Washington, D.C. Implements Paid Family Leave Requirements for Most Employers

When Washington, D.C., passed the Universal Paid Leave Amendment Act in 2016, it was among the most generous paid family leave laws in the United States. Now, three years later, most businesses with employees working in Washington, D.C., must begin meeting requirements under the law. While premium contributions began this month for employers and they have until July 31, 2019, to file their first payment before penalties kick in, eligible employees must wait until July 1, 2020, to take advantage of the program’s benefits.

Employers also have an option to administer their own voluntary plan, but regardless of whether they offer a plan that is equivalent to or more generous that the District’s plan, they are not exempt from paying the required premium contribution to the District’s PFL plan.

Self-employed individuals can choose to elect coverage, as well, and benefits for all are meant to be transferable between employers.

Which employers are subject to Washington, D.C. PFL?

Most Washington, D.C., employers, including out-of-District employers, who are required to pay D.C. unemployment insurance of behalf of their employees, regardless of structure, are subject to the new PFL requirements. There are notable exceptions, including federal employees, employees who work for the District of Columbia, and self-employed individuals – although self-employed individuals can opt-in under the following circumstances:

• Opt-in must occur during open enrollment period, so at one of the three following periods
  • 90 days after program starts (July 1, 2019 to Sept. 28, 2019)
  • November and December, beginning in 2020 and every year after
  • Within 60 days of becoming self-employed in the District
• Must pay 100 percent of PFL tax on payments where more than 50 percent of the work is performed in the District

Additionally, self-employed individuals who opt-in after the start of the program (Sept. 28, 2019) will be required to make contributions for three consecutive years before they can opt-out or if they are no longer self-employed. For those who opt-out, there are specific rules established for re-enrollment and benefit eligibility to ensure such individuals don’t enter the program only at the point where they would need benefits. Coverage can be canceled by Washington, D.C., for self-employed individuals if they fail to make payments or file reports.

What are the employer reporting and payment requirements for PFL in Washington, D.C.?

Under the PFL law in the District, employers will have reporting and payment requirements quarterly, due at the same time as unemployment insurance. The first deadline is July 31, 2019 for second-quarter wages (April 1 to Sept. 30), and these wages are generally the same for SUI wages that employers already file. An employer’s PFL contribution will be calculated by using the wage filing for unemployment insurance, with the employer now paying the PFL contribution (0.62 percent) of these wages separately.

Employers should note that, similar to unemployment insurance, this contribution is to be paid solely by them and they are not permitted to withhold the amount from an employee. Self-employed individuals who opt-in will need to calculate their own payments.

What are the employee benefits available through the Washington, D.C. PFL program?

On July 1, 2020, eligible employees can begin applying for program benefits, with three distinct leaves available – each with their own rules and maximum leave times. Employees can take a maximum of eight weeks per year of total leave – with a year based on a rolled 52 weeks and not a calendar year – and they can only take leave under PFL for one qualifying event per 12-month period.

What are reasons for qualified leave?

• Personal Medical leave: This leave, capped at two weeks per year, is for an eligible employee who is unable to work due to their own serious health condition such as injury, chronic illness, or incapacitation. A claim must be filed by the individual within 90 days of the qualifying event.
• Family Medical leave: Capped at six weeks per year, an employee can use this leave to care for a family member with a serious health condition, whether that be physical or psychological in nature. A covered family member includes a child, grandparent, parent, sibling, spouse, or a domestic partner of the employee, and that means biological, adoptive, foster or step for parent and child. The individual must file a claim within 90 days of the qualifying event.
• Parental leave: This leave enables bonding with a new child in the family, through birth, adoption, or foster placement. There is an eight-week cap, and the leave must be taken in the first 12 months after the birth or placement of the child. A claim must be filed within 52 weeks of the qualifying event.

Additionally, employees are eligible for benefits under the program if they were a qualified employee working in Washington, D.C., for at least some of the time 52 weeks immediately preceding the qualifying paid leave event. They also must be employed by a covered employer when they apply for paid-leave benefits. The standard generally applies to self-employed individuals, too. The District might further define what qualifies as enough weeks as the benefit start date in July 2020 gets closer, especially since the rule is not well-defined.

This is also a portable benefit and wages are accumulated between employers, so even if an employee is new to an employer they might qualify for leave based on past employment.

What are the calculations for PFL in Washington, D.C., and are there caps?

When the benefit is available to eligible employees in July 2020, they should be reminded that PFL benefits will not be at their full wage. Employees do remain eligible for employer-based benefits such as paid sick leave and paid vacation, which could add to what the employee receives. Plus, there is a weekly cap of $1,000 that will be adjusted for inflation and solvency after October 2021. Employees who qualify for PFL benefits will be paid a percentage of their average weekly wage (AWW) – with the AWW equaling the cumulative of their four highest-paid quarters out of the five quarters that immediately precede the leave, divided by 52.

The weekly benefit for covered employees will be:

• 90 percent of the employee’s AWW for those with wages up to 150 percent of the District’s minimum wage, multiplied by 40, and
• 50 percent of the employee’s AWW that exceeds 150 percent of the District’s minimum wage, multiplied by 40

What are PFL notification and other requirements for Washington, D.C., employers?

Employers must provide a notice of the program:

• At all times with a physical poster in conspicuous and common workplace area,
• Within 30 days of time of hiring,
• Annually to all employees, and
• When an employer becomes aware, formally or informally, that an employee needs PFL leave. It’s important for employers to understand what might be a qualifying event because even though the District determines whether an employee is eligible for PFL leave, the employer is responsible for notifying the employee when there is a potential qualifying event.

The D.C. Office of Paid Family Leave has developed, in English and Spanish, a poster and made it available on its website. Employers have until Jan. 1, 2020 to post.

As for notices to employees at the time of hire, annually, and when PFL leave is needed by an employee, they can be provided electronically or on paper. Employers must be able to demonstrate compliance of these notice requirements, and can do so by email receipt or signed statement from employees acknowledging receipt of the notice.

Violations of the notice requirements could result in penalties, including $100 for each covered employee who didn’t receive individual notice, as well as $100 for each day that a covered employer failed to post the notice in a conspicuous place at work.

Recordkeeping

Employers are required to maintain all records relating to PFL for three years, including covered employees’:

• Name and Social Security Number (or tax ID number)
• Payroll information (wages, beginning and ending dates of each pay period, method of payment, earnings, dates they were paid their wages)
• The dates the employee took parental, medical, or family leave
• Leave notices provided by the employer to the employee regarding PFL (copies)
• Records of any disputes between the employer and employee regarding PFL

Employers must also maintain records of copies of all written PFL notices given to employees and documents describing short-term and long-term disability policies, sick leave, vacation leave, and other employer paid and unpaid leave policies and practices.

Non-discrimination

All employers, generally, are prohibited from discriminating or retaliating against an employee for requesting or taking paid leave. The Washington, D.C., PFL states that an employee who works for a covered employer with fewer than 20 employees shall not be entitled to job protection if he or she decides to take paid leave. Employers with 20 or more employees are required to provide job protection. However, while the department has provided no guidelines as to what qualifies as job protection, the ordinance references D.C. FMLA job protections as a baseline.

Health benefits

Employers are required to continue an employee’s health insurance while they are on leave. However, if an employee contributes a portion to their premium, the employer can require they continue to pay their portion of the premium while on leave. Since the employee’s paycheck comes from the District – except in the case of voluntary plans – an employer will have to determine how it will collect the employee’s portion of their health insurance if it decides to require the employee to continue covering their portion.

What additional clarifications are necessary about Washington, D.C. PFL?

There are still some unanswered questions and additional clarifications needed that should be addressed to fully keep employers and employees informed about the program. Some examples include:

• While the Washington, D.C. PFL program is to run concurrently with other leaves including D.C. FMLA, Federal FMLA, and any employer paid leave such as those contained in collective bargaining agreements, it is unknown if there are circumstances where any other leaves might interact with D.C. PFL in a manner that the employee would receive more than their weekly pay. If that is the case how would this affect their benefits under the various plans?
• It is currently unknown if the benefit payment is subject to Federal Income Tax (FIT), but if it is, the department stated it would notify the beneficiary and the District would be able to withhold tax from the benefit payment.
• Will self-employed individuals who opt-in prior to Sept 28, 2019 have to report and pay second- and third-quarter contributions even though they would have opted-in after second quarter? According to the agency site, you are liable for PFL beginning with the quarter you opt-in, but this does not address this initial period of opt-in.

Employer takeaways

Employers should be prepared to pay the PFL tax amount when they file their second quarter unemployment return by July 31, 2019. Although employers can use the wages they file for unemployment insurance, the calculation and payment of the new PFL employer tax must be done separately. Self-employed individuals must decide soon whether they are going to opt-in to the program. These individuals must be prepared if they do opt-in to report their self-employment income attributed to the District and pay their contribution.

Employers also should post the Notice from the Department of Employment Services in a conspicuous place by Jan. 1, 2020. Additionally, they should determine how they will notify employees and ensure they can demonstrate the employee received the notifications. Employers must ensure that they have a plan for maintaining all the records associated with the new PFL program.

What next?

Paychex will continue to monitor the information from the Department of Employment Services and will provide an update approximately 30 days from the date in which employees can apply for benefits in July 2020. All pertinent information pertaining to how the law will affect the workplace will need to be addressed in the employee handbook, so we recommend employers begin looking at the process of updating appropriately. If you need help with your handbooks or are experiencing other HR issues, Paychex HR Services can help.

Other resources

D.C. PFL Act Employer Tool Kit