In its most basic definition, protected family and medical leave in the United States has encompassed three types of personal life changes: parental leave for new parents, caregiver leave for those caring for an ill family member, and medical leave for an individual’s serious health conditions. The federal Family and Medical Leave Act of 1993 (FMLA) offers job protection for eligible workers who take family and medical leave. However, this leave is unpaid. The 2017 tax reform legislation includes tax incentives to employers to voluntarily offer paid family and medical leave to employees. While many private employers do voluntarily offer some type of paid leave, federal proposals for various forms of mandated paid family leave protections have failed to pass in the U.S. Congress over the last few years, leaving the states to lead the way in passing and implementing required paid family leave laws to address this gap.
Federal Climate of Family Leave
The United States is only one of a handful of the 193 United Nations members that do not offer national paid maternity leave (and according to the Congressional Research Service is the only country in the Organization for Economic Co-operation and Development (OECD) that does not do so). The FMLA requires certain employers to provide its employees with 12 weeks of unpaid leave and job protection for qualified medical and family reasons, which include pregnancy complications, childbirth, or care for a covered family member, such as a newborn. This federal requirement is imposed only on companies that have 50 or more employees, and for qualifying employees based on work hours and time employed with the employer. This has meant a significant number of employees in the United States are ineligible to take medical or family leave at all, and those who are eligible often cannot afford to do so because they will not be paid.
While employees can access and apply paid employer leave to this time, this option is voluntary. According to a Bureau of Labor Statistics survey in March 2018, 16 percent of private industry employees had access to paid family leave through their employers. However, this was more prevalent among professional and technical occupations and industries, high-paying occupations, and for full-time workers and workers in large companies. It is this gap where paid time off has emerged as an issue, and national legislation has been reintroduced.
New Parents Act. In March 2019 Senator Marco Rubio (R-FL) and Senator Mitt Romney (R-UT) reintroduced the Economic Security for New Parents Act (New Parents Act), which would allow new parents paid parental leave in exchange for delaying or reducing their future Social Security benefits. A companion bill was introduced in the House by Representatives Ann Wagner (R-MO) and Dan Crenshaw (R-TX). Advocates applaud the bill for not increasing any tax burden and say it offers flexibility and freedom to an already existing program. Even so, this proposal has been criticized for including only new parents and no other common leave scenario and does not seem likely to be adopted into federal law because of competition from Democratic proposals.
FAMILY Act. The Family and Medical Insurance Leave Act (FAMILY Act) reintroduced in early 2019 by Senator Kirsten Gillibrand (D-NY) and Representative Rosa DeLauro (D-CT) has picked up the most momentum among recent paid leave policy proposals. The FAMILY Act would guarantee 12 weeks of partially paid leave for employees who are new parents, caring for an ill family member, or experiencing personal health issues. Specifically, it would allow employees nationally to earn 66 percent of their monthly wages (subject to maximum limitations). It would also be funded by a payroll tax paid by both employees and employers. The FAMILY Act has been modeled after similar policies executed among several states that have enacted similar schemes.
Trends from the States
While the Trump administration proposed an unemployment expansion in the 2020 budget similar to the Clinton administration’s Birth and Adoption Unemployment Compensation rules in place from 2000 to 2003, providing for an expansion of unemployment eligibility to cover periods of unemployment related to becoming a new parent, states are taking a different approach. California, Connecticut, the District of Columbia, Massachusetts, New Jersey, New York, Rhode Island, Washington, and most recently Oregon have all passed some form of paid leave insurance. Program eligibility typically requires a minimum period of employment within the state and some minimum earnings or contribution into the fund; programs are funded through some form of payroll tax receipts.
California, New Jersey, and Rhode Island. California, New Jersey, and Rhode Island have all passed paid family leave insurance programs that currently pay cash benefits to eligible workers engaged in qualified caregiving activities ranging from four weeks (Rhode Island) to six weeks (California and New Jersey).
California’s paid leave offers up to six weeks of partial pay when taking time off to bond with a new child entering the family through birth, adoption, or foster care placement. Partial payment currently ranges from about 60 percent to 70 percent of wages from the months prior to the claim, depending on the employee’s income level. Benefits range from $50 to a maximum of $1,252 per week and may be reduced by other paid income benefits available, such as paid sick time or vacation. It also extends to employees caring for a seriously ill child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner. Although California’s paid family leave insurance provides monetary benefits, job protection for employees who take time off is provided by the FMLA and California state leave law. California also offers partial pay for up to 52 weeks of time off for an employee’s own disability or medical condition. California paid leave insurance is currently funded by employee contributions only, and while all private-sector employers are covered under the law, only some public employees are covered. Possibly in response to some of the newer state laws passed and trends on paid leave, California recently extended its paid family leave eligibility from six weeks to eight weeks beginning July 1, 2020. Further changes are likely to come to California; its most recently signed law requires the governor to propose further benefit increases by November 2019.
New Jersey’s paid family leave insurance recently extended coverage from six to 12 weeks starting July 2020 and will also offer expanded coverage for intermittent leaves. The payment is capped at 85 percent of a worker’s average weekly pay, up to a total benefit cap of $859. Employees are eligible to apply this time to the state’s more generous family leave as well as other types of previously unpaid protected state leave.
All three states fund their paid leave insurance through employee payroll contributions. Rhode Island provides for specific protections for employees who use the benefits under the family leave insurance law, while the other states rely on FMLA or state leave law protections from retaliation for use of the benefit.
District of Columbia, Massachusetts, New York, and Washington. Three other states and the District of Columbia have implemented family leave insurance but are not yet paying benefits. New York began phased implementation in 2018, while Washington State and the District of Columbia saw legislation in 2017 with benefits to be paid starting in 2020. The Massachusetts law was signed in 2018, but benefits will not be paid out until 2021.
The District of Columbia will offer eight weeks for parental leave, six weeks for family care leave, and two weeks for an employee’s own serious health condition. Massachusetts and Washington State will each offer 12 weeks of paid family leave, including paid benefits for an employee’s own serious health condition. Massachusetts will offer up to 26 weeks for care of a qualified military service member. New York’s program phases in benefits gradually over a number of years, increasing the payout and duration over time, with the ability to make adjustment based on fiscal conditions. When New York has fully implemented its program in 2021, it will offer a maximum benefit of 12 weeks of pay.
In the District of Columbia, paid leave insurance is funded completely by employers at a rate of 0.62 percent of wages. However, Massachusetts and Washington State provide for funding contributions paid by both employees and employers, while New York is funded by employee contributions at a rate that varies based on income. Massachusetts and Washington State do not require employers of smaller companies (those with fewer than 25 and 50 employees, respectively) to pay the employer portion of insurance contributions for paid leave.
Massachusetts will offer a benefit rate of up to 80 percent of wages for employees paid 50 percent or less than the statewide weekly wage average. The District of Columbia and Washington State will offer up to 90 percent wage replacement for its lower-income employees on leave.
Connecticut. Connecticut passed state paid disability insurance in June 2019 and intends to offer up to 12 weeks of paid family leave under the insurance plan to eligible employees, funded by employee payroll tax contributions. An additional two weeks may be available to qualified employees related to childbirth. Contributions will be set at a maximum rate of 0.5 percent of the employee’s wages starting in 2021. Connecticut plans to offer benefits of up to 95 percent of a private sector employee’s average weekly wage rate to a maximum benefit of $900 per week starting in 2022.
Oregon. Oregon adopted the newest paid family leave insurance law in July 2019 and is the most generous law on the subject to date. Combined employer and employee payroll contributions are set to begin in 2022, with benefits paid beginning in 2023. Under the law, Oregon will offer up to 12 weeks paid for qualifying leave, and the maximum low-income employee benefit will be paid 100 percent of their wages for time off (subject to a benefit cap of $1,215 per week). This is important to advocates of the law because low-income employees tend to be hit the hardest when taking time off if they are living paycheck-to-paycheck. Oregon’s law also offers employees job security when they take paid leave under a broad range of already-existing state protected leaves, including employees welcoming a new baby, caring for an ill relative, or dealing with their own health condition, as well as victims of domestic violence. Oregon was the first state to include victims of domestic violence in its paid leave legislation (New Jersey has recently included domestic violence victims in an amendment to its law). Oregon also extends benefits to both full-time and part-time employees. Because state law expands the definition of “family member” from just blood relatives to include nontraditional family dynamics, the paid leave is similarly broad.
Implications for Employers
While there is disagreement about how paid leave should be funded, how long it should be offered, and who specifically it should be offered to, most can agree that this is an issue central to family life and one on which the United States has long been behind when compared to other countries around the world. A growing concern for employers is what government-mandated paid leave will cost them. Over the last few years, major tech companies have begun adopting their own paid family leave policies voluntarily, addressing some of the concerns from businesses. Laszlo Bock, senior vice president of Google’s people operations, wrote in his book Work Rules! (Twelve, 2015):
The attrition rate for women after childbirth was twice our average attrition rate. . . . After making the change in leave, the difference in attrition rates vanished. And moms told us that they were often using the extra two months to transition slowly back to work, making them more effective and happier when the leave ended. When we eventually did the math, it turned out this program cost nothing. The cost of having a mom out of the office for an extra couple of months was more than offset by the value of retaining her expertise and avoiding the cost of finding and training a new hire.
Advocates argue that paid leave plans communicate that employers value their employees and what they bring to their company. It is also becoming a competitive advantage for small businesses that have elected to voluntarily begin their own paid leave plans.
The costs of paid family leave to businesses are now being weighed against the interests of employees seeking to balance family life, health needs, and the need to continue supporting themselves and their family. Leave laws and compliance may continue to become increasingly complex. Business leaders must stay up-to-date on the status of mandated paid leave laws in their state and locality. Many experts advocate that businesses get a head start on statutory changes to paid leave by calculating the costs, assessing the potential benefits, and creating their own voluntary paid leave program.