As the idea to make paid family leave mandatory continues to gain attention, employers may be wondering what various paid leave proposals might mean for their businesses. A June 20 meeting between first daughter and presidential adviser Ivanka Trump and a handful of senators doesn’t draw a clear picture of what may be in store, but it does show movement on the issue.
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Trump met with U.S. Senators Marco Rubio (R-FL) and Deb Fischer (R-NE) along with a few more senators to discuss options, including the proposal included in President Donald Trump’s budget plan, which would provide six weeks of paid leave for mothers and fathers after the birth or adoption of a child.
In addition to the plan in the Trump budget proposal, lawmakers are looking at legislative proposals, including the Strong Families Act, which would create a tax credit to incentivize businesses to offer up to 12 weeks of paid family leave per year. Fischer is a sponsor of that bill.
No matter what form a paid family leave bill may take, the issue is gaining momentum, and employers need to be ready, according to one attorney watching the issue. “In short, employers should expect to see some form of federal paid family leave benefit program, perhaps as soon as the end of the year,” says Bradley Cave, an attorney with Holland & Hart LLP in Cheyenne, Wyoming.
Cave notes a joint report from the conservative American Enterprise Institute and the liberal Brookings Institute that shows differences on specifics of a paid family leave program but carries the subtitle “An Issue Whose Time Has Come.” Also, he says, Republicans “may be more inclined to support the creation of an expensive new employee benefit because of the need to counterbalance the negative aspects of the pending Affordable Care Act overhaul.”
| Need to learn more? Brad Cave will be copresenting a session on “Paid Leave in 2017 and Beyond: Strategies for Managing Emerging Compliance Obligations” at the 2017 Advanced Employment Issues Symposium (AEIS) in Las Vegas in mid-November. |
Proposed Legislation
Of the proposals currently on the drawing board, Cave says the Strong Families Act seems the most employer-friendly. “Its optional, tax-credit based approach appears to be beneficial for employers that already offer a paid sick leave benefit,” and it creates “very little in the way of regulatory burdens” beyond those already present in the federal Family and Medical Leave Act (FMLA), which provides time off for covered employees after the birth or adoption of a child as well as for other medical issues but doesn’t require the time off to be paid.
The Strong Families Act would create a tax credit for employers that provide paid family and medical leave for employees on leave for FMLA-qualifying reasons, Cave says. Also, employer participation would be optional, and only individuals who are employed and otherwise eligible for FMLA leave would receive paid family and medical leave under the policy employers would be required to adopt to claim the tax credit.
Another proposal getting attention—the Family and Medical Insurance Leave Act (known as the “FAMILY Act”)—would provide for a paid family and medical leave benefit for “caregiving days,” Cave says. This bill, introduced by Senator Kirsten Gillibrand (D-NY), would provide benefits funded through a newly created payroll tax of up to 0.2 percent on employee wages, with an equal employer match. The fund created through the taxes would be administered by a new federal Office of Paid and Family Leave.
Cave says the FAMILY Act plan would pay caregiving benefits regardless of whether recipients are currently employed. Individuals would be eligible if they have earned income from employment during the 12 months before applying for benefits.
Cave says the plan included in the Trump budget “suggests that the details and administration of a parental leave benefit program would be left to each state government, but the program would be financed through ‘sensible reforms’ of the unemployment insurance system.”
Compliance Burdens
The introduced bills and the plan included in the Trump budget proposal each carry different compliance burdens, Cave says. “The Gillibrand bill is the most streamlined from the employers’ perspective because the employer’s duty is simply to withhold and pay more tax through the payroll tax payment system already in place,” he says. “Eligibility and payment of benefits to individuals all would occur through the new federal agency.”
The Trump plan, which Ivanka Trump has reportedly called a “placeholder” subject to revision, “could be a compliance quagmire, depending on how states integrate the benefit process with the existing unemployment insurance program,” Cave says. “In particular, states could place the burden of policing eligibility on employers, much as employers are now required to report reasons for employee termination in response to unemployment claims and participate in disqualification hearings.” Also, multistate employers could face more complexity because states might adopt different approaches.
Cave says the Strong Families Act may create new accounting requirements to calculate and claim the tax credit, but employers with paid leave plans shouldn’t see significant compliance burdens.
Employer-Developed Plans
Although the paid family leave issue has garnered much attention lately, just three states—California, New Jersey, and Rhode Island—currently require employers to provide paid family or medical leave. New York and Washington, D.C., have adopted requirements that haven’t yet gone into effect. With few paid leave laws on the books, Cave says employers are free to design paid leave benefits to match their business objectives.
“Generous paid leave policies arguably promote employee loyalty, strengthen morale, and create a competitive advantage in the labor market,” Cave says. “On the other hand, paid leave is expensive and susceptible to abuse.”
To protect against abuse, Cave says employers should require strict compliance with notice and certification requirements and should incorporate second-opinion provisions into their policies. Also, depending on the industry and size of the employer, he says some employers might consider purchasing a short-term disability plan administered by a third party as a way to provide paid medical leave.
| Tammy Binford writes and edits news alerts and newsletter articles on labor and employment law topics for BLR web and print publications. In addition, she writes for HR Hero Line and Diversity Insight, two of the ezines and blogs found on HRHero.com. |