On December 20, 2016, in a 9-4 vote, the Washington, D.C. Council passed bill B21-0415, The Universal Paid Leave Act of 2015.  The bill establishes a universal paid leave system for individuals who work in the District of Columbia (“the District” or “D.C.”) and businesses operating in D.C.  It will be effective after Mayor Muriel Bowser’s signature, inaction, or, if vetoed, a Council override, and a 30-day Congressional review.

The bill grants an un-waivable right to 16 weeks of paid family and medical leave per year to covered employees for a qualifying event or exigency.

A covered employee is any individual who: (1) is employed by a private sector employer during some or all of the 52 weeks immediately preceding the qualifying event, and (2) either spends a majority of his or her time working in D.C., or who’s employer is registered in D.C. and the employee does not spend a majority of his or her time working for the employer in a state other than D.C.

Covered employees may take leave upon the occurrence of a qualifying event, such as:

1. The birth of a child of the employee;

2. The legal placement of a child with the employee (such as through adoption, guardianship, or foster care);

3. The placement with the employee of a child for whom the employee permanently assumes and discharges parental responsibilities; or

4. The care of a family member of the employee who has a serious health condition.

Covered employees may also take leave for a qualifying exigency, such as:

1. Notice given 7 or fewer days in advance of military deployment;

2. Military events and related activities;

3. Child care and school activities if required directly or indirectly because of a family member’s call to active duty or active duty status;

4. Financial and legal arrangements for the service member’s absence or because of the absence;

5. Counseling provided by someone other than a healthcare provider, if the need for counseling arises from the active duty or call to active duty status of a covered military member;

6. Spending time with a service member who is on short-term, temporary rest and recuperation leave during the period of deployment;

7. Post deployment activities;

8. Attending to issues that arise out of active duty or a call to active duty that a covered employer and covered employee agree should be covered;

9. Care for a qualifying service member who is the eligible individual’s next of kin as defined under the Family and Medical Leave Act of 1993 (“FMLA”).

If leave under this bill also qualifies for federal or D.C. FMLA leave, paid leave under the bill will run concurrently with leave under those laws.  Additionally, covered employers may grant paid leave rights greater than those the bill provides by establishing them by contract or in a collective bargaining agreement.

The bill establishes a floor, but not a ceiling.  The bill does not supersede provisions of law, collective bargaining agreements, or contracts that grant additional rights, but rights under the bill cannot be waived by collective bargaining agreement, contract, or employer policy.

Further, employers are still be required to offer short-term disability insurance to eligible individuals.

While on leave, employees must be paid 100% of their average weekly wages up to $1,000 per week, and thereafter 50% of their average weekly wages in excess of $1,000, for a maximum benefit of $3,000 per week.

To achieve this financially, the bill establishes a Fund that would collect taxes from D.C. employers, the D.C. government, and eligible individuals.  Depending on the salary amount, employers would contribute up to 1% of each employee’s salary to the Fund, employees would contribute up to 1% of their own salary to the Fund, and the D.C. government would contribute an amount to be later determined.  Together, the Fund’s tax scheme would result in a payroll tax increase of .62%.

Despite this increase in payroll taxes, 80% of D.C. residents favor the bill – some praising it for alleviating the burden that taking leave has on low income workers.  Yet, other insiders predict that the bill would have serious consequences for employers and the District.  For example, the increased payroll tax places an additional burden on employers, specifically, small businesses, who claim that they cannot afford to fund both this leave policy and the minimum wage increase that the District adopted earlier in 2016.  As a result, policies such as this one have forced struggling businesses to decrease employee salaries to afford tax increases, which harms employees in the long-run.  Employers are also concerned that this leave policy would result in an overall loss of productivity and profitability.

Another concern regarding this bill is that it requires the D.C. government to fund a policy that primarily benefits non-DC residents.  About 64% percent of Fund beneficiaries would be employees who commute into D.C. from Maryland or Virginia.  Although Councilmembers discussed this issue, they could not resolve how to prevent the funds raised from leaving with Maryland and Virginia residents.

With this vote, D.C. moves towards enacting the most expansive family leave law to date, leading states like New York, which recently enacted a 12 week paid family and medical leave law.  The bill will be presented to Mayor Muriel Bowser to sign.  Some predict that Mayor Bowser, who has expressed opposition to the bill because of the economic effect it would have on District residents and businesses, would elect to allow the bill to become effective without her signature or veto the bill.  However, even if she vetoes the bill, the recent 9-4 vote to pass the bill shows that the Council can override the veto with a two thirds vote.  Congress will then review the bill for 30 days prior to it becoming effective.

If B21-0415 becomes law, which is the predicted outcome, companies should prepare to: (1) create and post a notice to inform employees of the new law, (2) conduct accounting to prepare for the tax increase, and (3) confer with their attorneys regarding compliance and proper legal steps to take when an employee requests leave under the law.