Sep 27, 2002 General Employment Issues

California Adopts Nation’s First Paid Family Leave Law

On September 23, 2002, Governor Gray Davis signed new legislation, the Family Temporary Disability Insurance program (“TFDI”), making California the first state in the country to offer workers paid family leave.

TFDI, which applies to leaves beginning on or after July 1, 2004, provides that eligible employees will be entitled to receive 55 percent of their wages, up to a maximum payment of $728 per week, for leaves of up to six weeks in any twelve month period. As with the unpaid family and medical leave that is already available under the Federal Family and Medical Leave Act (“FMLA”) and the California Family Rights Act (“CFRA”), the benefits of TFDI are available for leave taken to care for a newborn, a newly adopted child, or an ill family member. Unlike FMLA and CFRA, however, TFDI does not provide benefits in the case of the employee’s own serious medical condition (for which other wage replacement benefits, such as disability insurance or workers compensation benefits, are often available). On the other hand, TFDI is in some respects more expansive than existing family leave laws. For example, under FMLA and CFRA unpaid family and medical leave is only available to employees in companies with 50 or more employees within a 75 mile radius; but TFDI applies to all private employers, regardless of size. Moreover, while only employees with at least one year of service are eligible for leave under current family and medical leave laws, the new law contains no such requirement In theory, an employee could ask for the leave his first day on the job.

The good new for employers is that the TFDI benefits will be funded by employee payroll deductions paid to the state (similar to state disability insurance). The deductions will average about $27 a year and range as high as $70 a year. However, while these deductions come entirely from employees, employers will unavoidably bear the cost of monitoring and administering these deductions, as well as the expense of hiring and training replacement workers and the additional overtime incurred to cover for absent employees.

It is anticipated that before TFDI takes effect in 2004, California will issue guidance to employers on the operation of the new program, including any notice requirements. We will be following the progress of the implementation of TFDI and will report any significant developments on this web site.