California is once again at the forefront of increasing employee benefits—likely bringing joy and relief to employees with new babies but concern to many employers. Just weeks after increasing California’s minimum wage to $15 per hour (See our April 18, 2016 Duane Morris Alert), the Golden State increased family leave benefits and the City of San Francisco became the first city in the United States to approve fully paid parental leave.
In 2004, California became the first state in the country to create a family leave insurance program (“Paid Family Leave”) that provides partial wage replacement to eligible employees on leave for bonding with a new child or family caregiving needs. Under the program, eligible employees who contribute to the California State Disability Insurance fund are entitled to six weeks of partial (55 percent) pay each year while taking time off from work to bond with a newborn baby, newly adopted child or a new foster child or to care for specified seriously ill family members. The 55-percent wage replacement is funded by employee payroll contributions. Since that law was passed, three other states (New Jersey, Rhode Island and New York) followed suit with partial pay during leave laws.
Last month, California Governor Jerry Brown signed a bill that will increase the amount of wage replacement payable under the Paid Family Leave law. Beginning January 1, 2018, qualified employees will be eligible to receive up to 70 percent of their weekly wages from the state during a qualifying leave of absence.
In a related move, the City of San Francisco enacted a law in April that makes it the first city in the United States to require employers of 50 or more employees to supplement payments to employees receiving Paid Family Leave benefits for the purpose of new child bonding. The new Paid Parental Leave Law for Bonding with New Child is intended to supplement the state’s Paid Family Leave partial wage replacement law by providing compensation that, in combination with the payment by the state, will total 100 percent of an employee’s weekly salary, subject to a weekly maximum benefit amount, for a period of up to six weeks.
The San Francisco law applies to certain part-time and temporary employees but contains geographical and length of employment restrictions. Government employers are excluded, and the requirements may be waived by collective bargaining. The law addresses fluctuating pay, caps and situations involving multiple employers. Although the law initially applies to employers of 50 or more, smaller employers are phased in, with employers of 35 or more required to comply, beginning July 1, 2017, and employers with 20 or more required to comply, beginning January 1, 2018.
Like most recent employment laws enacted by the city, the new ordinance prohibits retaliation. Employees terminated after requesting Paid Family Leave are presumed to have been discharged to avoid the new law, obligating employers to pay the supplemental compensation during the leave period despite the discharge, unless the employer can rebut the presumption. The law also addresses reimbursement in certain situations by employees who do not return to work.
Employers who do not comply may be ordered to do so by the Office of Labor Standards Enforcement, and they also may face additional payments, penalties and a civil action (subject to some limitations).
Neither the California Paid Family Leave law nor the San Francisco Paid Parental Leave for Bonding with New Child ordinance provide an employee the right to take a leave of absence. They provide for wage replacement if any employee qualifies for a leave. Further, the San Francisco law does not provide for wage replacement for reasons other than bonding with a new child, although the California law is designed to supplement for pay during leaves unrelated to baby bonding.
The San Francisco ordinance takes effect on January 1, 2017, for companies with more than 50 employees. On January 1, 2018, the ordinance will expand to employers with 20 or more employees. The changes to California Paid Family leave take effect on January 1, 2018. This means that employers in San Francisco should anticipate paying as much as 45 percent of an eligible employee’s wages for up to six weeks, beginning on January 1, 2017. Starting on January 1, 2018, when the changes to the California law take effect, the percentage of pay the employer is required to pay will drop.
The new legislation reflects a greater trend of employer paid leaves, including California’s mandatory paid sick leave law, which took effect in January 2015 and applies to all employers. (See our September 11, 2014 Duane Morris Alert.) Other states may follow California’s lead as legislators in New York also recently approved up to 12 weeks of partial pay for eligible employees. (See our April 29, 2016 Duane Morris Alert.)