The New Washington Paid Family and Medical Leave Law is Here. . . . (Sort Of)

By:  Katherine F. Weber

Effective January 1, 2019, Washington will become the fifth state to offer paid “family and medical leave” benefits to employees, pursuant to a new state insurance program.  This insurance program, codified in Chapter 50A.04 RCW, will provide partial income replacement for eligible workers who are on leave for a covered family and medical reason.

Although the paid family and medical leave (PFML) laws outlining the basic tenets/principles of the required PFML program have been enacted, the regulations spelling out the practical and administrative details and effects of the new law are still in development, as part of the “rule-making process.”  This rule-making process consists of six phases.  The Employment Security Division (ESD), which is responsible for overseeing and administering the PFML program, is currently commencing Phase 3 of the process; Phase Six is not likely to conclude until the latter part of 2019.

What this means for employers is that there are many more questions than answers about the new PFML program at this time, and these uncertainties will likely remain until the rule-making process has concluded late next year.

However, here’s what we currently do know about the new PFML program:

Coverage:  Both public and private employers, regardless of size, are covered under the PFML program.  However, as described more fully below, small employers are not obligated to pay the employer-portion of the PFML premiums.  The PFML definition of “employee” is very broad, and covers both exempt and non-exempt employees.  Notably, for public employers, the ESD has expressed an initial opinion that elected officials will be covered by the PFML program and therefore should be included in the employer’s workforce headcount.[1]  Additionally, the ESD has suggested that all W-2 employees, including shareholders and other owners, will also be considered “employees” for purposes of the PFML program, although Schedule K-1 “partners” will not.

Employees who work at least 820 hours for any covered employer during a qualifying period[2] will be eligible for PFML benefits. 

Premiums:  The premium required under the new PFML program is 0.4% of an employee’s wages, up to the social security cap.  This premium is allocated as follows:  1/3 is for family leave benefits, 100% of which may be deducted from the employee’s wages; 2/3 is for medical leave benefits, 45% of which may be deducted from the employee’s wages and 55% of which is paid by the employer.  Stated differently, employers are generally responsible for 37% of the required 0.4% PFML premium.  As an example:

If an employee makes an annual salary of $50,000, the total annual PFML premium is $200 ($50,000 x .004 = $200.00).  Of that $200, the employee’s share of the premium is $126.66 ($200 x .633) and the employer’s share is $73.34 ($200 x 3.667).

Importantly, however, employers with less than 50 employees[3] are not required to pay the employer-share of the premium, although they may elect to do so.  Small employers who do elect to pay the employer premiums are eligible for grants of up to $1,000 for significant additional wage-related costs associated with PFML (such as overtime costs) and up to $3,000 if the employer must hire a temporary employee to replace an employee who is on PFML for more than seven days.  Additionally, employers may elect to pay all or any portion of the employee-share of the premium.

Employers are responsible for filing quarterly reports on the collected/contributed PFML premiums and for remitting these premiums to the ESD.

Benefits:  Eligible employees will be entitled to paid family and medical leave for an absence: (i) due to the employee’s own serious health condition (medical leave); or (ii) to care for a family member[4] with a serious health condition; for bonding following childbirth or placement or child or for military qualifying exigent circumstances (collectively, family leave).[5]  The amount of the benefit will be determined by the ESD, based on a percentage of the employee’s average weekly wage (“AWW”) during the two highest quarters in the qualifying period, and will range from a weekly minimum of the lesser of $100.00 or the actual AWW, up to a weekly maximum of $1,000.

The duration of PFML will depend upon the nature of the absence.  If the leave is for medical reasons, an employee will receive up to 12 weeks of PFML leave during a 52-week consecutive period, or up to 14 weeks of leave if the serious health condition is pregnancy-related.  An employee will receive up to 12 weeks of paid family leave.  An employee may use a combined total of 16 weeks of medical and family leave (or 18 weeks if the medical leave is due to a pregnancy-related serious health condition).

No benefits are payable to the employee for the first seven calendar days of leave, except in cases of family leave for the birth/placement of a child.

An employee’s leave entitlement expires within 12 months of birth or placement of a child (when taken for “bonding” purposes).  In all other cases, the right to leave expires 12 months after the date the employee files an application for benefits.

At this time, it is unclear if, and to what extent, an employee may use PFML “intermittently.”  The ESD has deferred this question to the rule-making process.

Interplay with Other Leaves and Benefits:  This is where the new law gets really tricky, and a lot of unanswered questions remain.  Generally speaking:

• PFML will run concurrently with the FMLA (if applicable).  Note:  Unlike the FMLA, PFML does not independently provide job protection or require continued health care coverage. 
• PFML will be in addition to leave while an employee receives workers compensation benefits; however, an employee may not receive PFML if the employee is receiving workers compensation time loss benefits (or unemployment benefits).
• PFML will be in addition to pregnancy disability leave required under RCW 50A.04.250; however, such additional pregnancy disability leave would be unpaid (unless the employee otherwise has available paid time off).
• The law specifically provides that an employer may allow an employee to choose whether to use accrued vacation, sick or paid time off benefits or receive PFML in lieu of such benefits.  The employer cannot compel an employee to exhaust accrued paid leave before applying for PFML. 

Apart from this, there remain many unanswered questions about how the PFML will be administered and coordinated with other available paid leaves.

Voluntary Plans:  The laws allow an employer to adopt its own voluntary paid medical leave, paid family leave, or both, in lieu of participating in the PFML program; provided that such voluntary plan must offer benefits that are equal to or better than the benefits afforded under the state program.  Employers desiring to adopt a voluntary plan must apply to the ESD (and submit a $250 application fee) for approval of the plan.  If approved, the employer must maintain any collected premiums separately and in trust, and must still file quarterly reports with the ESD.  The voluntary plan guide published by the ESD may be found at https://esd.wa.gov/paid-family-medical-leave/voluntary.  However, at this time, the benefits of a voluntary plan remain unclear.  It may be that some employers who offer a short-term disability policy that provides benefits at least equal to the medical benefits of the PFML program may elect to “opt out” of the medical leave portion of the program; otherwise, it appears that most employers will participate in the state program.

The Rule-making Process:  The PFML laws provide the above general “backdrop,” which shall be supplemented by the regulations approved under the rule-making process.  Employers may learn more about the PFML program at the ESD website:  https://esd.wa.gov/paid-family-medical-leave. Employers who wish to engage in the rule-making process (by asking questions, offering comments, etc.) may do so by attending informational meetings or committee meetings (see https://www.paidleave.wa.gov/events) or by registering for the ESD’s online portal
(https://www.opentownhall.com/portals/289/forum_home?active_issue_id=5953&phase=Open).

What Should Employers Now Be Doing?:  Importantly, although the PFML law takes effect January 1, 2019, PFML benefits will not be available to eligible employees until January 1, 2020.  Once the rule-making process is completed in 2019, employers may then focus on crafting a written “Paid Family & Medical Leave” policy that reflects the law and the employer’s particular circumstances.  But until the regulations have been finalized, any such policy would arguably be premature.

However, all employers should be preparing to collect, track, report and remit the required PFML premiums, commencing January 1, 2019.  Towards this end, employers should meet with their payroll administrator to determine:  (i) their workforce headcount; (ii) the process to be used for calculating, deducting and tracking the employee premiums collected (and the employer’s correlating contribution, as applicable); (iii) how the PFML deductions/contributions will be itemized on employee paychecks; and (iv) the process for reporting premium deductions/contributions to the ESD.

Although it may be too early to adopt an official policy, employers should provide their employees with written notice of the new PFML laws and the correlating payroll deductions for the employee-share of the PFML benefits (or, the employer’s election to pay all or a portion of these required deductions, if applicable), and to educate employees now as to what they may expect to see on their paychecks, come January 1, 2019.

Those employers with employees who are represented by a union[6] should consider sending the union written notice of the employer’s intent to implement the PFML payroll deductions effective January 1, 2019, as required by law, and propose a reopener later in 2019 once the rules are finalized (if currently in contract negotiations, employers should propose to negotiate the PFML premium cost-sharing issue).[7]  Employers with represented employees are encouraged to further discuss the implications of the PFML laws with their labor counsel.

The PFML laws are proving to be complicated and, at this point, uncertain.  While steps should be taken now to begin processing the necessary premium collections/contributions as of January 1, 2019, employers are otherwise in a “holding pattern” until the ESD provides further information through the rule-making process.  Employers are encouraged to work with legal counsel to address the employer’s specific circumstances and to ultimately formulate a plan to ensure compliance with the PFML laws.

This publication is intended to generally inform our clients of recent legal developments. It is not intended, and should not be relied upon, as a substitute for specific legal advice, and it does not create an attorney- client relationship. Please contact legal counsel to further discuss any particular situation(s) or question(s) that you might have.