California's Paid Family Leave Law - what it means for employers doing business in this state and how it relates to existing federal and California family leave statutes

By now all California employers should be aware of the recently enacted state law providing for paid family leave ("PFL"), which became effective for claims filing purposes on July 1, 2004. In some respects PFL tracks the leave entitlements afforded by the federal Family Medical Leave Act ("FMLA") and California Family Rights Act ("CFRA"), both of which have been in place since the early 1990's; however, smaller employers (i.e., less than 50 employees) who have been exempt from coverage under FMLA and CFRA are not exempt from PFL coverage. Smaller employers must therefore confront the same question faced by larger employers: what affect will PFL compliance have on their operations?

The answer is that PFL probably won't have much of a direct affect on any employer, large or small. For the most part, PFL compliance merely means an added payroll deduction that the employer must take out of the employee's wages. No part of PFL is funded by the employer. To be sure, there is an argument that PFL benefits provide an added incentive for employees to take time off, thereby resulting in an indirect cost to the employer, who must find a replacement or otherwise adjust to the employee's absence; nevertheless, it is too early to determine whether this argument can be validated.

Below, we have summarized some of the major points of overlap, as well as differences, between PFL and FMLA/CFRA. The summary is for informational purposes only. Employers should consult the statutory text and the pending regulations for a more detailed explanation of the rights and obligations under all of these laws.

1. Nature of Leave Entitlement under PFL v. FMLA/CFRA

PFL provides for paid leave of up to 6 weeks in a 12-month period to care for a family member with a serious health condition or to bond with a new child, while FMLA and CFRA provide for unpaid leave of up to 12 weeks in a 12-month period for these same circumstances. In addition, FMLA and CFRA provide for unpaid leave to employees who themselves have a serious health condition. For employers who are covered by both PFL and FMLA/ CFRA, both types of leave run concurrently.

2. Funding and Administering of Benefits under PFL v. FMLA/CFRA

PFL is a paid leave program funded by employee contributions and administered by the California Employment Development Department. In contrast, neither FMLA and CFRA establish any type of paid leave benefit program. FMLA and CFRA merely require employers to provide authorized leaves of absence, which can be paid or unpaid, to their employees when a leave-qualifying event occurs. For employers who have their own paid leave program, PFL does not authorize the employer to require that the employee use accumulated leave under that program while on PFL. The only exception to this is that the employer can require employees to use up to two weeks of earned but unused vacation time while on PFL.

3. Medical Certification under PFL v. FMLA/CFRA

Under FMLA and CFRA, the employer can, but is not required to verify the existence of a serious health condition requiring medical treatment, if that is the qualifying event for which leave is sought. Such verification is accomplished by the employer's demand of a medical certification from the physician or other health care provider treating the employee or family member as the case may be. In contrast, employees seeking PFL to care for a family member must, as part of the claims submission process, verify with the EDD, not the employer, that the family member has a serious health condition in need of medical treatment.

4. Reinstatement Rights

FMLA and CFRA require that employees be reinstated to their same or comparable position at the conclusion of their leave. No such reinstatement rights exist for employees who are on PFL. Even so, it would be unwise for employers to assume that they have no exposure for discharging employees who exercise their rights to take PFL. Experienced employment law counsel should be consulted before taking any such action.

5. Resolution of Claims concerning Leave Entitlement

Because PFL claims are administered by the EDD, any disputes concerning such claims are handled in the same manner as disputes concerning state unemployment and state disability claims; i.e., all such claims may be appealed to the California Unemployment Insurance Appeal Board. Employees who claim they have been denied leave entitlements under FMLA or CFRA, or who otherwise claim a violation of their rights under those laws, can initiate court action; however, in the case of claims brought under CFRA, the employee first must file charges with the California Department of Fair Employment and Housing, and receive a right to sue letter from that agency.

6. Notice to Employees of Leave Entitlement

Employers have a legal obligation to advise employees of their PFL rights; hence, employers are required to post the State notice advising employees of these rights, and they must provide newly hired employees with the State published pamphlet setting forth these rights. Under FMLA and CFRA, employers have similar notice obligations.

Questions or comments concerning any of the foregoing can be directed to Jonathan M. Turner or Lawrence J. Song at Epstein, Turner & Song.