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Employer and Worker Experiences with Paid Family Leave in California

 

Excerpt:

As family and work patterns have shifted over recent decades, the demand for time off from work to address family needs has grown rapidly.  Women — and increasingly men as well — often find themselves caught between the competing pressures of paid work and family responsibilities, especially when they become parents, or when serious illness strikes a family member.  “Work-family balance” has become an urgent but elusive priority for millions of Americans, driven by high labor force participation rates among mothers and the caregiving needs of an aging population.

Yet the United States is notoriously lacking in public policies that support workers who need time off to attend to family needs.  Across the industrialized world, longstanding government-sponsored programs provide mothers — and, in many countries, fathers as well — with wage replacement and job security for extended periods immediately before and after the birth of a new child.  Generous paid sick leave and vacation policies are also widespread, and some governments make provision for eldercare as well (see Gornick and Meyers 2003).

By contrast, the only major U.S. legislation to address these issues is the 1993 Family and Medical Leave Act (FMLA), which guarantees up to twelve weeks of job-protected leave, with continuing fringe benefits, for both men and women who need time off from work to attend to their own medical conditions or for family care.  However, FMLA’s coverage is limited to only about half of all workers, and less than a fifth of all new mothers (Ruhm 1997, Waldfogel 2001).1  And because the leaves FMLA provides are unpaid, even workers who are covered often cannot afford to take advantage of it.

In the absence of government provision for wage replacement during family leave, many U.S. workers rely on a patchwork of employer-provided benefits to make ends meet, such as paid sick leave, vacation, disability insurance, and/or parental and family leave.  However, such employer-provided benefits are by no means universally available.  Most managers and professionals, as well as public-sector workers and others covered by collective bargaining agreements often do have benefits that provide some form of wage replacement during a family leave.  However, vast sectors of the U.S. workforce have little or no access to paid sick days or paid vacation, and paid parental or family leave is even rarer.  The situation is particularly acute for low-wage workers, as well as the growing numbers of independent contractors, freelancers, and others who lack any stable connection to an employer.

Against this background, California’s passage of the nation’s first comprehensive Paid Family Leave (PFL) program on September 23, 2002 was a historic breakthrough.  Benefits provided by this legislation became available to most working Californians on July 1, 2004.  The law provides eligible employees up to six weeks of wage replacement leave at 55 percent of their usual weekly earnings, up to a maximum benefit of $987 per week in 2011 (the maximum is indexed in relation to the state’s average weekly wage), when they take time off from work to bond with a new child or to care for a seriously ill family member.  This report presents findings from surveys we conducted in 2009 and 2010 of 253 employers and 500 individuals about their experiences with the California PFL program and concludes with policy recommendations.

Provisions of the California Paid Family Leave Program

California’s PFL program offers partial wage replacement for covered workers who go on leave to bond with a new biological, adopted, or foster child; this benefit is available to fathers as well as mothers during the first year after a child is born or placed with the family.2  The program also offers wage replacement during leaves to care for certain seriously ill family members (a parent, child, spouse, or registered domestic partner).  For both bonding and care leaves, covered workers may receive up to six weeks of partial pay during any twelve-month period.  The six weeks of leave can be continuous or intermittent.

The program is funded by an employee-paid payroll tax with benefit levels indexed to inflation.  It builds on California’s longstanding State Disability Insurance (SDI) system, which has provided income support for employees’ medical and pregnancy-related leaves for many years.  PFL is available to biological mothers for six weeks in addition to the SDI benefits they may receive during pregnancy leave.3  Unlike SDI benefits, income from PFL benefits has been deemed taxable by the Internal Revenue Service.

The PFL program is structured as an insurance benefit, like SDI.  There are no direct costs to employers: the wage replacement benefit is funded entirely by an employee payroll tax (currently a 1.2 percent tax that finances both SDI and PFL).  Workers can claim PFL benefits after a one-week waiting period, by submitting appropriate documentation (including certification from a health care provider) to the state’s Employment Development Department.  Employers may require workers to take up to two weeks of earned (unused) vacation before collecting PFL benefits; in such cases, this vacation period runs concurrently with the one-week waiting period required under the PFL program.

The PFL program does not provide job protection or guarantee the continuation of fringe benefits, although in many cases leave-takers will have these additional protections under the FMLA or the California Family Rights Act (CFRA).  For those who are covered by these laws, the PFL leave and the FMLA/CFRA leave must be taken concurrently.4

Unlike FMLA, California PFL is nearly universal in its coverage: apart from some self-employed persons, virtually all private-sector (and nonprofit sector) workers are included, regardless of the size of the employer.  California public employees may be covered if the agency or unit that employs them opts into the program, but most are not eligible for PFL.  Workers need not have been with their current employer for any specific period of time to be eligible for PFL; they need only to have earned $300 or more in an SDI-covered job during any quarter in the “base period,” which is five to seventeen months before filing a PFL claim. . . .

Key Findings: Employers

  • The business community’s concerns prior to passage of the PFL legislation, that it would impose extensive new costs on employers and involve a particularly serious burden for small businesses, were unfounded.  After more than five years’ experience with PFL, the vast majority of employers reported that it has had minimal impact on their business operations.
  • Most employers report that PFL had either a “positive effect” or “no noticeable effect” on productivity (89 percent), profitability/performance (91 percent), turnover (96 percent), and employee morale (99 percent).
  • Small businesses were less likely than larger establishments (those with more than 100 employees) to report any negative effects.
  • Employers raised strong concerns prior to implementation about abuse of the program.  However the vast majority (91 percent) of respondents to the employer survey said “No” when asked if they were “aware of any instances in which employees that you are responsible for abused the state Paid Family Leave program.”
  • About 60 percent of employers surveyed reported that they coordinated their own benefits with the state PFL program.  This meant cost savings to employers when employees used PFL instead of (or in combination with) employer-provided paid sick leave, vacation, or disability benefits.

Key Findings: Workers

  • Access to employer-provided benefits like paid sick leave, vacation, disability, and parental leave is far greater for some workers than others.  Exempt employees (mainly managers and professionals) have more access than non-exempt, male employees have more access than female, and those in high-quality jobs (those that pay over $20 per hour and include employer-provided health insurance) have more access than those in low-quality jobs.
  • Public awareness of PFL remains limited.  Workers in our screening survey had all experienced a life event that the program was designed to cover, but more than half of them did not know the program existed.  Low-wage workers, immigrants, and Latinos — groups that overlap significantly — were least likely to be aware of the program.
  • Public-sector workers would benefit from greater access to the state’s PFL program.  More than a fifth (21 percent) of public employees in high-quality jobs and nearly half (48 percent) of those in low-quality jobs received no pay at all while on family leave.
  • Nearly a third of respondents who were aware of PFL but did not apply for it when they needed a family leave, for whom data are available, reported that they felt the level of wage replacement was too low.
  • Many respondents who were aware of PFL but did not apply for the program when they needed a family leave feared that using it might have negative consequences for them at work.  About 37 percent of those for whom data are available were worried that if they took PFL, their employer would be unhappy, that their opportunities for advancement would be affected, or that they might actually be fired.
  • Use of PFL greatly increased the level of wage replacement during family leaves for respondents in low-quality jobs: 84 percent of those in low-quality jobs who used PFL received at least half of their usual pay while on leave, compared with 31 percent of those in low-quality jobs who did not use it.
  • Most respondents who used PFL reported that they found the program easy to utilize, that their applications were processed in a timely manner, and that they received their first PFL check promptly.
  • For workers in high-quality jobs, use of PFL did not affect satisfaction with the length of their leaves.  Among workers in low-quality jobs, however, 97 percent of those who used PFL were satisfied with the length of their leave, compared to 73 percent of those who did not use PFL.
  • Workers in high-quality jobs were more likely than those in low-quality jobs to return to the same employer.  However, among workers in low-quality jobs, use of PFL increased retention: 83 percent returned to the same employer compared with 74 percent of those who did not use PFL.
  • Use of PFL positively affected respondents’ ability to care for a new baby or adopted child.  Among workers in low-quality jobs who used PFL for bonding leaves, 91 percent reported a positive effect on their ability to care for the new child, compared with 71 percent of those who did not use PFL; 72 percent of those in low-quality jobs who used PFL reported a positive effect on their ability to arrange child care compared to 49 percent of those who did not use PFL.
  • PFL doubled the median duration of breastfeeding for all new mothers who used it, from five to eleven weeks for mothers in high-quality jobs and from five to nine weeks for those in low-quality jobs.
  • The proportion of bonding claims filed by men has gone up steadily and substantially since the introduction of PFL, as state data show; similarly, many employers reported that the number of men taking paid parental leave is higher than it was five years ago.

1  FMLA covers all public-sector workers, and private-sector workers who work for organizations with fifty or more employees on the payroll at or within seventy-five miles of the worksite.  In addition, to be eligible for FMLA leave, one must have been with the same employer for at least 12 months, and have worked 1,250 hours or more in the year preceding the leave.

2  For biological mothers, this new benefit supplements the pregnancy disability benefits previously available under SDI.  Although it does not increase the amount of job-protected leave available to women who have given birth, it does provide six additional weeks of partial wage replacement.

3  SDI benefits for pregnancy typically cover up to four weeks before delivery and an additional six to eight weeks afterward at the doctor’s discretion.

4  Highlights of the legislative history on family and medical leave in California can be found on the inside front cover of this report.

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Eileen Appelbaum is a senior economist at the Center for Economic and Policy Research.  Ruth Milkman is Professor of Sociology at the CUNY Graduate Center and Academic Director of CUNY’s Murphy Labor Institute.  This article was first published by CEPR in January 2011 under a Creative Commons license.




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