The DC Universal Paid Leave Act (the Act) has been a source of much consternation for DC employers, not only in its interaction with other leave laws, but also as to how it will be funded. In this alert, we will briefly cover the Act's general provisions, interaction with other leave laws, and potential changes on the horizon.
Overview of the Act
The Act creates a paid leave system for those employed in the District of Columbia. In short, "covered employers" are required to contribute an amount equal to 0.62% of the wages of each of their "covered employees" to the Universal Paid Leave Implementation Fund (the Fund). "Eligible individuals" may then file a claim for paid leave benefits upon the occurrence of a "qualifying leave event," with those benefits to be paid out of the Fund. As currently written, the Act requires employers to start paying into the Fund on July 1, 2019, and employees will be eligible for leave benefits beginning July 1, 2020.
Who Can Take Leave?
Many DC employers are "covered." A "covered employer" is any entity or person who, either directly or via a staffing agency or other such entity, "exercises control over the wages, hours or working conditions of an employee" and is required to pay unemployment insurance consistent with Section 3 of the DC Unemployment Compensation Act (the Unemployment Act). Notably exempt from this definition are churches and church-run organizations that are established for religious purposes, as well as the federal and DC governments.
Many – but not all – employees are "covered." A "covered employee" works for a covered employer and spends more than 50% of his or her work time working for the covered employer in DC. This means that an individual who lives in Virginia, but works in DC, is covered by the Act. A covered employee need work for a covered employer only "during at least some" of the year preceding a "qualifying leave event" to be considered an "eligible individual."
Why Can an Employee Take Leave?
Employees can claim up to 8 weeks of paid leave per year in any combination of:
- 8 weeks of leave for the birth of a child, placement of a child for adoption, or assumption of legal guardianship of a child (Qualifying Parental Leave);
- 6 weeks for the serious health condition of a family member (Qualifying Family Leave); and
- 2 weeks for an employee's own serious health condition (Qualifying Family Leave).
During the period of leave, employees who earn 150% of the DC minimum wage or less will receive 90% of their average weekly wage. Employees who earn over 150% of the DC minimum wage will receive 90% of their average weekly wage plus 50% of the amount by which their regular earnings exceed the DC minimum wage, up to a $1,000 weekly cap. Beginning on October 1, 2021, the weekly cap will increase proportionally with the inflation rate.
It should be noted that employers are still permitted to provide paid leave policies that are more generous than those in the Act, but will not be exempt from contributing to the Fund if they do so.
Interaction with Other Laws
The Family Medical Leave Act and the DC Family Medical Leave Act
Any period of paid leave taken under the Act will run concurrently with, not in addition to, any leave to which an employee is entitled under either the FMLA or the DC FMLA. In other words, taking paid leave under the Act will count toward any available unpaid leave allotment (12 or 16 weeks) provided under the FMLA or DC FMLA. In addition, the Act will not provide any job protection rights beyond those already guaranteed by the FMLA or DC FMLA. But employers should be careful not to confuse their obligations under the FMLA, DCFMLA, and the Act.
Whereas both the FMLA and DC FMLA have "time in service" requirements for eligibility (1,250 and 1,000 hours, respectively), the Act has no such "time in service" restrictions. Part-time employees and new hires will be eligible for paid leave under the Act as long as they have worked for their current employer at some point in the prior year. Moreover, the Act does not require employers with fewer than 20 DC employees to ensure job protection upon return from paid leave.
Accrued Sick and Safe Leave Act of 2008
An employee's eligibility for paid leave under the Act is in addition to, and not in lieu of, paid sick leave required by the DC Sick and Safe Leave Act of 2008. Employers will still be required to provide all employees with paid sick leave, at rates set by the statute, and make contributions to the Fund. Employees who are not eligible for paid leave under the Act will still be entitled to use their paid sick leave.
Proposed Changes to the Act
Despite enacting this law, DC councilmembers and the mayor still have reservations about it, particularly its funding source. Mayor Bowser neither vetoed nor signed the bill. As currently written, the Act taxes DC businesses and provides benefits to all of their employees – including residents of Virginia and Maryland. This structure is deliberate – DC's Home Rule Act prohibits the city from taxing the income of non-residents.
Currently, five bills are pending that attempt to ease the burden on DC businesses. Several proposals require larger employers to provide paid leave themselves, while creating a fund only for employees of smaller employers, and would decrease or graduate the tax rate.
What's in a Name?
Perhaps the most controversial option, introduced by Ward 3 Councilmember Mary Cheh, reduces the employer contribution to the Fund to 0.2% and introduces an employee "fee" (more about that below) of 0.42%. Through the proposed "fee," anyone who works in DC, including Virginia and Maryland residents, would contribute to the paid leave program directly out of their paychecks. Characterizing the employee contribution as a "fee" and not a "tax" may avoid the Act's running afoul of the DC Home Rule Act. Where a "fee" implies a rough correlation between the amount collected and benefit received, a "tax" implies a general collection for the greater good. Councilmember Cheh's approach solves two objections about the Act: it would lower the cost to DC employers while requiring all employees, the beneficiaries of the Act, to pay their "fair share."
Time will tell whether any of these proposed amendments gains traction. We will continue to monitor the evolution of the law.