Ho-Ho . . . NO! Universal Paid Leave Act Will Create Significant New Costs for District of Columbia Employers
Employers in the District of Columbia (D.C. or District) found a lump of coal in their holiday stockings this year thanks to the D.C. Council’s passage of the Universal Paid Leave Amendment Act of 2016 (UPLA) on December 20, 2016. The UPLA creates the most expansive paid leave benefits in the nation, enabling employees to receive a combination of paid leave, which can include up to eight weeks of parental leave, six weeks of family medical leave, and two weeks of personal medical leave every year. The benefits will be provided to employees through a government-run, claims-based system similar to the one used for unemployment insurance.
The UPLA program will be financed through a new tax on D.C. employers. Covered employers will have to contribute to the UPLA fund the equivalent of 0.62 percent of all wages paid to covered employees. To allow time for the District to establish the bureaucracy that will be necessary to administer the program, the District will not begin collecting the tax from employers until July 1, 2019, and will not begin paying benefits to employees until July 1, 2020.
The D.C. Council passed the UPLA over strong objections from District employers, adding it to a long list of employment regulations that exist in the District but not in neighboring Virginia or Maryland.
The UPLA covers private sector employers that are required to pay D.C. unemployment insurance taxes on behalf of their employees. Self-employed individuals can choose whether to opt in to the UPLA benefits program.
Any employee who spends more than 50 percent of his or her working time in the District will be eligible for benefits. An employee will also be eligible for benefits if he or she is based in the District, regularly spends a substantial amount of working time in the District, and does not spend more than 50 percent of their working time in any other single jurisdiction. D.C. Mayor Muriel Bowser, an opponent of the bill, estimates that roughly two thirds of the employees qualifying for benefits will be Virginia or Maryland residents who commute into the District for work.
Types of Paid Leave
The UPLA creates three forms of paid leave, any of which may be taken on a continuous or intermittent basis. An employee may take up to:
8 weeks of parental leave at any point during the 52-week period following the birth, adoption, or placement of a child through foster care or legal guardianship;
6 weeks of family leave within a 52-week period in order to provide care or companionship to a family member because of the diagnosis or occurrence of a serious health condition of that family member; and
2 weeks of medical leave within a 52-week period for the diagnosis or occurrence of his or her own serious health condition.
The UPLA contains elaborate definitions that govern whether an individual has a “serious health condition.” As the UPLA contemplates that a city agency will have responsibility for eligibility determinations, employers can expect that leave benefits will be awarded generously.
Limitations on Paid Leave Benefits
Contrary to some reports, the UPLA does not entitle employees to take all 16 weeks of leave each year. The statute imposes an annual cap on benefits so that employees may not, in the aggregate, take more than 8 weeks of paid UPLA leave in any 52-week period, regardless of the number of qualifying events that occur during that period. For example, an employee who takes eight weeks of paid parental leave one year would not be entitled to additional paid family leave or paid medical leave benefits during that same year.
The UPLA also creates a one-week “waiting period” each year; in other words, employees will not receive paid benefits for the first week of eligible leave of any type that they may take in a 52-week period. Presumably, eligible employees in many cases will cover the waiting period with paid sick leave to which they may be entitled under the the District of Columbia Accrued Sick and Safe Leave Act.
Employees who earn more than 150 percent of the D.C. minimum wage will receive paid leave benefits equal to 90 percent of their regular earnings up to 150 percent of the D.C. minimum wage, plus 50 percent of their regular earnings above the D.C. minimum wage, up to an overall cap of $1,000 per week. After October 21, 2021, the weekly cap will be indexed to inflation.
The UPLA makes it unlawful for any person to interfere with, restrain, or deny the exercise of or the attempt to exercise any right provided for in the statute. It also prohibits employers from retaliating against any person because such person opposes any practice made unlawful under the act; files or attempts to file a charge; institutes or attempts to institute a proceeding; facilitates the institution of a proceeding; requests, applies for, or uses paid leave benefits; or gives any information or testimony in connection with an inquiry or proceeding related to the UPLA.
The statute defines “retaliation” in broad terms that are not expressly limited to material adverse employment actions. Among other things, retaliation includes “any form of intimidation, threat, reprisal, harassment”; transfer or assignment to a “lesser position in terms of job security” or any other “condition of employment”; and even “the denial of hours.”
The UPLA creates a new private right of action, such that employees may file a civil action in any court of competent jurisdiction within one year after the occurrence or discovery of an alleged violation. This limitations period will be tolled during any period when the employer has failed to comply with the notice provisions of the UPLA.
No Job Protection for Small Business Employees
Although the city council has touted the UPLA as a boon for workers at small businesses that do not offer generous paid leave benefits, the use of UPLA leave could be a risky proposition for these workers. The UPLA requires that the mayor prepare a standard notice advising employees of their leave rights, and the notice must state that people who work for a covered employer with fewer than 20 employees will not be entitled to job protection if they decide to take paid leave under the Act. Oddly, the UPLA’s anti-retaliation provision does not address whether a small employer’s failure to restore an employee to his or her former position would constitute unlawful retaliation. The apparent tension between the anti-retaliation provision and the small-employer notice provision puts small employers in a precarious position.
Coordination of Benefits
Employers may offer leave benefits that are more generous than those provided in the UPLA, but doing so will not excuse them from paying the new tax. Likewise, employees can receive UPLA benefits even if their employers already provide them with full wage replacement during covered periods of leave. Consequently, employers may wish to adjust their disability and other paid leave benefits so as to offset the replacement income that employees will be eligible to receive from the city.
UPLA leave will run concurrently with, and not in addition to, protected leave taken under the D.C. Family Medical Leave Act or other statutes. An individual will not receive UPLA benefits if he or she is receiving unemployment insurance benefits or long-term disability payments.
Employees covered by collective bargaining agreements are not exempt from the statute. Collective bargaining agreements entered into or renewed after December 31, 2017 must be compliant with the UPLA.
Considerations for District Employers
In addition to a new tax of 0.62 percent on wages, employers should give some thought to the hidden costs embedded within the UPLA.
First, the statute will create a significant ongoing compliance burden for employers. Although benefits determinations will be made by the District government, employers still will need to coordinate UPLA benefits with their existing leave and attendance policies. This will be particularly challenging for multi-jurisdictional employers that are subject to a patchwork of local leave laws with varying requirements, including Montgomery County’s Earned Sick and Safe Leave Law and statewide leave legislation that Maryland Governor Larry Hogan recently has vowed to enact.
Second, the UPLA will add to the operational challenges faced by employers by incentivizing absences under circumstances that otherwise would have been unpaid, particularly inasmuch as the system is ill-equipped to curtail abuse. As a practical matter, the statute does little to ensure that employees provide advance notice of their leave plans when they are able to do so.
Third, the statute may expose employers to a broad new set of legal claims. The UPLA gives employees the right to bring retaliation claims against their employers directly in court, without requiring exhaustion of any preliminary administrative process. Indeed, the statute contains an expansive definition of what constitutes retaliation, and employees who take leave on an intermittent basis over the course of the year can be in a near-perpetual state of protected activity.
The costs of the UPLA are undeniable and will competitively disadvantage District employers in terms of their labor costs compared to their suburban Maryland and Virginia competitors. As commercial leases come up for renewal in the next few years, the statute creates a powerful reason for D.C. employers to take a fresh look at relocating employees to surrounding counties in Maryland and Virginia.