Family Leave Law Brings Confusion, Fiscal Uncertainty
By SHERRI CRUZ
With all the attention being paid to workers’ compensation insurance and state-mandated healthcare coverage, another confusing issue looms for employers and workers: family leave.
California’s new worker-funded Paid Family Leave Act is set to go into effect Jan. 1. It adds another challenge to California employers already bogged down in labor laws.
With the recall election and its focus on more high-profile issues, some employers may have forgotten about the law, which was enacted in October.
Employers will have to start making payroll deductions for family leave in three weeks. Workers will see their deduction for the state disability insurance tax increase by about a 10th of 1%. The bite won’t be huge; a labor lawyer estimated workers will pay $10 a year or less.
Workers will be eligible for benefits starting in July.
On the surface, the new act seems simple. Employers don’t even have to pay for it. But employers and workers can get tripped up on the details, labor attorneys said.
“It’s a complicated new area, and it’s going to be hard to communicate,” said Dale Hudson, an employment attorney with Nixon Peabody LLC in Irvine.
The law offers workers six weeks of partially paid time off to care for a “seriously ill” relative or domestic partner, or to bond with a new baby.
Employees already receiving state disability insurance, unemployment or workers compensation benefits aren’t eligible for paid family leave.
Payment for time off is based on past quarterly earnings and ranges from $50 per week to a maximum of $728 per week for up to six weeks within 12 months.
In 2005, the maximum benefit goes up to $840 a week.
The catch for workers: Payment is guaranteed, but your job may not be.
Under the new law, holding your job for you while you’re out rests with the employer, Hudson said.
Employers need to decide what their policy will be on paid leave and then include that in their benefits handbook, Hudson said.
At the minimum, employers need to give a copy of the Employment Development Department’s “Paid Family Leave” brochure to all new workers hired after Jan. 1 and workers taking time to care for a sick family member or a newborn.
A point of likely confusion: The law complements and overlaps with two similar laws already on the books.
The California Family Rights Act and the federal Family and Medical Leave Act both offer unpaid time off. Those laws also protect jobs for returning workers.
Those laws apply to employers with 50 or more workers. The new law applies to all employers, big and small.
But the new law works differently for big and small employers. Workers at a business with 50 or more employees are eligible for paid leave and are guaranteed job protection because they can simultaneously apply for leave under the state and federal family acts.
Those at a company with fewer than 50 workers are eligible for the paid leave but are not guaranteed job protection because the older state and federal leave laws don’t apply to smaller employers.
“There’s room for potential confusion here,” said Teresa Brummet, an employment and labor law attorney with Fisher & Phillips LLP in Irvine. “The FMLA and CFRA are leave laws providing job protection. While the paid family leave act provides benefits to employees while out on leave.”
Smaller employers will bear the greater burden, Brummet said. They need to make it clear to their workers that if they take leave under the new law, their jobs aren’t assured, she said.
The Sacramento-based California Chamber of Commerce advocates an exemption for small businesses. So far, Gov. Arnold Schwarzenegger has dodged the question in news reports.
Sen. Sheila Kuehl, the Santa Monica Democrat who sponsored the legislation, argued the law is good for employers because it could reduce turnover costs by $89 million.
Workers don’t have to take the six weeks leave at once. They can use it throughout the year, taking a couple days off a month, Brummet said.
Employers can require workers to use up to two weeks of vacation time before applying for the paid leave. But they can’t make them use their sick time.
Nixon Peabody’s Hudson said he expects to see a rise in the number of employees taking the benefit because they’ll be paying for it. Lower-paid workers are more likely to use the benefits because the partial wage payments will be enough to pay the bills, he said.
But if a lot of workers take paid leave, will their relatively low contributions be enough to cover the costs?
“I have concerns about it,” said Jennifer Simonson, a labor and employment attorney with Allen Matkins Leck Gamble & Mallory LLP in Irvine.
If deductions don’t cover the costs, the Employment Development Department will need to increase the amount that employees pay.
That wouldn’t be without precedent. The state’s unemployment insurance fund is projected to be $1.2 billion in the red in a year’s time. The Employment Development Department is asking employers to pony at least $136 more per worker next year to help cover the expected shortfall.
