Happy Holidays and Happy New Year! So the cliché: the Holidays are a time for being with family and loved ones and each new year gives hope for a better year than the last. Speaking of awkward transitions, the New Year 2023 also comes with a new FAMLI. Nope, not a spelling error. The Family and Medical Leave Insurance requirements are upon us.
I know what you are thinking. First, horrible and uncalled for transition and what the heck is FAMLI? What are you on about? OK, remember 2020? That was fun times! Well, more specifically, do you remember the general election in 2020? You may then recall that Colorado voters approved a new Paid Family and Medical Leave program. I will give you a refresher:
Employers in Colorado have not historically been required to provide family and medical leave unless they were subject to the federal Family Medical Leave Act (generally 50 or more employees). Even then, FMLA does not require employers to provide paid leave, just to provide the leave. In 2019, SB19-188 was introduced in the General Assembly calling for a new paid family medical leave program. The bill ultimately failed. So, ascribing to the “make them tell you no” theory, it was introduced to the voters for the 2020 election as Proposition 118 and passed with 57.7% voter approval.
For two years, it has been out of sight, out of mind. Anecdotally, most of the people I have talked to recently forgot it even happened. Everyone is about to get a reminder come January 1, 2023.
Understanding that requiring employers to simply provide paid family medical leave was outside what most small to mid-size employers can afford, Prop 118 called for an employer and employee funded insurance program that would allow for paid family and medical leave. Essentially, every employer and employee will begin paying a combined 0.9% contribution to the fund beginning in January 2023. Employees, however, will not be eligible to use the leave benefits until January 1, 2024.
And, in case you are wondering, yes, it faced a constitutional challenge. In 2021, Chronos Builders, LLC filed a lawsuit in Denver District Court arguing that Prop 118 was unconstitutional and violates the TABOR Amendment. I will not bore you with the details of the lawsuit. On December 13, 2021, the Denver District Court dismissed the lawsuit. The dismissal was ultimately appealed to the Colorado Supreme Court. On June 21, 2022, the Colorado Supreme Court upheld Prop 118, finding that it does not constitute an “income tax” in violation of TABOR because the amounts paid by employers and employees are “premiums” for insurance, not taxes.
What Does FAMLI Do?
Well, to start, beginning in January 2024, a covered individual may receive up to 12 weeks of paid family and medical leave. An additional four weeks are allowed for pregnancy or childbirth complications. Individuals will receive 90% of their average weekly wage for the portion of wages that are less than or equal to 50% of the state average weekly wage and 50% of the portion that exceeds it. So, your calculus classes will come in handy after all. The maximum benefit will be capped at $1100 per week for 2024.An individual will be eligible after they have earned $2500 in wages that were subject to the premiums and have been employed by the employer for at least 180 days. An eligible individual will be able to take leave for the following:
- caring for their own serious health condition;
- caring for a new child during the first year after the birth or adoption or for foster care of a new child;
- caring for a family member with a serious health condition;
- when a family member is on active duty military service or is called for active-duty military service; and
- when the individual or the individual’s family member is a victim of domestic violence, stalking, or sexual assault.
Employers will be prohibited from taking disciplinary or retaliatory actions against employees for requesting or using paid leave. The employee must return to the same position or a position with the same pay, benefits, and seniority or status. The employee cannot lose health benefits during their leave, but are still required to pay their health insurance premiums while on leave. Of course, like the FMLA, there are some nuances and exceptions here and employers and employees should consult counsel whenever there is a question.
Prop 118 was touted as a means for Colorado employers to provide paid family and medical leave at low cost by setting up a State run insurance program not dissimilar to the unemployment compensation insurance program. However, employers with 9 or fewer employees are not required to pay the employer share of the premium. Also, employers who already offer paid family and medical leave at or better than FAMLI can opt out as well. There is a process for approving this and we highly suggest you consult the Toolkit provided by the Division at the link below and consult with legal counsel on your specific situation.
What Does This Mean for Employers?
For now, beginning January 1, 2023, Colorado employers must pay a payroll “premium” of 0.45% for every Colorado employee and deduct 0.45% from every Colorado employee’s paycheck to be paid quarterly to the fund. As noted above, some employers may be eligible to opt out. We would encourage all Colorado employers to check with their payroll services and/or accountants to make sure they are taking steps to comply. Colorado employers should also register with FAMLI+ Employer (https://famli.colorado.gov/employers/my-famli-employer) as soon as possible. The program offers a Toolkit and other resources to help navigate the process.
Starting in 2024, even employers already subject to the FMLA should note that FAMLI adds eligible reasons for taking leave. It also reduces the eligibility requirements for employees to take leave. Under the FMLA, the employee must have worked for 12 months and contributed 1250 hours of work during that time. Under FAMLI, the time worked is reduced to 180 days and $2500 in wages subject to premium contribution.
What Does This Mean for Employees?
Employees cannot opt out of premiums regardless of whether the employer does. So, employees can expect to see withholding on their paychecks starting in January 2023 for 0.45% of their gross pay. Premiums may be adjusted in future years, but are capped at 1.2% total. Barring a change in the law, premiums for employees should never exceed 0.6%. Beginning in January 2024, employees will be eligible to apply for benefits and take leave. The State has provided a premium and benefits calculator as well as other information here: https://famli.colorado.gov/individuals-and-families. Look for a portal for applying for benefits sometime in late 2023.
Colorado is on the cutting edge of States offering paid family medical leave. This will be a bit of a transition for everyone. If you have any questions about FAMLI, its requirements, or impacts, please do not hesitate to reach out!