Ladies and gentlemen in the payroll department, buckle your seatbelts. The ride may get bumpy. While this caution could apply in many situations you face daily, this discussion focuses on the time employees don’t spend at work, for which they may or may not be paid. These include family leaves and sick time.
The reason for the turbulence is the existence of various rules across different jurisdictions. If you’re paying people in different states, cities, or perhaps even counties, you need to pay close attention to the latest leave rules.
Let’s start at the top, with the nearly 25-year-old Family Medical Leave Act (FMLA). This federal law covers all private employers in the United States, mandating up to 12 weeks of unpaid leave for employees in certain family-related situations. With a quarter-century of FMLA history behind us, we are confident that you have this one down.
Consequences Expected, Not Realized
When the FMLA was enacted, there were concerns that it would have dire consequences for employers, like dramatic reductions in productivity. However, experience has shown it to be a positive for workers with a negligible impact on employers.
In fact, in recognition of the FMLA’s 20th anniversary, the Department of Labor issued survey results showing that 91% of employers reported complying with the Act had either no noticeable effect or a positive effect on business operations and on employee absenteeism, turnover and morale. Furthermore, the survey found that 90% of workers return to their employer after taking an FMLA leave.
The discussion at various levels of government and business today is that the FMLA doesn’t go far enough. That’s why some jurisdictions are taking matters into their own hands, adding to the law’s basic requirements.
Of course, employers are free to pay employees during their leaves, and a few states—California, New Jersey and Rhode Island, as of this writing—actually do. These may ultimately serve as models for what’s to come, either nationally or for other individual jurisdictions.
Eleven states and the District of Columbia used the FMLA as the base on which to build a more expansive leave program. These differ in the details of eligibility, coverage and time allowances—which leads to the issue back in your payroll department. What works in one state or city where you pay employees may not work in another.
Sick Leave Varies by Area
States, cities, and counties across the country are implementing requirements that employers provide paid sick leave for employees. The specific rules vary, so you should periodically check with employment authorities to make sure you know the latest requirements where you pay people. Developing a relationship with a labor and employment lawyer who can keep you apprised of new developments in your locale(s) is also wise.
Steven Ludwig, Partner at Fox Rothschild LLP is one such lawyer. He is an expert in labor and employment law, and is very clear about the potential consequences of ignoring or misapplying leave rules.
“There are different remedies available to an aggrieved employee, depending upon the jurisdiction and the statute,” he says. “In addition to the risk of an audit by government investigators and lawsuits (including class actions), the risks can include fines, recovery of counsel fees, compensatory damages, liquidated damages, and even criminal penalties.”
As of July 1, 2017, at least six states—Arizona, Connecticut, California, Massachusetts, Oregon, and Vermont—require private sector employers to pay employees for sick leaves. Other states and counties have passed laws which will take effect later, or are actively considering new legislation.
Watch for further action in Chicago and Cook County, Illinois; Maryland; Nevada; New York; and Washington State, among others.
Federal Paid Leave Program Proposed
In May 2017, President Donald Trump included a provision for paid family leave in the 2018 White House budget proposal. The program would allow employees to take up to 6 weeks of paid leave for the care of newborn or newly adopted children, with some flexibility in design of the program. The leaves would be administered through each state’s unemployment insurance program.
Writing in their Insight column, Milliman’s Paul L. Correia explained some of the details of the proposal. How paid family leaves are to be funded under the proposal is unclear. But, Correia said, there are some methods that already exist and that could be used for the program.
“These mechanisms could vary from state to state,” he wrote, “and the options may include funding through general tax revenues, a specific new tax, employer-paid premiums, or employee-paid premiums. In the states that have already adopted a paid leave program, the benefits are funded through employee contributions.
“The contribution levels are established by state insurance departments. In California, the 2016 contribution rate for disability insurance and paid family leave was 0.9% of payroll, and in Rhode Island it was 1.2% of payroll.”
Like the rest of us, Correia says he believes many question are yet to be answered about paid family leave in the United States. Until these questions are settled, keep careful watch of what’s happening in your state, city, and county.
Ludwig suggests that compliance with federal law isn’t enough. “In each jurisdiction where employees are employed, an employer should have an employee handbook and policies, and required postings which comply with state and local requirements,” he says. “This also includes systems to track use and accrual of leave time.”
The bottom line, according to Ludwig: “Because of the legislative fervor, continued vigilance is necessary.”