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Colorado voters approve Proposition 118 Paid Family and Medical Leave Insurance

Colorado voters approved Proposition 118, the Paid Family and Medical Leave Insurance Act, to be codified at CRS 8-13.3-401, et seq. The Act enhances already required paid leaves at the federal and state level by requiring the State of Colorado to create a new agency capable of administering a paid family and medical leave insurance-based program. The new agency will be called the DFMLI (Division of Family and Medical Leave Insurance).

Interested in more information about Proposition 118 and the other new federal and state paid leave laws?

  • How will all this play out?
  • What do we know?
  • What can we expect?
  • What should HR professionals do to prepare their organizations?

Join us for a complimentary, engaging and interactive webinar.

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When: Thursday, Nov 12, 2020 Noon 12:00 PM Mountain Time (US and Canada) 

Register in advance for this webinar: https://us02web.zoom.us/webinar/register/WN_vGmrkeFcQ6iaM26Hg3iMGQ 

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When will Proposition 118 take effect?

Employers, employees and the State of Colorado have ample time to consider Proposition 118 and begin preparing. The first premiums will not be charged until January 1, 2023, and benefits will not be available until January 1, 2024.

What does Proposition 118 require?

Proposition 118 will require the State of Colorado to create the DFMLI, which will administer this new program. Premiums will be paid in part by employers and employees, although employers will be able, if they choose, to pay the employee-share. The insurance benefits to be paid to eligible workers will cover up to 12 weeks of family and medical leave, plus another 4 weeks in the event of pregnancy or childbirth complications. Such leave will be allowed on an intermittent basis. When “foreseeable,” at least 30-day notice will be required of the worker; when not, the worker will be required to provide as much notice as possible, CRS 8-13.3-405.

What employers will be exempt from Proposition 118?

Proposition 118 will apply to employers of 10 or more workers; in other words, employers of fewer than 10 employees will be exempt from paying premiums. Sole proprietors will have the opportunity to opt into the program if they choose for 50% of what their premium would otherwise be based on their income (see below).

Which employees will be eligible for Proposition 118?

Workers who have worked for their employer for at least 180 days, will be eligible to receive benefits after they have earned $2,500 in wages on which Proposition 118 taxes (premiums) were paid. It is not clear in Proposition 118’s language, but it appears that a worker need not work for a covered employer to claim these benefits; in other words, it appears that a worker who meets those wage-and-hour requirements may be able to claim these benefits even if their employer did not pay the company-side premiums (although employees of exempt small employers will be required to pay their own employee-side premiums).

CRS 8-13.3-403(7)’s definition of “employee” also includes those who provide “labor or services for the benefit of another, irrespective of whether the common law relationship of master and servant exists,” which arguably may include some traditional independent contractors.

What reasons will trigger paid leave under Proposition 118?

There will be five qualifying reasons for Proposition 118 leave:

  1. The worker’s own serious health condition
  2. A serious health condition of a family member
  3. Birth, adoption, or placement in foster care
  4. Certain military service
  5. “Safe leave,” which is a type of leave, defined in Proposition 118, related to absences for the worker’s or a family member’s experiences involving domestic violence, stalking or sexual assault

What will benefit levels be?

Benefits will be paid at 90% of the worker’s average weekly wage (AWW) to the extent the worker’s AWW is less than or equal to 50% of the Statewide AWW (SAWW), plus 50% to the extent the worker’s AWW exceeds 50% of the SAWW. In 2024, Proposition 118 anticipates the SAWW will be $1,340, at which time the maximum benefit will be $1,100 per week. In 2025, Proposition 118 estimates the SAWW will be $1,392, setting the maximum benefit of $1,253. Explanatory material in the Colorado legislature’s 2020 Blue Book summarizing Proposition 118, illustrated this benefit formula, as follows:

Weekly wage Weekly benefit Maximum annual benefit Percent of weekly wage
$500 $450 $5,400 90%
$1,000 $768 $9,216 77%
$1,500 $1,018 $12,216 68%
$2,000 $1,100 $13,200 55%
$3,000 $1,100 $13,200 37%

 

What will Proposition 118 cost and how much will employers and employees pay?

Proposition 118 is expected to cost a minimum of $575.4-million in the second half of the government’s 2022-23 budget year then $1.2-billion in its 2023-24 budget year. Of this, the State itself expects to spend $3.2-million in 2021-22 and $48.6-million in 2022-23. Employers will pay their share through premiums in the form of a payroll tax, but may split the premium 50/50 with their workers. Employers who choose will be able to absorb some or all of the employee share. The premium rate for the first two years, 2023 and 2024, will be 0.9% of the worker’s wages, of which half (i.e., 0.45%) will be paid by the company and the other half (i.e., the other 0.45%) will be paid by the employee, although a company will be able to choose to pay some or all of the worker’s share. In its third year, 2025, Proposition 118 will reset premium rates, so that the total aggregate amount of premiums paid into the program will equal 135% of 2024’s claims plus 100% of the DFMLI’s administrative costs. At that point, Proposition 118 sets a cap on the employee premium at 1.2% of the employee’s wages; Proposition 118 does not on an initial read appear to set a cap on the amount that will be imposed on employers once the premiums are reset starting in 2025.

During Proposition 118 leave, what happens with the worker’s health insurance?

During Proposition 118 leave, the worker’s health benefits will need to be continued though the worker will be required to pay their portion of such premiums, unless an employer chooses to absorb some or all of the employee’s share.

After Proposition 118 leave, will the worker be guaranteed a right to return to their position?

Proposition 118 provides that a worker who takes Proposition 118 leave will be entitled to return to their same position or a position with the same pay, benefits, seniority and status.

Additional expected requirements of Proposition 118

In addition, Proposition 118 prohibits retaliation and discrimination against workers who request or use Proposition 118 benefits.

While Proposition 118 contains some definitions and explanations of this new program, there is substantial work yet to be done to stand up this new program. Litigation is anticipated.