United States: California Paid Family Leave Began July 1, 2004

Employees in California, beginning July 1, 2004, are eligible for paid family leave benefits, for which they have been contributing through payroll deductions since the beginning of this year. The paid family leave ("PFL") program will apply to all employers who participate in the California State Disability Insurance ("CSDI") program either through the CSDI fund or through voluntary self-funded accounts. In other words, virtually all private-sector employers are covered.

Paid family leave is a wage-replacement program. According to regulations recently issued by the Employment Development Department ("EDD"), it is not a leave entitlement, in contrast to California state or federal family and medical leave ("FMLA"). Nevertheless, many employees will be eligible for both paid family leave and unpaid FMLA leave, which, according to the PFL statute, run concurrently.

This is the first program of its type anywhere in the United States. Because it is so new, there are many unanswered questions. In general, though, an employee wishing to take PFL must submit an application to the EDD (or to the employer, if the employer maintains a selffunded, voluntary disability plan). Once the application is submitted, the EDD will make a determination whether the individual is entitled to PFL benefits. The PFL program will be administered by the EDD in much the same way as the CSDI program is administered.

If the EDD approves an employee’s application for PFL benefits, the employee is entitled to up to six weeks’ benefits in a twelve-month period.

The PFL program is funded solely through employee contributions, which have been amassed in a fund since January 1, 2004. There is no obligation for employers to contribute.

Many questions have been raised about the economic viability of the PFL program. However, the statute has several built in restrictions or disincentives. Most notably, employers may require that the employee use two weeks of vacation pay prior to becoming eligible for any PFL benefits. There is also a one-week "waiting" period prior to entitlement to PFL benefits. One of the two weeks of mandatory vacation pay may be used to provide income for the oneweek waiting period. Employers should make sure their policies provide notice of the waiting period and vacation pay requirements. During the one-week waiting period, the employee may use vacation or sick leave, and the employer may require the use of vacation and/or sick leave. However, most commentators believe that the employer may require only one week’s sick leave usage and no more than two weeks’ vacation pay usage.

Since PFL is a wage replacement program, there is no entitlement to PFL unless the employee has suffered a wage loss. No wage loss occurs during periods when the employee is receiving vacation pay, sick leave, workers compensation benefits or state disability insurance benefits. The receipt of these additional benefits will delay, in many cases, the employee’s entitlement to PFL.

Unlike FMLA or CFRA, there is no "small employer" exemption. All private sector employers who participate in the CSDI fund, or through voluntary self-funded disability accounts, are covered.

Once again, unlike FMLA/CFRA, there is no requirement for a minimum length of employment. There is no requirement that the employee have worked a minimum number of hours or be employed at a facility of a specific size. If the employer participates in the CSDI fund, or through a voluntary disability plan (and almost all private employers do so), the employee is covered. Theoretically, an employee could be eligible for PFL after only a day on the job.

The events for which PFL is available are essentially the same as those for which unpaid FMLA/CFRA leave is available: (a) the birth, adoption or placement in foster care of a child of the employee, or the child of the employee’s spouse or domestic partner; (b) to care for a sick child of the employee, or of the employee’s spouse or domestic partner; or (c) to care for a sick spouse or domestic partner, or the employee’s sick parent. There is no PFL entitlement to care for a sick parent-in-law. A domestic partner means a person registered as the employee’s domestic partner. In almost all cases this will be a same-sex partner.

The statute and the new EDD regulations use the term "serious health condition" to define when a spouse, child or domestic partner is ill. As defined by the EDD, "serious health condition" means essentially the same as that term is used in unpaid FMLA/CFRA situations.

An employee eligible for PFL may take up to six weeks of PFL in a twelve month period. The "twelve month period" is a "look forward" concept starting from the date the individual first establishes a valid claim for PFL benefits. The "look forward" feature is designed to prevent excessive use of leave; but it is also contrary to the "look back" method, used by most employers, for calculating the maximum unpaid leave under FMLA/CFRA.

According to the EDD, the maximum PFL benefit for 2004 is $728 per week. PFL is paid at the rate of fifty-five percent (55%) of the employee’s wages, up to the cap of $728.

PFL forms are available on the website of the EDD: www.edd.ca.gov. Employers who have created voluntary self-funded disability plans, and therefore do not participate in CSDI, must develop their own forms. We recommend that the EDD’s forms be adapted by self-funded employers for that purpose.

There is a posting requirement, and the mandatory poster is available on the EDD website (DE Form 1857a). Also, employers are required to distribute a PFL pamphlet, EDD Form DE 2511, to all new employees hired January 1, 2004 or after, and to all employees who are absent beginning on or after July 1, 2004, if the absence is for a reason that may qualify for PFL benefits. These documents are also available on the EDD website.

Except for the fact that PFL runs concurrently with FMLA/CFRA leave, there was no effort to coordinate PFL with FMLA/CFRA. Remember that PFL is a wage replacement statute, not a leave entitlement. Employees who are not entitled to FMLA/CFRA leave (because the employee is short-term or the employer is too small) may nonetheless be entitled to PFL.

When an employee provides information that may entitle him/her to either FMLA/CFRA or PFL, or both, the employer must assess what leave rights the employee has. FMLA/CFRA notices and medical certifications should be given immediately to eligible employees who may be entitled to FMLA/CFRA leave. PFL forms should be given to persons who may be entitled to PFL. The employer should advise the employee of the one-week waiting period and two-week mandatory vacation pay usage (if the employer has the two-week mandatory usage policy).

In practice, many employees will be entitled to both PFL (subject to the waiting periods) and unpaid FMLA/CFRA leave. These employees will be entitled to reinstatement rights under FMLA/CFRA if the employee complies with the requirements of those statutes.

One unsettled area involves intermittent leave. There is no provision in the PFL statute or the EDD regulations for intermittent PFL. Theoretically, if an employee could establish entitlement to PFL, he or she would be entitled to wage replacement for periods of wage loss, even though those periods might not be contiguous or consecutive days or weeks.

PFL will provide an additional means of income for employees who wish to take time off to bond with a newborn child, or a child placed for adoption or foster care. In this situation, the child bonding must be completed within twelve months after the birth, adoption or placement of the child, in order for PFL benefits to be payable. Eligible employees may also take FMLA/CFRA leave concurrently, subject to certain limitations, and be entitled to the reinstatement rights provided by those statutes. EDD’s recent regulations establish necessary documentation requirements in order for the employee to qualify for PFL benefits for periods of child bonding.

Female employees who are receiving SDI benefits due to pregnancy or pregnancy-related conditions are not eligible for PFL during the period of receipt of SDI benefits. Upon the cessation of SDI benefits, a female employee would be eligible for PFL benefits for a period of bonding with the child. A female employee who has already served a waiting period in order to obtain SDI benefits, need not serve a second waiting period if she is eligible for PFL benefits at the conclusion of the period of disability.

If the employee can establish eligibility for PFL for any period after July 1, 2004, it does not matter when the PFL-qualifying event began. For example, if the employee’s spouse began to undergo chemotherapy treatments in May 2004, the employee could nevertheless apply for PFL benefits beginning August 1, 2004, if the treatment continued after that date.

Employers should do at least the following:

• Make sure the PFL poster is posted immediately and that the EDD PFL pamphlet is available (see section 8 above regarding how to access those documents).

• Provide the EDD pamphlet to all employees, including those currently absent for reasons that might qualify the employee for PFL benefits.

• Make sure that the company’s leave of absence policies describe PFL and contain the one-week waiting period and two-week mandatory vacation pay usage features.

• Educate human resource staff and key supervisors about the PFL program and its requirements.

• Many employers may wish to distribute additional literature regarding the PFL program and its benefits.

• Review the company’s leave of absence policies to make sure they address all major forms of leave: CFRA/FMLA; "kin care" under Labor Code section 233; PFL; pregnancy disability leave; workers compensation and other mandated leaves.

• If the company has established a voluntary disability plan in lieu of participating in CSDI, obtain PFL forms from the EDD and adapt them for the company’s use.

• Consult the EDD website which contains a wealth of useful information regarding the program.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.