As a Professional Employer Organization (“PEO”), part of C2’s responsibility is to assist our clients with securing and administering benefits for their employees. C2 assists with everything from shopping health insurance options to helping manage employee leaves of absence. That’s why one of our government contracting clients recently asked for guidance on how to handle an employee who had just informed them that she was pregnant, would need to take some time off work, and wondered whether any of that time off would be paid. As we explained to our client, the answer is “complicated” and depends almost entirely on the state law where the employee works.
A. The Current State of Affairs
Globally, forty-one (41) countries provide varying degrees of paid family leave to their citizens. The United States does not have a federal law requiring employers to provide paid family leave. The sole federal leave law is the Family and Medical Leave Act (“FMLA”), which only provides for unpaid leave in certain circumstances related to an employee’s (or family member’s) serious health condition, surrounding the birth or adoption of a child, or to care for an injured servicemember.
However, the District of Columbia and eight (8) other states (California, New Jersey, Rhode Island, New York, Washington, Massachusetts, Connecticut and Oregon) have enacted their own laws that mandate paid family leave. Although, the laws in Washington, D.C., Connecticut, Oregon and Washington state haven’t gone into full effect yet. The paid family leave is provided to the employee by the state and the source of the funding varies from state-to-state, but generally involves an additional payroll tax. In some states both employer and employees pay into the fund. Whereas, some states are funded solely by an employer tax or an employee tax.
B. Some Employers Are Choosing to Look Ahead
Many employers are staying ahead of the curve and implementing a paid family leave benefit prior to their state requiring it. Not only does this allow them to, potentially, already be in compliance with a new law, if passed; but providing paid family leave is becoming a popular benefit that companies are using to attract talented employees. An attractive benefits package can be a determining factor in recruiting and retaining high quality employees.
C. Practical Considerations Before Implementing
Before an employer implements its own paid family leave policy, there are several factors to consider. The following are a few to take into consideration as your company attempts to craft its own program.
- Length of Service and Employment Type: Are you going to attach a length of service to be eligible for the benefit? Most state and federal laws have a one-year, full-time service requirement to be eligible. Remember, once you attach a length of service requirement, it must be consistently applied. Additionally, your company should decide what classes of employees will be eligible for this benefit (i.e., all employees vs. just full-time employees).
- Total Time Off: How much leave time will your policy provide? It’s important to keep in mind that this benefit would not just be for new mothers who delivered a child; but should also apply to fathers and adoptions or foster care placement in order to comport with most state and federal sex discrimination laws. Will unused leave time expire at the end of the year, or will you allow some rollover to the next year?
- Family Medical Leave Act (FMLA): If your company is required to provide FMLA leave, would the paid family leave and FMLA run concurrently? The best answer is yes, they should. The paid family leave benefit provides a monetary benefit, whereas the FMLA leave provides unpaid leave with job protection. Running the two leave benefits concurrently will prevent an employee from utilizing the paid leave and then having all twelve (12) weeks of FMLA leave remaining to also utilize.
- Scope of the Leave Benefit: What circumstances will trigger a family leave entitlement? Does your company intend the leave to be used only for the birth or adoption of a child (i.e., parental leave) or do you want the leave to be broader and encompass sickness or illnesses that might affect immediate family members? There is no right or wrong answer, but defining the scope of the leave benefit is critical.
- Other Paid Benefits: Do you have a short-term disability benefit? If so, mothers who deliver their child should be eligible for these benefits. However, most short-term disability benefit plans have a waiting period for benefits and will only provide up to a certain dollar amount for time missed. In addition, these benefits typically end around week six after delivery. An employer’s family leave policy could provide compensation for the elimination period of the short-term disability benefit and then provide the difference in pay between regular wages and the short-term disability benefit.
- Timing: How long will employees have to use the paid family leave? Will the benefit only be available immediately after the initial birth or adoption; or will you allow employees to utilize family leave within a certain time frame thereafter? For example, your employee recently became a new father. His wife, who delivered the child, has FMLA and paid parental leave with her employer. Your employee wants to take his paid family leave after his spouse has exhausted her leave benefits so that one parent can stay home with the newborn. Will you allow this? Many employers do, but a reasonable time frame to utilize the leave after the child’s birth is appropriate – say six (6) months, for example.
- Proper Documentation: Regardless of whether your employee is giving birth to the child, is adopting, or is the father, you want to be sure you are consistent in your application of the policy and any documentation required (e.g., leave request form). Proper documentation will help eliminate confusion on both ends.
D. Employer Takeaway
A federal paid family leave law, while often discussed, is unlikely to pass Congress in the immediate future. That’s one reason that state paid family leave laws have started to proliferate. But even if the state where your company is located does not require some type of paid family leave, chances are reasonably good it may in the not-too-distant future. At a minimum, companies should begin doing preliminary planning and cost analysis so that they are prepared should their state adopt a paid family leave law. That way also, should your company decide it wants to join many other employers and enact a paid family leave program on its own to stay competitive in the market, the preliminary groundwork is already done.
C2 provides strategic HR outsourcing to clients who want to develop optimal workforce strategies and solutions to allow them to be more competitive and profitable. C2 blog posts are intended for educational and informational purposes only.