United States: Proposed National Paid Leave Legislation Could Preempt State Laws

Three Republicans from the House of Representatives hailing from states with paid family and sick leave laws have sponsored the Workflex in the 21st Century Act. This proposed law signals the increasing frustration with the complexities of multi-state compliance among business owners.

Representatives Mimi Walters of California, Elise Stefanik of New York, and Cathy McMorris Rodgers of Washington have pitched a bill that would exempt employers who offer certain amounts of paid time off from complying with state paid leave laws.

In its current form, the bill would serve to drastically reduce employee access to paid leave, but would also grant employees alternative work arrangements, known as "workflex" options.

The Workflex in the 21st Century Act, H.R. 4219, was proposed on October 26, 2017 as an amendment to the Employee Retirement Income Security Act to "Include a voluntary option for qualified flexible workplace arrangements."

Under the law, employers would be exempt from state paid leave law requirements, but since the bill only reaches employees eligible for employer-provided benefits, employers would still have to comply with state and local leave laws for employees ineligible for the company's benefits.

Employers with a unionized workforce must incorporate the rights of employees to compensable leave and workflex options pursuant to applicable collective bargaining agreements into the plan.

The bill provides that plans which meet all of these requirements will also satisfy the requirements of Executive Order 13706, or Paid Sick Leave for federal contractors. However, this law does not, on its face, amend or limit employees' ability to use unpaid leave in accordance with the Family and Medical Leave Act.

Employers wishing to take advantage of the bill's preemptive effects must provide a minimum amount of "compensable leave" for employees based on their years of service. Compensable leave includes any leave permitted to be used for paid time off, sick leave, personal leave, or vacation. Employers are permitted to include up to six paid holidays towards meeting the minimum amounts reflected below.

The bill makes clear that employers who wish to allow employees to take leave exceeding these minimum amounts are free to do so under the law. In that vein, employers who provide unlimited compensable leave, as defined above, are deemed to comply with the minimum amount of leave requirement.

Employers may frontload the employee's compensable leave at the beginning of the plan year, or allow the employee to accrue compensable leave proportionally as the calendar year progresses, and is available for the employee to use as the compensable leave accrues. It is unclear whether the employer can impose a waiting period to use compensable leave, or if there are further limits on accrual of leave based on the wording of the bill. Further, the employer has the option to offer both carryover and cash out of unused leave.

The number of employees is determined by calculating the total number of monthly employees for each month of the preceding plan year and dividing by 12. To be counted, an employee must be considered an employee for first and last day of the month.

Defining full time

"Full-time" must be "reasonably" defined, but the bill does not give further guidelines regarding the definition. All other employees are considered "part-time," but the method of determining how part-time employees may accrue compensable leave is not clear based on the bill.

An employer may restrict the use of leave during the first 90 days of employment with the employer, and may also limit the use of leave to times when it does not "unduly disrupt the operations of the employer," and whether to use the leave in full-day or partial-day increments.

In addition to paid leave, the bill provides that an employer must offer each employee in the plan, so long as the employee meets eligibility requirements, at least one of the following "workflex" options, which are not limited in time according to the bill as written:

Biweekly work schedule: A non-exempt employee may work up to 80 hours in a two-week period. In any one week, the employee may work between 40 - 60 hours. Employees must be compensated at their regular rate, and may only earn overtime for any time worked over the agreed-upon biweekly work schedule, or over 80 hours in the two-week period. It is unclear how this arrangement will interact with the Fair Labor Standards Act or state wage and hour laws.

Compressed schedule work program: A non-exempt employee may work his or her regular weekly hours spread among fewer days, i.e., a 40-hour week over four days. Employees who choose this option earn overtime in accordance with the FLSA. Moreover, state wage and hour requirements would also apply.

Job sharing program: An arrangement where the employer approves two or more employees to share one employment position.

Flexible scheduling: An agreement under which the employee's regular work schedule is "altered." This term is not further defined in the bill.

Predictable scheduling: A system whereby the employer provides a schedule to an employee with reasonable advanced notice and with as few alterations as possible.

Telework program: An arrangement where the employee is permitted to perform the duties and responsibilities of his or her position from a worksite other than where the employee would otherwise work.

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Options offered may differ depending on the particular position. Employees eligible for "workflex" options must be employed for at least 12 months for at least 1,000 hours of service during the 12-month period. An employer may estimate the number of hours worked by the employee. However, the employer may not force an employee to use workflex options.

If an employee elects to use a workflex option offered by the employer, a written agreement signed prior to starting the arrangement must set forth the employee's work schedule with a description of the workflex option.

Employees who elect to use a workflex option or compensable leave under the bill must be reinstated to their same or equivalent position, unless the employee has used more than 12 weeks of compensable leave in a 12-month period, or is a key employee as defined under the Family and Medical Leave Act. The bill also notes it is not intended to relieve an employer's obligations under the Americans with Disabilities Act.

This bill, should it pass, would offer attractive alternatives to employers who find complying with various state and local paid leave regulations challenging. It would also offer flexible work arrangements to employees that could save employers money and reduce turnover of employees who would otherwise leave a job for family or personal reasons.

It would ostensibly preempt paid leave laws that are popping up all over the country, including most recently paid family leave in New York and paid sick leave in various municipalities, including Cook County, Illinois and the state of Washington. However, its overlap with various laws, including ERISA, the FMLA, and the FLSA may necessitate complex legal solutions in order to implement it.

Retirement plan advisers and employers should continue to track this bill as it moves through the legislative process.

Previously published in Employee Benefit Adviser.

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.

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