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Mapping the Labyrinth: Considerations for Employers Affected by New Paid Family Leave Laws

Justice Brandeis famously likened the states to “laboratories of democracy” that could undertake bold policy experiments for which the federal government was too timid. But when state and local governments pass a patchwork of different and even incompatible laws, they cause headaches for multi-state employers that would prefer to maintain uniform, efficient practices.

Barring a seismic shift the in current balance of political power, we will likely not see a national paid family leave law in the near future. But without a doubt, there has been momentum for paid family leave laws at the state and local level in politically progressive locales.

On April 21, 2016, the Mayor of San Francisco, Ed Lee, signed into law an ordinance establishing fully paid parental leave for San Francisco-based employees. The State of California already administers an insurance program that pays 55% of an employee’s salary during parental leave for a period of six weeks. Under San Francisco’s new law, San Francisco employers will be required to pay the remaining 45% of an employee’s salary during the six-week leave period, resulting in six weeks of 100% compensation for workers taking parental leave. Businesses that employ 50 or more employees need to begin complying with the law on January 1, 2017; businesses employing 20 or more employees—but fewer than 50—need to comply by January 1, 2018.

In New York, meanwhile, Governor Andrew M. Cuomo signed a paid family leave law on April 4, 2016. The New York law is going to be phased-in incrementally. By 2021, the paid leave will last up to 12 weeks and the amount of the benefit is 67% of an a worker’s earnings, capped at 67% of the state’s average weekly salary. Unlike the San Francisco mandate, the paid family leave in New York is an insurance program, funded by small payroll deductions from the paycheck of every New York employee.

States and local governments will likely continue to push for paid family leave and, thus, create challenges for multistate employers. It is a given that multi-state employers must at a minimum comply with the laws of the relevant political entities in which they employ workers. Employers with workers who split time between locations should give particular consideration to how the laws of different states and cities may be implicated.

So what is an employer to do? One option is for employers to adopt a single paid leave policy that exceeds all the required paid leave requirements of all the states and municipalities where the employer does business. If incorporating the requirements of a new state law into a nationwide pay policy is unlikely to cost much, an employer may benefit from being able to maintain a uniform policy. Most employers, however, are unwilling to have their policies held hostage to the laws of those states that require the most benefits. Moreover, leave laws differ in much more than in the amount of leave that must be paid. There are also differences from state to state in how accruals should be handled and whether unused leave must be included in a final paycheck. Most companies with a California presence, for example, have given up on the idea of having one nation-wide policy for leave and have created a separate leave policy for California employees. What has become clear, however, is that until this issue is addressed at the federal level, employers will need to continue to monitor developments in the state legislatures and municipalities where they have employees to make sure that that they remain in compliance.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.