D.C.’s Universal Paid Leave Act Takes Effect, but Uncertainty Remains

Washington, D.C.’s Universal Paid Leave Amendment Act of 2016 (the Act) became effective Friday, April 7, 2017, instituting one of the nation’s most expansive paid leave laws. Yet, even as the Act takes effect, uncertainty about how the law will work in practice persists.

Legislative History

On October 6, 2015, seven D.C. Councilmembers introduced the Universal Paid Leave Act, B21-0415, “[t]o establish a universal paid leave system for all District residents and for workers who are employed in the District of Columbia and to allow for 16 weeks of paid family and medical leave[.]” Following public hearings and amendments to the original legislation, the D.C. Council voted in favor of the Universal Paid Leave Amendment Act of 2016 by a veto-proof majority of nine to four.

The bill was transmitted to D.C. Mayor Muriel Bowser for signature on February 2, 2017. Despite expressing opposition to the bill as being bad for business and for disproportionately benefitting non-D.C. residents who commute from Maryland and Virginia to work for D.C. based employers, Mayor Bowser declined to veto the bill, and following a 30-legislative-day Congressional review period, the Act took effect on April 7, 2017.

Applicability

Under the Act, “eligible individuals” may request paid leave following the occurrence of certain qualifying events, subject to a one-week waiting period during which time no benefits are payable. “Eligible individuals” include: (1) individuals who have been “covered employees” during some or all of the 52-week period preceding the occurrence of a qualifying event; or (2) self-employed individuals who have opted into the paid leave program, and who spent more than 50 percent of their work time in D.C. during some or all of the 52-week period preceding the occurrence of a qualifying event.

“Covered employees” include employees of “covered employers” who: (1) spend more than 50 percent of their work time in D.C. working for that employer; or (2) who regularly spend a substantial amount of time working for that employer in D.C., and who do not spend more than 50 percent of their work time for that employer in another jurisdiction.

“Covered employers” include: (1) any individual, partnership, general contractor, subcontractor, association, corporation, business trust, or group of persons who employs or exercises control over employees and is required to pay D.C. unemployment insurance on the employees’ behalf; or (2) self-employed individuals who opt into the paid-leave program. The D.C. and Federal governments are excluded from the definition of “covered employer.”

Employee Entitlements

 The Act provides “eligible individuals” up to eight weeks of paid leave each year, which may be taken intermittently, and which may include a combination of:

 (1) up to eight weeks of parental leave, to be taken within one year of the birth of a child, the placement of an adopted or a foster child, or the assumption of legal guardianship of a child;

(2) up to six weeks of family leave, to be taken within one year of the diagnosis or occurrence of a family member’s “serious health condition;” and

(3) up to two weeks of personal medical leave, to be taken within one year of the diagnosis or occurrence of the employee’s “serious health condition.”

“Serious health conditions” are defined broadly to include physical or mental illnesses, injuries, or impairments that require inpatient care or continuing health care-related treatment or supervision at home.

During the paid leave period, eligible individuals who earn 150 percent of the D.C. minimum wage or less will receive 90 percent of their average weekly wage. Eligible individuals who earn over 150 percent of the D.C. minimum wage will receive 90 percent of their average weekly wage, plus 50 percent of the amount by which their regular earnings exceed the D.C. minimum wage, up to a $1,000 weekly cap. Beginning on October 1, 2021, the weekly cap will increase proportionally with the inflation rate.

Interaction with Benefits Provided under Other Laws and Employer Policies

Paid leave under the Act runs concurrently with, not in addition to, the Federal Family and Medical Leave Act (FMLA) and D.C. FMLA leave. Further, individuals receiving long-term disability payments or unemployment compensation under the D.C. Unemployment Compensation Amendment Act are not eligible to receive benefits under the Act.

Collective-bargaining agreements entered into or renewed after December 31, 2017 cannot diminish eligible individuals’ rights under the Act. Covered employers that offer eligible individuals benefits, that are more generous than those provided under the Act, are nonetheless required to make full contributions to the government-administered fund from which benefits will be paid to eligible individuals.

Administration and Funding

Within 180 days of the Act’s effective date, the D.C. Mayor is responsible for issuing regulations and creating a program to administer paid leave benefits under the Act. Employees will be able to access paid leave benefits in accordance with the program beginning on July 1, 2020.

The District of Columbia will fund the paid leave program through a payroll tax on all covered D.C. employers amounting to 0.62 percent of all wages paid to eligible individuals. Beginning on July 1, 2019, D.C. will begin to collect taxes from covered employers, to be remitted to a D.C. government-administered fund.

Employee Protections and Penalties

Covered employers are prohibited from interfering with eligible individuals’ rights under the Act. Further, it is unlawful for employers to retaliate against employees for exercising or attempting to exercise their rights under the Act.

The D.C. Mayor is responsible for providing employers with a form notice, which covered employers will be required to provide to their employees and to conspicuously post, explaining:

(1) employees’ right to paid-leave benefits under the Act and the terms under which the benefits may be used;

(2) that employers may not retaliate against employees for requesting, applying for, or using paid-leave benefits;

(3) that employees who work for employers with fewer than 20 employees are not entitled to job protection if they take paid-leave under the Act; and

(4) that employees may file complaints under procedures that will be established by the Mayor.

Covered employers that violate the notice requirement face a $100 civil penalty for each employee to whom they do not distribute the notice, and for each day that they do not conspicuously post the notice.

Covered employers that otherwise violate the Act face the possibility of civil actions by eligible individuals, the D.C. Attorney General, or the D.C. Mayor. Liability for covered employers that violate the Act may include: (1) back pay and related damages; (2) the greater of either an amount equal to back pay and related damages, or consequential damages of up to three times the amount of back pay and related damages; and (3) attorneys’ fees.

Remaining Uncertainty

Prior to the Act becoming effective, Councilmembers proposed changes to it in the form of two alternative bills. On February 21, 2017, D.C. Councilmembers introduced both the Paid Leave Compensation Act of 2017 (B22-130) (PLCA), and the Universal Paid Leave Compensation for Workers Amendment Act of 2017 (B22-133) (UPLCWAA). Both bills would maintain the Act’s employee entitlements, but would change the Act’s funding provisions.

Under the PLCA, “large employers” (employers with 50 or more employees or annual payroll of at least $3.5 million) would be required to pay a payroll tax of only 0.2 percent, but would be required to administer benefits for their own employees. “Small employers” (employers with five to 49 employees and annual payroll up to $3.5 million) would pay a payroll tax of 0.4 percent, and would be covered by a government-administered benefit program. Employers with fewer than five employees would be exempt from the PLCA.

Alternatively, the UPLCWAA would eliminate the government-administered program and require employers to purchase private insurance to pay eligible individuals during their time off. The UPLCWAA would further limit the payroll tax to 0.1 percent, and would not impose the tax on employers with fewer than 50 employees.

Both bills are currently under D.C. Council review.

Recommendations

Employers should continue to monitor developments related to the Act over the coming months and years. The implementing regulations are expected to be published by the D.C. Mayor later in 2017, which will provide more detailed information on what the Act will mean for employers in practice. Yet, depending on whether the D.C. Council adopts the PLCA or the UPLCWAA, or something else entirely, D.C. employers’ obligations could change significantly.

Although employees will not be able to claim benefits under the Act until July 1, 2020, employers should review their leave policies to ensure compliance with new regulations, when they are published. Further, employers that enter or renew collective bargaining agreements after December 31, 2017, will need to ensure those agreements comply with the Act.

If you have questions, please contact any of the Labor & Employment Department attorneys listed below or your usual Winston & Strawn contact.