As I write this on Tuesday afternoon, a bill is being discussed in a state legislative committee that would add a major new mandate on employers and employees.
Senate Bill 188, known as the Family and Medical Leave Insurance Program or FAMLI. SB 188, would create a government-run employee leave program funded with a payroll tax on Colorado employers and employees. While paid leave is a desirable benefit, we do not support mandating an inflexible one-size-fits-all on Colorado employers.
Per the Colorado Competitive Council:
- “This bill creates a mandatory Family and Medical Leave Insurance (FAMLI) program, providing partial wage replacement (up to $1,000 per week) to eligible individuals who take leave from work to care for a new child or a family member with a serious medical condition, because of a serious medical condition of their own or due to certain needs arising from a family member’s active duty service.
- It requires employees and employers to each pay 50 percent of the cost of the premium, which will start at .52 percent of an employees’ annual earnings. The percentage payroll tax will adjust based on premium needs in subsequent years and is capped at .99 percent for employers.
- Premiums are discounted for the public sector and companies with less than 10 employees.
- The program will be implemented in January 2022, with the collection of payroll tax beginning in July 2020.
- Employees are eligible for up to 16 weeks of leave after working 680 hours – or 17 full-time weeks – in a one-year period.”
The Colorado Competitive Council cites a number of concerns:
- There are no exceptions to this mandate, potentially resulting in a reduction of benefits for employees who already have more generous paid leave. SB 188 mandates participation via payroll tax by all employers and employees, including those who today offer a paid leave program. Rather than incenting companies to do more, this bill punishes companies that already offer generous leave programs, forcing them to administer multiple programs and weave together benefits. Although they bear an administrative burden with the state program, employers will not be compensated for their administrative costs. A possible consequence of this bill would be a reduction of benefits for many Colorado employees who today have paid leave programs.
- The costs of this program are being understated and will grow significantly over time. The financial viability of the program is a big unknown. As proposed, it has higher payouts and broader eligibility than almost every other state-sponsored program in the country. In just four years it will cost almost $1 billion. And, the scary part is the law builds in a mechanism that will push premium rates even higher in future years.
- The private sector is forced to subsidize the public sector to help pay for the costly program. Then, of course, because SB 188 is so costly, the legislature is proposing to give government a deep discount on the payroll tax, in effect forcing nonprofits, businesses and their employees to subsidize government budgets and public employees.
- The proposal provides among the highest payouts in the country. Under Senate Bill 188, after only 17 weeks of full-time employment employees could be eligible for up to 16 weeks of leave. This is a problem for most organizations but particularly ones that employ seasonal and short-term workers.
- FAMLI eligibility requirements don’t align with federal family leave programs. Eligibility for benefits under Senate Bill 188 do not align with the Federal Family & Medical Leave Act (FMLA). The result will be eligibility inconsistencies and confusion. And the generous eligibility is an invitation for abuse. A covered person can be granted leave for any individual with which they have a “significant personal bond.”
- The cost and administrative burden on small businesses is crippling. This is an inflexible mandate. Employers, especially small- and medium-sized employers and nonprofits, will struggle to comply with SB 188.
- The program could hurt employees, rather than help them. Then there’s the matter of how companies will pay for this new program. For some it will mean eliminating positions and / or cutting other benefits. Many employers, including nonprofits, won’t have the luxury of passing the new cost on to their customer, members, or constituents by increasing their prices. That means cutting costs.
- Finally, many employees will never realize a benefit for the lost wages they pay into this program.
If you want to know more about Senate Bill 188, you can find an overview and a link to the full bill here.