Washington Paid Family Leave Is Coming in 2019: Employers Should Start Preparing

Under Washington’s new Paid Family and Medical Leave (PFML) law, eligible employees will be entitled to paid leave up to 12 weeks for their own serious health condition (medical leave) or for family care (family leave), up to 16 weeks combined family and medical leave, and up to 2 additional weeks for certain pregnancy complications. Starting on January 1, 2019, employers must begin remitting premiums and submitting quarterly reports for PFML. Starting January 1, 2020, employees may begin taking PFML leave.
 
All employers in Washington should review the new law’s rules and requirements in advance of the January 2019 premium payment launch date. This advisory provides a summary of the PFML law, highlights rules from the recently completed Phase One of the rulemaking process, and provides an overview of upcoming rulemaking. To help prepare employers for the implementation in 2019, Davis Wright Tremaine will publish a series of advisories on PFML as Washington’s Employment Security Department (“ESD”) completes its rulemaking process.

Paid Family and Medical Leave Program Basics

Washington’s PFML program is an insurance program administered by ESD. In most cases, employees and employers (except small employers with 50 or fewer employees) will pay premiums each paycheck to fund the program, and then eligible employees can receive benefits from the state when they need family or medical leave. 

Under the program, employers may deduct up to 100 percent of the premiums for the family leave portion and up to 45 percent of the premiums for the medical leave portion from employees’ wages. An employer is responsible for 55 percent of the medical leave premiums. Overall, an employer is responsible for approximately 37 percent of the total premiums. Small employers are not required to contribute towards the premiums. Employers are responsible for reporting hours and wages to the state and for remitting all premiums collected to the state.

Premium payments will begin January 1, 2019, and employees may begin taking leave and receiving benefits under the program starting on January 1, 2020. Eligible employees are entitled to the following leave:

• Family Leave: An employee can take up to 12 weeks of paid family leave, which includes caring for a newborn or newly-adopted child or a family member with a serious health condition, which includes a child, spouse, domestic partner, parent, parent-in-law, sibling, grandparent, or grandchild. Employees can also take time to be with a family member injured in military service, or to deal with exigencies of military deployment.
• Medical Leave: An employee can take up to 12 weeks of paid medical leave, which can only be used for the employee’s own serious health condition, with an additional 2 weeks available for pregnancy complications.
• Combined Family and Medical Leave: For combined family and medical leave (for example, medical leave due to birth of a child plus caring for a newborn), the total combined leave an employee can take in a year is 16 weeks, or 18 weeks if the leave includes a qualifying pregnancy-related complication.
• Waiting Period: For all leaves except birth or placement of a child, there is a 7-day waiting period before an employee will be eligible for PFML benefits.
• Leave Benefits: To receive benefits under the state program, an employee must file a claim with ESD, notify the employer of the request, and meet certain eligibility requirements. If ESD approves the application, ESD pays benefits for the duration of the leave of absence directly to the employee. The amount an employee receives is a percentage of the employee’s weekly wages, up to $1,000 per week. Employees will typically pay 63 percent of the premium, with employers contributing 37 percent.
• Leave is Job-Protected: Family or medical leave under the program is protected, meaning an employee must be returned to the same or comparable position at the end of the leave period, if the employer has at least 50 employees and the employee has worked for the employer for at least 12 months and at least 1,250 hours in the preceding year. Regardless, employers should be mindful of additional legal protections, such as reinstatement requirements under state and federal laws, before making any decisions regarding employment separation.
• Eligibility: An employee who worked at least 820 hours in Washington in four of the past five quarters will be covered. The hours worked do not need to be for the same employer for eligibility purposes.
• Small Business Support: Companies with fewer than 50 employees are exempt from paying the employer premium, but may choose to do so and be eligible for small business assistance funds. Companies with fewer than 150 employees may be eligible for assistance funds as well.
• Voluntary Employer Plans: Employers have the option to opt-out of the state program if they apply for and receive state approval to implement a voluntary employer plan. More details about voluntary plans are provided below.

What to Expect in 2018: Rulemaking and Implementation

In preparing for the launch of PFML, ESD has divided the rulemaking process into four phases. Phase One included the following topics: (1) collective bargaining agreements; (2) premiums; and (3) voluntary plans. The Phase One rules have been published and you may review the rules here. This advisory focuses primarily on the Phase One rules.

Phase Two will include the following topics: (1) employer responsibilities; (2) penalties; and (3) small business assistance. The first draft of the Phase Two rules are now available here. Phase Three will likely begin in August 2018 and will relate to benefits. Phase four will likely being in mid-2019 and will address appeal issues. 

Phase One Rules are Final

On May 29, 2018, ESD released final rules regarding collective bargaining agreements, voluntary employer plans, and premium liability. Some of the key components of the Phase One rules are as follows:

1) Collective Bargaining temporary exemption: The PFML program does not apply to employers covered by a Collective Bargaining Agreement in effect prior to October 19, 2017 as to employees covered by that agreement until it expires, is reopened, or is renegotiated. Once the exemption terminates, employers must immediately notify ESD and begin filing quarterly reports at that time. Other than the temporary exemption there is no union waiver allowed, meaning an employer and union cannot agree to waive the requirements of PFML.

2) Premiums:  

• Determining Employer Size: ESD will consider all in-state employees in determining the size of an employer.
• Premium Payments: Employers must pay premiums quarterly. Payments must be made by the last day of the month following the end of the calendar quarter for which premiums are being paid.
• “Localization” of Work: An employee’s work is subject to premiums when the work is “localized” in Washington. Work is considered “localized” if it is performed entirely in Washington or mostly performed in Washington with some temporary or transitory work, or isolated transactions, occurring outside of Washington.  Work that is not localized in Washington may also be subject to premiums if certain conditions are met.
• Conditional Premium Waiver: An employer can request a conditional premium waiver for an out-of-state employee who is temporarily working in Washington.  Employers must file quarterly reports to verify the employee still qualifies for the waiver. If the employee exceeds 820 hours in the qualifying period, the conditional waiver expires and both the employer and employee will be responsible for paying premiums during the qualifying period.

3) Voluntary Plans: An employer who wishes to implement a voluntary plan must submit an application to ESD. Applications are expected to be available later this year. If the plan is approved by ESD, it will take effect the first day of the quarter following approval of the plan. The employer may choose to provide only medical leave benefits or only family leave benefits through a voluntary plan, or both. 

• Voluntary Plan Requirements: A voluntary plan must provide employees with the same amount of leave, with at least the same monetary benefits, and offer leave for the same reasons. The employer can deduct its employees share of the premium and use that toward funding the plan, but cannot deduct more than what the employee would pay under the state plan.
• Accelerated Payments: An employer may use an accelerated payment schedule (e.g., paying out the same total dollar amount over a shorter period of weeks), as long as the total monetary benefit is at least equal to the state plan and the employee is still entitled to the same amount of leave. 
• Eligibility Requirements: An employee qualifies for the approved voluntary plan if the employee has worked 820 hours in Washington during the qualifying period and at least 340 hours for the current employer, or if the employee was covered by a voluntary plan through their previous employer.  Employees who have not yet met the eligibility requirements for an employer’s voluntary plan are eligible for benefits under the state plan so long as other state plan eligibility requirements are met.
• Benefit Amount: If an employee files a claim for benefits, the employer must verify the employee’s benefit amount under the state plan and ensure the employee receives at least the same amount under the employer’s voluntary plan.
• Reporting Requirements: Employers with voluntary plans must nevertheless report all information required under the state plan, as well as weekly benefit and leave duration information for any employee who takes leave under the plan, and any premiums withheld from employee wages.
• Third Party Administration: In the explanatory statement accompanying the final Phase One rules, ESD confirmed that an employer is not prevented from contracting with a third-party to manage the voluntary plan. The employer remains liable for all responsibilities required by the law.

What Employers Should Do Now

All employers in Washington should familiarize themselves with the PFML program requirements and options in advance of the upcoming effective dates. We recommend employers prioritize the following:

• Consider whether to implement a voluntary plan. Employers who already have a generous leave or disability plan may wish to opt-out of the state program and administer a voluntary family and/or medical leave plan.
• Ensure your payroll department is prepared to begin deducting employee premiums in January 2019. Employers with 50 or more employees will also need to be prepared to make the employer’s premium payment.
• Be prepared to revise employee handbooks or leave policies later next year, to have updated policies in place when leave under the program becomes available in January 2020.
• Determine how to best communicate this information to employees. Many employees may not realize that they will have a payroll deduction starting in January 2019. We recommend communicating with employees in 2018 about PFML so that employees are aware of the new deductions going into effect.
• Employers with eligible Collective Bargaining Agreements should be aware of the temporary exemption and triggering events that will terminate the exemption and prompt compliance with the premium and reporting obligations.

Conclusion

Davis Wright Tremaine attorneys will continue to monitor the PFML rulemaking process throughout the year and will publish the second advisory in this series once the Phase 2 rulemaking process is complete.