As Washington’s new paid family leave program rumbles toward its 2020 launch, lawmakers have begun looking for ways to blunt the costs for small businesses.
The paid family leave program, SB 5975, was approved by the Washington Legislature on July 30 in the 2017 session on a 31-12 vote in the Senate and a 65-29 vote in the House. Gov. Jay Inslee signed it into law on July 5. In the program, eligible employees get 12 weeks of family or medical leave, with a cap of 16 weeks per year if an employee experiences both a family and medical crisis. Women with pregnancy complications can also get an additional two weeks leave.
“The business community was really involved in creating the law in the first place,” said Sen. Joe Fain, R-Auburn, the lead Republican author. “There was a lot of back and forth with several groups. After it passed, the first step was to go through and do rulemaking for elements of the law.”
Both employees and employers will pay for the program through a payroll tax. Employees are eligible for the program after working 820 hours. Employees will be eligible to take leave starting in 2020, with premiums starting in 2019 to build up a funding pool for the program, Fain said.
“We will build resources into a trust fund to pay claims,” Fain said. “There will be a year when it’s just generating resources and not paying out, but by January 2020 benefits will start.”
Most employees will pay less than $2 a week for the coverage. And low-wage employees making up to $17 an hour would get about 90 percent of their income in the weekly benefit, with an overall cap of $1,000 a week for others. Overall, workers will pay about 63 percent of the cost of the program, while employers pay 37 percent, Fain said.
Fain created a simple online calculator for businesses and employees to get an idea of the costs at family.senatorfain.com.
“I actually coded it myself,” he said.
The site includes a video about the program and other details.
For a worker making $50,000 a year, the weekly employee premium would be about $2.50, and the weekly employer premium for companies with more than 50 employees would be $1.50, Fain said.
“Each company’s going to do their own math,” he said.
Jim Sikora, an employment attorney with Landerholm in Vancouver, said it’s still a bit early to know how employers will fare under the costs of the new program.
“Right now we’re before even the first effective date for premium collections,” Sikora said. ”We’re still in the rulemaking process.”
But employers are starting to learn what they’ll need to comply. One major concern he’s heard repeatedly is that the requirement to hold an employee position open during leave could be problematic, Sikora said.
“What are the requirements in terms of what to do with their positions?” Sikora asked. “What effect will that have on operators depending on what their operations are? Employees may be taking more frequent leaves of absence than they would when this was unpaid.”
As part of the rulemaking process, lawmakers are looking at stipends for employers to access when employees are on leave. Employers can use the funds to bring on temp workers, Fain said.
“When you’re sick you shouldn’t work,” Fain said. “When you’re hurt you shouldn’t work. When you’ve got a newborn kid you shouldn’t be working either. This is a societal cost and it shouldn’t be borne solely by employers.”
As part of an effort to help small business, companies with 150 or fewer employees will be eligible for reimbursement funds. For instance, if a company hires a temp, it can apply for state reimbursement up to $3,000 per worker.
“I think employers are happy that the option exists,” Sikora said. “I think it’s a little early to know how effective it will be. It depends on how onerous the process will be.”
That said, many businesses have been supportive of the new program.
“From a ‘health of your employees’ and overall health and productivity perspective there probably is a benefit for employees to be able to take time off, take care of themselves and a newborn child,” Sikora said. “That’s good for overall health of your employees. There’s just a lot of curiosity about what the requirements will be.”
Another change is a provision that lets companies with their own family leave programs opt out of the state program, as long as they meet certain conditions, Fain said.
“There were concerns when we were developing the law,” Fain said. “Businesses were concerned and should be. But for the most part we tried to be the lightest touch possible.”
The first talks on the subject were aimed at making businesses pay all the costs, he added.
“I was vehemently against that,” Fain said. “With this the only additional requirement on the businesses is they have to calculate and remit this tax.”
And companies that have fewer than 50 employees don’t have to pay any tax at all, he said.
Sikora’s advice for companies is to make sure they have a plan in place to start making deductions.
“Look at your payroll vendor or payroll department and make sure they’re ready to do that,” he said. “You also want to prepare to make quarterly filings on employee wages and hours.”
Fain said he also hopes the state will give the program a user-friendly interface for employers and employees to interact with.
“I think it’s going to be good for the state,” Fain said. “I think it will be good for both employees and employers.”