On November 3, 2020, Colorado voters placed their ballots in favor of Proposition 118 – a first-of-its-kind ballot initiative. In passing the Paid Family and Medical Leave Insurance Act (FAMLI), Colorado joined just eight other states and the District of Columbia in creating a state-level paid family and medical leave program. The benefits under FAMLI begin in 2024, with more clarity coming in January 2022. Despite that timeline, we already have some insight into what FAMLI means for Colorado employers and employees.
As its name suggests, FAMLI provides paid leave. This immediately sets it apart from the federal Family and Medical Leave Act (FMLA), which provides only unpaid leave. FAMLI also has greater reach than the FMLA. While the FMLA is applicable to employers with 50 or more employees, FAMLI is effectively applicable to all employers. Any employer with at least one employee falls under the Act. Specifically, FAMLI provides 12 weeks of paid family and medical leave for employees, but that’s not all. It also provides for an additional four weeks of leave in the event of pregnancy or childbirth complications. All told, that is 16 weeks of paid leave.
FAMLI’s benefits to employees start on January 1, 2024, but FAMLI’s premiums begin on January 1, 2023. This paid program is funded through a payroll tax, which requires employers and employees to pay evenly: 50/50. Generally, FAMLI is an insurance program funded through premiums or wage reductions. The payroll tax is set at .9% of the employee’s wage during 2023 and 2024. Employers pay .45%, and employees pay their .45% share. Employers should note that though the tax is set at .9%, they can choose to pay more than .45% of the cost, all the way up to 100%. Then, starting in 2025 and continuing each year after that, FAMLI adjusts the premiums so that the total amount of the premium contributions into FAMLI total 135% of the previous year’s claims and 100% of the administration costs. These adjustments are capped at 1.2% of each employee’s wages. Employers submit these contributions into an insurance fund, which will include bonds issued by the state. FAMLI involves a complicated formula to determine the percentage of wages employees will receive while on leave. Employees can expect to receive between 65% and 90% of their wages, with benefits capped at $1,100 per week. This formula dictates that those employees with higher wages will generally be at the lower end of the scale.
Though FAMLI provides paid leave to a greater swath of employees than does the FMLA, there are similarities between the two laws. First, covered reasons under FAMLI include:
- Parental leave, including adoption and foster care.
- Medical leave for an employee’s serious health condition.
- Family leave to care for a family member’s serious health condition.
- Exigency leave to make arrangements for a family member’s military deployment.
- Leave for an employee or employee’s family member who is the victim of domestic violence, sexual assault or stalking.
Employers should note that FAMLI expands “covered reasons” under the Act to include exigency leave for domestic violence, sexual assault or stalking, which is not specifically provided for in the FMLA. FAMLI also defines “covered individuals” as those employees who have (1) earned at least $2,500 in wages (subject to FAMLI’s premiums) and (2) been employed with the employer for at least 180 days before they begin their FAMLI leave.
There are some key takeaways for employers. First, as described, FAMLI imposes a financial burden on employers. Still, some employers may see the benefit of this Act in that they now will be able (required) to offer their employees insurance coverage that they otherwise would not have been able to provide. This could help make smaller employers more competitive with larger employers. There is also a silver lining for smaller employers. Colorado employers with fewer than 10 employees may opt out of paying the premiums described above, though they must still withhold and pay the employee’s contribution into the state-run insurance program.
The second takeaway is that employers will now be required to navigate the Act’s complex regulatory requirements, including how FAMLI interplays with other leave programs such as the FMLA, the Americans with Disabilities Act, workers’ compensation and Colorado’s domestic violence leave statute. How precisely these programs will work together will not be fully known until FAMLI’s regulations are unveiled. What we know now, though, seems favorable to employers. An employer may require that any FAMLI leave must run concurrently with other disability programs (if offered) and with FMLA leave. As long as the employer specifies from the outset that the programs will run concurrently, it can eliminate an employee “stacking” one type of leave on top of another. Employers should also note that FAMLI leave can be intermittent, as there is no requirement that all 12 (or 16) weeks be taken at once.
Finally, employers should be cautious to not run afoul of FAMLI’s requirements when an employee requests leave, while they are out on leave, and when the employee returns to work. The Act prohibits employers from interfering with employees exercising their FAMLI rights, and it prohibits employers from retaliating against employees who take FAMLI leave. And while a covered individual is out on FAMLI leave, the employer must maintain any healthcare benefits that the employee had before taking the leave. Once the employee returns to work, FAMLI requires that they are returned to the same position or a position with the same pay, benefits and seniority. FAMLI does not provide that employers must provide any other seniority or employment benefits to the employee while they are on leave.
Colorado will conduct education outreach in the state over the next year to provide the public and employers with more information regarding FAMLI. BakerHostetler will be closely monitoring the Act and will provide important updates as more information becomes available and as the regulations are unveiled.