Are You Ready for Oregon's Paid Family Medical Leave Program?

In 2019, the Oregon legislature passed the Paid Family Medical Leave Act, HB 2005, which established a paid family and medical leave insurance ("PFMLI") program in Oregon. After delays due to COVID-19, Oregon PFMLI is officially being rolled out starting in January 2023.

PFMLI provides employees working in Oregon with paid time off for their own serious health condition (medical leave), for family care (family leave), or for purposes related to domestic violence, sexual assault, stalking, or harassment (safe leave). The PFMLI program will be funded by employee and employer payroll contributions, which begin on January 1, 2023. Eligible employees may file for benefits with the Oregon Employment Department ("OED") starting September 1, 2023.

PFMLI covers nearly all employers with at least one employee working in Oregon. Employers cannot opt out of providing PFMLI, and must either participate in the OED's PFMLI program or provide benefits through a state-approved PFMLI equivalent plan.

Oregon employers should review legal requirements before the January 2023 premium payment start date. This advisory provides a summary of the PFMLI program, including an overview of OED's rulemaking to date.

PFMLI Program Basics

Oregon's PFMLI program is an insurance program with two key aspects: (1) protected leave from the employer and (2) partial-to-total wage replacement from the OED. The PFMLI program does not replace or take away from eligible employees' rights under the federal Family and Medical Leave Act ("FMLA"), the Oregon Family Leave Act ("OFLA"), or Oregon's paid sick time law; employers must ensure that they are meeting their obligations under each.

Eligibility for Leave

Employees are eligible to apply for benefits if they:

1. are located in Oregon;
2. have earned at least $1,000 in the prior base year (the first four of the last five completed calendar quarters prior to the benefit year) or alternate base year (the last four completed calendar quarters prior to the benefit year) from Oregon employment; and
3. have a qualifying life event.

PFMLI leave is protected, meaning employers are prohibited from discriminating or retaliating against any employee for reasons related to PFMLI. In addition, an employee must generally be returned to the same or comparable position at the end of the leave period if they have been employed for at least 90 days. The law also requires employers continue to provide healthcare benefits during an employee's PFMLI leave.

Eligible employees are entitled to the following types of protected leave:

• Medical Leave to care for an employee's own serious health condition.
• Family Leave for: (1) the birth of a child; (2) bonding with a child in the first year after birth, or after adoption placement or foster care placement; or (3) to care for a defined family member with a serious health condition.
• Safe Leave to seek medical, legal, or law enforcement assistance for an employee or their minor child or dependent related to domestic violence, harassment, sexual assault, or stalking.

Because this is a portable benefit, a new employee could qualify for protected leave and benefits on the first day of work, as long as they meet the income eligibility requirements from past employment.

Definition of "Family Member"

The broad definition of "family member" under the PFMLI program includes spouses and domestic partners, children, parents, siblings or stepsiblings, grandparents, grandchildren, and "[a]ny individual related by blood or affinity whose close relationship with a covered individual is the equivalent of a family relationship." This definition of "family member" is different and broader than family members covered under the FMLA, OFLA, and the Oregon paid sick time law.

Length of Leave

Eligible employees may generally take up to 12 weeks of PFMLI leave in a benefit year. An additional two weeks of leave for pregnancy, childbirth, or pregnancy-related conditions (including lactation) can create a total of 14 weeks of paid leave. Employees may take leave in increments of a full workweek, or by workdays. If the absence also qualifies the employee for unpaid leave under OFLA or FMLA, employees must take the leaves concurrently, up to 16 weeks of combined paid and unpaid leave in one benefit year (or 18 weeks, if the employee takes leave due to pregnancy, childbirth, or related conditions).

Employers may require 30 days' written notice for a foreseeable leave, and notice within 24 hours of an unforeseen absence. Employers may also require employees to provide proper verification documentation specific to the type of leave requested, similar to verification under the FMLA or OFLA.

How to Obtain Benefits

Employees seeking PFMLI benefits must apply for benefits to the OED, not the employer. Once an employee has applied for PFMLI benefits, OED will notify the employer of the request. The OED is responsible for informing the employee of whether their application for benefits is approved.

PFMLI benefit amounts are based on the employee's previous wages, and the State's average weekly wage. Many Oregon employees will receive total wage replacement. If an employee's average weekly wage during the previous base year is equal to or less than 65% of the State's average weekly wage, that employee's weekly benefit amount is 100% of their average weekly wage. For employees above that threshold, OED will pay a percentage of their average weekly wage, up to a set weekly benefit cap.

Employers may choose to provide additional pay to their employees – such as through the use of PTO, vacation time, or short-term disability – to supplement employee benefits. However, at no point can an employee earn more than 100% of their average weekly wage. Employees receiving unemployment or workers' compensation are ineligible for PFMLI benefits.

Contributions

In most cases, employees and employers will pay premiums each paycheck to fund the state program, and then eligible employees can receive benefits directly from the OED when they need medical, family, or safe leave. This is separate from and additional to paid sick leave under the Oregon paid sick time law.

Employers pay 40% of the premium and may deduct the other 60% of the premium from employees' wages. Small employers—fewer than 25 employees total (not just in Oregon)—take deductions for employee premiums but are not required to contribute the employer portion (unless voluntarily choosing to access a grant program). The OED sets the contribution rate annually, which may be up to 1% of each employee's gross wages. In lieu of participating in OED's PFMLI plan, employers may choose to develop an equivalent plan, which must be approved by the OED.

Equivalent Plans

If an employer does not wish to participate in the OED-administered PFMLI plan, they can provide their employees with paid family, medical, and save leave benefits through a state-approved equivalent plan. Benefits provided under an equivalent plan must be equal to or greater than those provided by the OED. Equivalent plans can either be self-administered by the employer, or administered by a third-party insurance company. If an employer chooses an equivalent plan and it is approved, employees will then apply for benefits directly to the employer or insurance company, instead of applying with the OED.

To be exempt from the January 1, 2023, contribution start date, employers must submit either an equivalent plan application or a Declaration of Intent to Obtain an Equivalent Plan to the OED no later than November 30, 2022. Equivalent plans will be effective starting on September 3, 2023, when benefits start.

Applicable and Upcoming Rules

OED's implementing regulations are still rolling out. Employers can review the OED's permanent and proposed rules here.

Highlights of adopted rules include:

• Contributions. Thirty permanent rules relate to PFMLI contributions, and include topics like: the definition of wages, explaining how and when the PFMLI contribution rate and wage amount will be calculated each year, direction about when an employer may deduct PFMLI contributions from employee wages, and the due dates for wage reporting and contribution payments.
• Benefits. Sixteen permanent rules relate to PFMLI benefits, including details about eligibility, application content, and how benefits calculations will work.
• Equivalent Plans. Equivalent plan rules cover topics including directions for employers, plan contents, when an equivalent plan employer must cover an employee, and when equivalent plans and related reports must be filed with OED.
• Small Employers; Self Employed. Several rules describe topics like OED's method to determine employer size, small employer assistance grants, and rules for self-employed individuals.

Beyond permanent rules, OED has issued several rounds of proposed rules – including rules about benefits applications and appeals – set to be approved soon.

Employee Location. The OED and Washington's Employment Security Department ("ESD") also issued joint guidance for employers to clarify which paid leave program applies when both states are potentially implicated. The joint guidance can be found here. In short, employers in Washington and Oregon should consider: (1) the location of the work performed; (2) the location of the employer's base of operations; and (3) where the employee lives, in that order, to determine where to report subject wages and contributions.

What Employers Should Do Now

All employers with at least one employee in Oregon should familiarize themselves with the PFMLI program requirements and options in advance of the upcoming effective dates. In addition, employers should:

• Consider whether to implement an equivalent plan instead of relying on OED's PFMLI program and, if so, submit an equivalent plan application or Declaration of Intent to do so to the OED no later than November 30, 2022.
• Ensure your payroll department/administrator is prepared to begin deducting employee premiums in January 2023, unless the organization is fully covering employee premiums as a benefit. Employers with 25 or more total employees will also need to be prepared to make the employer's premium payment.
• Be prepared to revise employee handbooks or leave policies, to have updated policies in place before leave becomes available in September 2023.
• Determine how best to communicate this information to employees. OED has published a model notice poster and other employer resources. As of January 1, 2023, employers are required to post the model notice poster at each work site, and they must provide it electronically or by mail to any remote workers. Many employers have begun communicating with employees about PFMLI now so that they are aware of the new deductions and policy going into effect.

Conclusion

Davis Wright Tremaine attorneys will continue to monitor any additional OED rulemaking, and are ready to help Oregon employers prepare for their upcoming PFMLI obligations.