On June 25, 2019, Connecticut enacted the Paid Family and Medical Leave Act (PFMLA), which creates a system that will entitle each eligible Connecticut employee to paid family leave. While payment of benefits under the law will not start before January 2022, important employer obligations take effect in less than two months. Most critically, employers must begin taking deductions from the pay of Connecticut employees to fund the program on January 1, 2021. Complying with payroll and other aspects of the complex act will be challenging, not the least because the state has not yet issued explanatory regulations. With much about the new law still uncertain, employers should monitor new developments and get ready to implement necessary changes to policies and procedures before 2020 comes to a close.
Overview of the Program
The PFMLA created the Connecticut Paid Leave program (Program), a paid family and medical leave insurance program that has been called the most generous program of its kind. The paid leave benefit will be funded by employees in Connecticut through mandatory payroll deduction. The rate of the deduction is initially capped at one half of one percent (0.5%). The deduction applies to each employee's wages up to the Social Security contribution base ($142,800 in 2021). Employers must begin withholding from employees' paychecks for the PFMLA on January 1, 2021; no benefits will be paid to employees before January 1, 2022.
A newly created quasi-public agency, the Connecticut Paid Leave Authority (Authority), is responsible for administering the program, which includes accepting employee applications for leave and distributing benefits to qualified employees. The Authority's website is www.ctpaidleave.org. On this website, employers can find several tools and resources provided by the Authority, including fact sheets, videos, and other literature.
The Program is noteworthy not only because it is new, but also because of its breadth. The Program covers all employers with at least one employee in Connecticut. Self-employed individuals and sole proprietorships may apply to participate. To be eligible, employees must meet modest earned-wage thresholds. Employees in Connecticut will be eligible for benefits under the PFMLA if they have earned wages of $2,325 in the highest-earning quarter of the first four of the five most recently completed quarters (the "base period") and are currently employed, and have been employed within the last 12 weeks. To illustrate, in order to be eligible, an employee applying for benefits in April 2022 would have to have earned wages of at least $2,325 in their highest-earning quarter of 2021. An employee applying for benefits in November 2022 would have to have earned wages of at least $2,325 in their highest earning quarter between June 2021 and June 2022.
Employees will be permitted to take paid leave under the program as early as January 1, 2022, if the leave is for a range of reasons covered under the existing Connecticut Family and Medical Leave Act (CTFMLA). These include:
- the birth of a child of the employee or placement of a child with the employee for adoption or foster care;
- the need to care for a family member with a serious health condition;
- a serious health condition of the employee;
- service as an organ or bone marrow donor;
- a qualifying exigency related to the employee's spouse, son, daughter, or parent being on active duty or having been notified of an impending call or order to active duty in the armed forces; or
- reasons related to family violence.
While the reasons for taking leave correspond to unpaid leave under the CTFMLA, the scope of who will be considered a covered "family member" is greatly expanded under the new paid leave law. In addition to spouse, son, daughter, or parent, all included under the current unpaid leave law, the new paid leave expands "family member" to include siblings, parents-in-law, grandparents, and grandchildren, as well as any other "individual related to the employee by blood or affinity whose close association the employee shows to be the equivalent of those family relationships."
Benefits under the new law will be generous. Eligible employees may receive up to 12 weeks of paid leave in a 12-month period with an additional two weeks available in the event of a pregnancy-related health condition resulting in incapacitation. Eligible employees may receive a maximum benefit of up to 95 percent of the employee's regular weekly pay, capped at 60 times the state minimum wage.
For employers, participating in the Program, or privately offering benefits comparable to those provided by the Program, will be mandatory. Beginning November 1, 2020, employers may register with the state to enroll in Program. Registration is completed via the CT Paid Leave webpage.
As an alternative to registering for the Program, employers have the option of purchasing their own private insurance plan to provide paid leave benefits to their employees. If an employer chooses to offer a private Paid Family and Medical Leave Plan, it must apply to the Authority for an exemption from the Program. The CT Paid Leave Authority is currently developing the application process for this exemption. If (1) the private program is comparable to the state's plan, and (2) a majority of the employer's employees have agreed to the plan, the employer may be issued an exemption from participating in the public program.
Employee Contributions and Payments to the Fund
Beginning January 1, 2021, employers must begin withholding employee contributions of one-half of one percent (0.5%) of the employee's wages up to the Social Security contribution base. Collected contributions must be remitted to the Authority on a quarterly basis. For 2021, the payments will be due by March 31, June 30, September 30, and December 31, 2021.
The contributions will be paid into the Authority Trust Fund. The Authority has advised that ACH files will be accepted, but the methods by which contributions may be delivered to the Trust Fund have not yet been formally established.
For employers currently using a third-party administrator for tax withholding, the payroll provider should already be working in partnership with the Authority to arrange the process by which deductions and payments will be remitted. Employers should confirm with their payroll providers that they will be in compliance prior to January 1, 2021. Employers that do not have a payroll provider and instead handle payroll in-house will be responsible for undertaking the administrative burdens of the Program.
We recommend that employers provide written notice to employees of the PFMLA Program and the new deductions from their pay that will take effect on January 1, 2021. This notice should preferably be given at least 30 days before such deductions will commence.
Employee Relations Implications
Expect that employees will have questions about why this additional deduction is being taken from their paychecks. It will therefore be important for Human Resource leaders to understand the law and the requirements the state has imposed on employers to withhold these funds.
If an employer already provides partial pay (either through short-term disability programs or other benefits) for employees who are out of work for serious health conditions, the new state Program may raise a concern that its pay benefit of up to 95% of the employee's base compensation for lower-paid employees may cause a substantial increase in leave requests among employees beginning in 2022. Any decision to reduce current benefits in conjunction with the new law's becoming effective should be discussed with counsel to avoid potential claims of retaliation and to craft appropriate communications.
We are closely monitoring this new law, and will provide updates on significant developments as additional information becomes available.
For more information, please contact us or visit the state's Paid Leave webpage at www.ctpaidleave.org.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.