Several large employers announced the adoption of paid family leave policies in 2015. Some employers have implemented these policies as “good ideas” and others because several states have passed legislation that mandates paid family leave. Since California enacted the first paid leave mandate in 2004, several states have passed similar laws, including Rhode Island, New Jersey and New York. Additionally, Maryland has proposed a mandate, and Connecticut created a task force to research a paid leave mandate. As more states mandate paid leave, employers should understand the implications these laws can have on the workplace.

State mandated paid family leave allows employees to take time away from work to: 1) provide care for and bond with newborn or recently adopted children, and/or; 2) act as a caregiver to a family member suffering from a “serious illness.” The period of paid time granted varies from state-to-state, with a range of 4 to 12 weeks. However, some legislative measures, such as a new ordinance in San Francisco, include a threshold minimum number of employees before an employer is subject to the mandate.

During paid family leave, employees are generally entitled to receive a percentage of their regular compensation, capped at a fixed amount. In California, employees will transition from an entitlement of 55% to 70% of their wages during their leave in 2018. The increase will be capped at one third of the State’s average weekly wage of $1,121. Similarly, New York’s newly enacted law will entitle employees to 50% of their weekly wage, capped at 50% of the statewide average weekly wage of $1,300. 

Additionally, some mandates require protection of an employee’s job security. In New York, New Jersey and Rhode Island, the law requires employee to be restored to the position they previously held or a position that provides equivalent seniority, status, benefits and pay. The mandates do not increase, reduce or modify the employee’s current benefits. 

Key questions to consider regarding the impact of mandated paid family leave on the workplace include:

• What percentage of compensation has your state’s law mandated be paid?

• How long does your state’s law provide for a leave of absence? 

• Does your state’s law require job protection?

• Does your state’s law provide a cap on benefits? If so, what is the cap?

• How does your state’s law define a “family member” for the purpose of providing care for a family member with a serious illness? 

• Does your state’s law require a threshold number of employees before paid leave becomes mandatory? 

• If you have employees in multiple states, will you adopt a uniform policy for all employees, only provide state mandated benefits, or adopt a policy somewhere in between?

• How will you manage the additional cost incurred by complying with these laws, particularly with laws increasing minimum wages?

As paid family leave laws gain national attention, additional states may begin to consider implementing similar laws. We will continue to follow changes and monitor how the changes affect employers and benefit plans.