employee's average weekly wage.

Employers may require FAMLI leave to run concurrently with leave under the federal Family and Medical Leave Act (FMLA). For example, an employee taking FAMLI leave for "safe leave" purposes may not qualify for FMLA leave, so such FAMLI leave could not concurrently deplete an employee's FMLA balance. In contrast, an employee taking FAMLI leave for pregnancy complications would likely qualify for FMLA leave, so FAMLI leave could be required to deplete an employee's FMLA balance concurrently. Employers may require FAMLI leave to run concurrently with a short-term or long-term disability policy, if the employer provides written notice to its employees.

Employers may not take disciplinary or retaliatory actions against employees who exercise their rights under FAMLI. Employees must be returned to the same position or a position with the same pay, benefits, and status as they had prior to taking leave. While on FAMLI leave, employees must continue to receive their health benefits and are required to continue paying their portion of health insurance premiums.

Employers must register with the FAMLI Division by Jan. 1, 2023. A new platform is expected to launch in phases beginning in fall 2022 to allow employers to report wage data, remit premium payments and apply for an exemption with a private plan.

Michael H. Bell and Rebecca M. Lindell are attorneys with Ogletree Deakins in Denver. © 2022. All rights reserved. Reprinted with permission.