Unequal benefits: An unintended consequence of state leave programs
This year more than 10 states have shown interest in joining about a dozen others currently mandating paid family and medical leave (PFML). A policy issue once predominately confined to coastal states is being debated in state legislatures in the middle of the country – Illinois, Indiana, Missouri, Oklahoma and Texas, to name a few. We don’t expect all of these states to pass paid leave legislation in 2023 but the bipartisan interest in this issue points to a continued expansion of the patchwork of state leave laws.
As more state PFML programs take effect, employers should be mindful of unintended equity disparities. For example, employees may be contributing to a state benefit that, when taken, offsets the amount of paid leave they receive from their employer. An employee in a state without a mandatory PFML program has no offsets from the employer-provided benefit. As a result, the employee in the statutory state is funding some of their leave benefit while the employee in the state without a mandate isn’t. Additionally, an employee working in a state with PFML may receive more paid time off than an employee who is not working in a state with PFML.
Reevaluating employee contributions and paid leave benefits across all workforce jurisdictions is a good practice to identify inconsistencies that may not align with company goals. Determining the employee’s work state is central to the analysis, as statutory leave contributions and benefits are connected to the employee’s work state. These determinations take on greater significance for employers with remote and hybrid workers -- particularly those that have relocated since the start of the COVID-19 pandemic.
Determining the employee’s work state
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The individual's service is performed entirely within one state, or the service performed outside the one state is only incidental.
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The individual’s base of operations is in one state in which some service is performed.
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The service is directed or controlled from one state in which some service is performed.
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The individual resides in a state in which some service is performed.
Since each state is free to craft their own definition of work state, employers should do a state-by-state analysis to accurately determine each employee’s work state and applicable PFML program.
Employers have been grappling with work state determinations and will continue to do so as remote and hybrid work models persist and new states enact PFML mandates. But work state determinations for purposes of establishing eligibility for state PFML benefits should not be confused with the Department of Labor’s recent guidance defining the worksite for Family Medical and Leave Act (FMLA) eligibility. The FMLA worksite for remote employees is the office to which they report or from which work is assigned – it’s not their personal residence.
Employees have new expectations about work today and paid leave is an important component of the value proposition. Ensuring an equitable paid leave strategy should be at the top of the to-do list for those that design and administer employee leave programs.