Oregon Enacts Paid Family Leave

The Oregon Legislature passed House Bill 2005 (the “Bill”) on June 30, 2019, creating a new program of up to 12 weeks of paid medical and family leave benefits (the “Program”) for eligible employees and self-employed individuals who opt-in to the program.  Oregon Governor Kate Brown is expected to sign the Bill.  The Program is similar to the State of Washington’s paid family and medical leave program (read about that here), which took effect January 1, 2019 and under which benefits are planned to be available beginning January 1, 2020.

Applicability Dates

Contributions to the Program will begin no later than January 1, 2022.  Benefits for employees will be available beginning January 1, 2023.

Contributions

Oregon employers with 25 or more employees must contribute toward the fund that will be used to pay benefits.  The Program is funded with payroll contributions, 40% from employers and the remaining 60% from employees, the latter portion of which may be deducted from employee wages.  An employer may, however, elect to pay the employee portion.  The amount of the contribution is based on employee wages, capped at a wage base amount of $132,900 (adjusted for inflation).  The Director of the Employment Department will set the contribution rate, which will not exceed 1% of employee wages (up to the wage base).  Small employers with fewer than 25 employees are generally exempt from paying the 40% employer portion of the contribution but may elect to pay it.  If a small employer chooses to pay the 40% employer portion of the contribution, the employer may be eligible to receive certain grants under the Bill when an employee takes paid family or medical leave.

Employer contributions will not begin until January 2022, at which time employers must also notify employees of their rights under the Program.

Benefits

Employees who have earned at least $1,000 during the first four of the last five completed calendar quarters preceding the benefit year (the base year) or, in the alternative, during the last four completed calendar quarters preceding the benefit year (the alternate base year) are eligible for benefits.  An eligible employee may make a claim for benefits during periods of family leave (generally, birth or adoption), medical leave (generally, a serious health condition), or “safe leave” (generally, refuge from domestic violence).

The amount of benefits depends on the eligible employee’s average weekly wages and the state’s average weekly wage, not to exceed 120% of the state’s average weekly wage (approximately $1,254).  Employees who earn less than 65% of the state average weekly wage (approximately $679) will receive 100% of their average weekly wage.  Employees who earn more than 65% of the state average weekly wage will receive 65% of the state average weekly wage plus 50% of the amount by which the employee’s average weekly wage exceeds the state average weekly wage.  Of course, employees may use accrued vacation or sick time to supplement up to 100% of their wages.

Benefits generally may be claimed for a maximum of 12 weeks each benefit year, but an eligible employee may qualify for an additional two weeks of benefits under certain circumstances related to pregnancy or childbirth.  The Bill also provides that the maximum amount of leave that an employee may take is 16 weeks, composed of the 12 weeks of paid leave under the Bill plus an additional four weeks of unpaid leave under ORS 659A.159 (if eligible for such unpaid leave).  Employees must provide written notice at least 30 days prior to the paid leave, if the leave is foreseeable.

Benefits will be available beginning in 2023.

Equivalent Employer Plans

An employer that adopts its own paid leave program may be exempt from the Program.  To be exempt, the employer’s program must be available to all employees who have been continuously employed with the employer for 30 days and must provide benefits that equal or exceed the benefits provided under the Program.  An employer may assume all costs associated with its employee leave program, but may choose to deduct from the wages of employees up to the amount permitted under the Program (i.e., 60% of the amount that would be required to be contributed to the Program if the employer did not have its own equivalent leave program).  If an employer adopting an equivalent plan withholds from employee wages, the withheld amount must be used for plan expenses.

Elective Coverage

Self-employed individuals may elect to be covered under the Program.  A self-employed individual’s contributions to the Program are based on the individual’s taxable income.  Generally, a participating self-employed individual must elect into the Program for at least three years and will be required to file notice of the election and agree to supply any information concerning taxable income that the Director of the Employment Department deems necessary.  The three-year duration of the election may be shortened under certain circumstances, such as if the self-employed individual becomes an employee or files for bankruptcy.  Tribal governments and tribal government employees also may elect into coverage under the Program.

Penalties and Liabilities

The Bill includes a number of provisions related to liability for contributions and excess benefit payments as well as penalties for non-compliance.  Employers are generally liable for the payment of the required contributions, and individuals receiving benefits may be liable for payments from the Program to which they were not entitled.  In addition, owners, officers, and employees of a company who are responsible for payment of contributions on behalf of a company may be individually liable for non-payment of the required contribution amount.

Additional Rules Expected

The Director of the Employment Department will issue rules to clarify parts of the Program, including the applicable rate for calculating contributions, the notice employers must provide to employees regarding the Program, how self-employed individuals and tribal governments may elect into coverage under the Program, specifics related to claiming benefits under the Program, successor liability, and how the number of employees is calculated for purposes of determining whether an employer employs fewer than 25 employees.  Those rules are expected to be issued by September 2021.

Contact your Stoel Rives attorney if you have any questions about these new requirements.