
The State of Oregon enacted a new Paid Family Leave Program in 2021, which was originally to become effective in 2022, but was delayed to 2023 due to the COVID-19 pandemic. The new effective date is January 1, 2023, for employee and employer contributions, and September 2023 for employee benefits to begin.
The system works like an insurance program, requiring contributions from all Oregon employees. However, only employers with 25 or more employees will also be required to contribute. The contribution rate is 1% for 2023 which is shared 60/40 with employees and employers. Consequently, all Oregon employees will have a .6% tax withheld from their paychecks beginning 1/1/23, while only those employers with 25 or more employees will contribute the other .4% of wages. However, it should be noted that the 25-employee threshold is a worldwide number, not the number of Oregon employees. So, a multi-state company that has only 1 Oregon employee, but more than 24 employees will need to contribute on behalf of the Oregon employee.
ALL employers are required to post a notice no later than 1/1/2023 informing employees of the program details. A model notice can be found on Oregon’s website: https://paidleave.oregon.gov/Pages/default.aspx Likewise, ALL employers must begin withholding the .6% tax as of 1/1/2023. If your business uses one of the major payroll companies, such as Paychex or ADP you should expect this to be taken care of automatically. However, if you use a smaller service or use software, such as QuickBooks, you’ll need to make sure that this new tax is properly set up in your payroll system.
Employers can opt out of the program by providing an “equivalent plan”, which must be pre-approved by the state. Likewise, small employers can opt in to the plan and will then be eligible for grants to help offset the cost of temporary hires while employees are away on leave.
Oregon’s plan has one of the lowest thresholds in the U.S. for employee eligibility. Employees need earn only $1,000 over the prior 4 of 5 quarters to be eligible for benefits. There are no minimum hour’s requirements so part-time employees will be eligible if they meet the wage threshold.
The program is intended to pay 100% of wages, up to a maximum weekly amount of $1,469 (to be adjusted annually) and for a maximum of 12 weeks (or more under certain conditions) in a year for certain family leave events, such as the birth of a child, serious illness or injury, adoption, domestic violence, and other events identified in the legislation.
Employees must provide 30 days’ notice (except in the case of emergencies) to employers and must submit an application to the state in order to be eligible for benefits. The benefits are reduced dollar for dollar by employer paid leave provided by an employer during the leave period. Employees can take one day off at a time or in any combination of time, up to the 12-week total per year.
Employers must hold open the employee’s job (or an equivalent position) and are not permitted to change any seniority rights or otherwise discriminate based on an employee taking leave. However, this requirement only applies to employees who have been employed for at least 90 days.
Difficulties with implementation could include employee privacy issues (especially as related to domestic violence, harassment and stalking), employee difficulty in completing the application, and employees not being properly notified of the benefits. Employees will need to be mindful of the potential loss of company paid health insurance during a paid leave period, as many employers do not cover these costs if employees do not work a minimum number of hours per week. That cost alone could wipe out any benefits provided under the plan.
The program’s administration will be done by the Oregon Employment Division, which will charge the fund for the administrative costs. Claims will apparently be paid on a first come first served basis and if the fund runs out of money before eligible claims can be paid, then those employees will not receive any benefits under the plan. The state of Oregon is exempted from any obligation to pay unpaid claims due to fund shortages under ORS 675B.050(4).
With the extraordinary complexity that will be involved in reviewing applications, accepting or rejecting them, adjudicating appeals, investigating potential fraud and malfeasance, and with no way to know how many claims might be filed in a given year, the program is likely in for a bumpy ride in its first year of implementation. Meanwhile, employers should take care to ensure that employees are notified of their rights under the plan and that all compliance requirements are met.