On December 20, 2016, the Council of the District of Columbia voted 9-4 to approve the Universal Paid Leave Amendment Act of 2016, a landmark piece of legislation that would create one of the most generous paid family and medical leave programs in the nation. The bill, originally introduced by Councilmember David Grosso (I-At Large) and Councilmember Elissa Silverman (I-At-Large), now heads to the desk of Mayor Muriel Bowser, who has consistently opposed the legislation since it was first introduced in October 2015 and has publicly expressed misgivings about the cost of the program and the fact that approximately two-thirds of the DC workers who would benefit from it live in Virginia and Maryland.

Under the Act, covered employees who have a child through birth, adoption, foster care, or other legal placement would be eligible for up to eight weeks of paid leave. The Act would also provide up to six weeks of paid leave to workers in the District of Columbia to care for a covered family member experiencing a serious health condition, and up to two weeks for a personal serious health condition. The Act would apply to all private employers in Washington, DC, regardless of size.

The new law, supported by national paid leave organizations and the Obama Administration, is one of the most generous in the nation. The level of benefits provided under DC’s paid leave program would substantially exceed those provided in other states that have passed paid leave laws, such as California, New Jersey, and New York. New Jersey and California currently pay 60 percent of a worker’s salary for up to six weeks, and New York will begin implementing a family leave law in 2018 that will eventually provide workers with 67 percent of their pay for up to 12 weeks. In contrast, DC workers will receive up to 90 percent of their average weekly earnings up to a maximum of $1,000 per week. DC’s Chief Financial Officer released a fiscal impact statement earlier this month estimating that costs will exceed $238 million per year when factoring in personnel and infrastructure expenses necessary to administer the program.

Several Council members, even some who voted for the bill, expressed concern subsequent to the vote about the program and suggested that it would require significant changes over the next several years before it goes into effect to be viable. Mayor Bowser released a statement confirming that she would not sign the legislation but stopped short of promising a veto. Regardless, the nine Council member votes in support are enough to override any veto attempt, and the Act can still take effect even if Mayor Bowser simply refuses to sign it.

The final bill passed in substantially similar form to the version that the Council preliminarily approved on December 6, 2016. Paid leave benefits will be made available through a public fund administered by the DC government and funded by a payroll tax equal to 0.62% of each covered employee’s annual wages. The bill was approved over an eleventh-hour amendment that was advanced by Council members Jack Evans (D-Ward 2) and Mary Cheh (D-Ward 3) and that was favored by Mayor Bowser. The alternative proposal would have required employers to guarantee the same amount of leave as the version of the bill that passed, but would have jettisoned the payroll tax and instead offered small employers modest subsidies to help absorb the costs of providing the mandated leave.

Takeaways

Although it will be several years before the payroll tax authorized by the Universal Paid Leave Amendment Act of 2016 will be assessed against employers and even longer until covered employees will be able to claim benefits, DC employers should be aware that DC’s new paid leave requirement will impose new costs. Unlike DC’s Family and Medical Leave Act, the new paid leave bill will apply to virtually all private employers who operate in the District of Columbia, regardless of size. And given that it also covers all employees who spend at least 50% of their working time in DC, regardless of the number of hours they work each year, it will also dramatically expand the number of employees entitled to family and medical leave benefits. As such, although employers do not need to take any immediate action to comply with the new law, they should begin to assess the likely budgetary impact of the payroll tax once it goes into effect and consider the associated costs when making long-term strategic planning decisions. Ultimately, many employers will be required to review and revise their existing leave policies to ensure that they are in compliance with the requirements of the Act.