Family Leave

Paid Family Leave in California:

Passage of Historic Legislation

         On Monday, September 23, 2002 , Governor Gray Davis signed a bill establishing paid family leave in California .  California is the first state to provide six weeks of paid leave to workers who take time off to care for a new child or seriously ill child, spouse, parent or domestic partner.  The stated purpose of the new law is to make it economically feasible for California employees to exercise their right to take family leave.   

Effective Date of the New Law  

            The new law does not go into effect until January 1, 2004 with the benefits only applying to leaves beginning on or after July 1, 2004 .  To avoid confusion, or unrealistic employee expectations, employers should make employees aware of this fact.  

Six Weeks Paid Family Leave  

            Currently, the federal Family and Medical Leave Act and the California Family Rights Act allow workers at companies with 50 or more employees to take as much as twelve unpaid weeks off per year to bond with a newborn or adopted child or to care for themselves or a seriously ill child, parent, spouse or domestic partner.[1]  California disability insurance benefits currently provide wage replacement for employees who need time off due to their own non-work-related injuries, illnesses or conditions that prevent them from working, but do not cover leave to care for a sick or injured family member or to bond with a new child.  The new California family leave law provides important monetary benefits to California employees so they do not have to choose between taking a leave of absence to care for a loved one and going without pay.  

The new law provides employees at companies of any size with partial reimbursement of their pay for up to six weeks during any 12-month period.  Employees will be reimbursed 55% of their base wage, with a cap at $728 per week.  This benefit is not paid directly by the employer; it is paid from the newly created Family Disability Insurance Program.  The benefit is not taxable and mirrors the maximum benefit allowed under the State Disability Insurance program.  In addition, to qualify for the leave, employers can require employees to utilize a maximum of two weeks of unused vacation time before their paid leave commences.  

Paid Family Leave Applicable to All California Businesses  

            Current state and federal law only applies to employers with 50 or more employees.  The new California legislation applies the family leave law to all businesses regardless of size.   

            Employees at companies with more than 50 employees will be eligible for the state’s six week paid leave, plus the remaining six weeks of unpaid leave allowable under federal law.  These employees are given job protection during their leave.  

            Employees at companies with fewer than 50 employees will be eligible only for California ’s six week paid leave.  Further, these employees are not afforded job protection, meaning an employer is not required to hold a job open for the employee on leave.  

            All employees currently covered by State Disability Insurance are eligible.  There is no length of service requirement under the new California law.  Therefore, an employee who has only been with the company a few days is eligible for the paid leave.[2]  To establish eligibility, employee claimants must file a claim for disability benefits with the Employment Development Department.  The claim must be supported by  certification from the treating physician or practitioner.  

Funding of the Program  

            The Family Disability Insurance Program will be funded by additional employee contributions to the State Disability Insurance system.  Thus, all employers who currently withhold Social Disability Insurance contributions from their employees’ pay will be withholding for this new family leave starting January 1, 2004 .  The average increase is an estimated $27 per year beginning January 1, 2004 .  However, the annual contribution could go as high as $70 per year for employees earning more than $72,000 annually.[3]  

Impact on Business Owners  

            Business owners rallied against the passage of this legislation asserting it will undoubtedly create management and cost hardships.  It is feared small business owners will be especially hard hit by unplanned absenteeism and the cost of temporary replacements.  The California Chamber of Commerce, in lobbying against the passage of the law, feels the law will cause California to lose its competitive edge as many businesses will look to other states when relocating or starting up to avoid the economic burden imposed by this law.  

            Further, many employers fear employee abuse of this new law.  Employers fear that employees will be tempted to lie in order to be granted paid leave.  Fortunately, since the paid leave comes under the temporary disability insurance program, it is a criminal offense to present a false statement in support of a benefit claim.  As such, employers should take every effort to be vigilant in requiring proper documentation for the leave.

This Memo was prepared by Stacey L. Fell. For more information, contact: