In 2004, California enacted the nation’s first paid family leave program, offering up to six weeks of paid leave to workers who need to care for a new baby or an ill family member. The program was financed through disability insurance taxes paid by employees through payroll withholdings. The 2004 program paid 55 percent of the employee’s wages, up to a set maximum of about $1,100 per week.
On April 11, 2016, Governor Brown signed a new law (AB 908) to expand paid family leave benefits. Under the new law, employees earning one-third or less of the State’s average wage (which is near minimum wage) will receive 70 percent of their wages through paid family leave benefits, while workers who make more than one-third of the average (up to $108,000 annually) will receive 60 percent of their wages. The same set maximum of about $1,100 per week applies to the new law, as does the six week benefit period. To cover the increase in benefits, the State will increase the amount employees pay into the fund through disability insurance taxes. The increased benefits are reported to cost about $587 million by 2021. The new law takes effect January 1, 2018.
Employers should carefully consider all family leave and disability-related issues. For example, while the expanded State paid family leave benefits do not require employer contributions, San Francisco’s paid leave law requires full pay to new parents, and employers must pay the difference between the benefit provided by the State and the employee’s pay.