Oregon Enacts Paid Family and Medical Leave

For our July 2019 article about Washington's paid family and medical leave, please click here.

Just this month, Oregon's governor, Kate Brown, signed a new law providing paid family and medical leave benefits to employees in Oregon. Unless employers adopt a voluntary plan that provides equivalent benefits¹, these benefits will be funded through an insurance program to be collected by the Department of Revenue and administered by the Oregon Employment Department (OED). We expect these benefits and unemployment insurance benefits to be administered similarly. While most of the requirements won't kick in until January 1, 2022, and these benefits won't be available to employees until January 1, 2023, Oregon employers should start getting familiar with a few details now so that they know what is expected and are prepared to comply.

What is the paid leave available for and how much will be allowed?
Under the new law, an eligible employee will be able to take 12 weeks of paid leave for the following events:

1. To care for and bond with a new child in the employee's family within the first year after birth, adoption, or foster placement.
2. For the employee's serious health condition.
3. To care for a family member with a serious health condition.
4. For safe leave needed by the employee to:

Up to two weeks of additional paid leave will be available when the need for leave involves the employee's pregnancy, childbirth, or related medical condition.

The law also extends the unpaid-leave period for most of these qualifying reasons to a total of 16 weeks for employers subject to the Oregon Family Leave Act (OFLA), which means public employers and private employers with more than 25 employees. So most circumstances outlined above will mean that employees for OFLA-covered employers will be entitled to 12 weeks of paid leave plus an additional 4 weeks of unpaid leave. If pregnancy or childbirth is involved, that increases to a potential total of 18 weeks of leave, with 14 eligible for paid benefits. This leave entitlement does, however, run concurrently with the unpaid leave that may be available under the federal Family and Medical Leave Act (FMLA), for employers to which the FMLA applies.

Who is eligible?
Employees will be eligible for this leave if they have earned at least $1,000 in wages in the base year, or in an alternative base year, and they properly apply for benefits under the procedures to be adopted under the program. Note that this applies both to employees who work entirely within the state of Oregon and to those who work only partly within Oregon, if their services performed outside the state are deemed "incidental to the employee's services within the state." Stay tuned for more guidance on that as implementing rules are adopted.

The self-employed and employees of tribal governments in Oregon who have opted in may also be eligible for certain benefits yet to be established.

Paid-leave benefits amounts will be based on a set Average Weekly Wage.
The statute directs the OED Director to establish the weekly benefits amounts based on a state Average Weekly Wage (AWW) using the rate used under the workers' compensation statutes, and determined not more than once per year. That amount as of July 1 of this year, is $1044.40 per week, but again, this amount will presumably change by the time the law goes into effect in 2022.

An employee whose weekly wage is equal to or less than 65 percent of the established AWW will receive the full AWW amount per week. If the employee's weekly wage is greater than 65 percent of the AWW, the employee will receive a weekly benefit equal to (1) 65 percent of the AWW, plus (2) 50 percent of the difference between the employee's actual weekly wage and that amount (i.e., 65 percent of the AWW). The OED Director is also charged with establishing a maximum weekly benefit amount that is no more than 120 percent of the AWW, and a minimum weekly benefit amount that is not less than 5 percent of the AWW.

The OED Director will also determine the appropriate benefits available for the self-employed or employees of any tribal governments, based on the contributions received from those who have opted in under those programs.

Again, these benefits will be funded by payroll contributions.
This benefit will be funded by payroll contributions shared by the employer (40 percent) and the employee (60 percent) based on rates set by the OED Director, as long as that rate does not exceed 1 percent of the employee's wages, up to a maximum of $132,900 in wages. These contributions must be held in trust and then reported and remitted quarterly to the Department of Revenue, where they will be deposited into a Paid Family and Medical Leave Insurance Fund that the state is now in the process of establishing.

Employers with fewer than 25 employees are not required pay any portion of the contribution. If they opt to do so voluntarily, grants will be available to cover the costs for hiring a temporary replacement worker during any period of leave and other wage-related costs associated with the leave.

But what about paid sick leave, vacation, PTO, or other employer-offered paid leave benefits? And workers' compensation time-loss benefits?
This paid leave is in addition to the paid sick leave required under Oregon law, as well as any paid benefits available under an employer-offered benefits program or policy. But employers may permit employees to use any additional paid leave benefits to supplement their benefits under the state program up to a maximum of 100 percent of their regular weekly wages.

These benefits are not available when an employee is receiving time loss benefits under a workers' compensation program, nor are they available when the person is receiving unemployment.

A few additional observations that warrant special mention: 

• This law applies to employers with even a single employee in Oregon.
  Unlike some other leave statutes, this law did not limit coverage to only employers with a certain number of employees. If a business has even one employee in Oregon, it is expected to comply. That means reporting the required information and making the necessary withholdings from employees, even if the employer is small enough (i.e. less than 25 employees) not to be obligated to contribute toward the premiums itself.
  
  This could impact remote work arrangements too. As outlined in the eligibility section above, employees will be eligible for these paid leave benefits if they work exclusively in Oregon, or if they work only partly in Oregon if their work outside Oregon is seen as "incidental." Presumably, that would include employees who may make sales calls or travel for business purposes outside Oregon but whose primary office location is in Oregon. But it is unclear whether it might also apply to a remote employee who works from a home office in Washington for an Oregon business, and who may already be subject to Washington's Paid Family and Medical Leave that was adopted in 2018. We are hopeful the implementing rules that are to be adopted over the coming months before the law goes into effect will give us a better idea about how the enforcing agency intends to interpret these terms.
  
• There is the potential for personal liability for leadership and responsible administrators, and both civil and criminal penalties may apply.
  If an employer fails to comply with its obligations to ensure that contributions are timely made, this law permits the OED to pursue collection personally from officers (of a corporation), members (of a limited liability company), partners (of a limited liability partnership), and employees who are deemed to have been under a duty to perform the actions necessary to ensure that the required contributions were properly made and accounted for. In addition to personal liability for the penalties and assessments that the law imposes, potentially responsible personal parties also face the potential for misdemeanor criminal sanctions. This includes corporate officers deemed to have had knowledge that the entity had not complied with its obligations under this law, or who should have had such knowledge if they had been properly executing their duties.
  
• The payment obligations triggered by this law will require additional considerations when closing or selling a business in Oregon after 2022.
  If the employer ceases or discontinues operations or business, or sells, exchanges, transfers, or otherwise disposes of the assets or stock of the business, any payroll contributions required under this new law that would have otherwise been reported and remitted quarterly to the Department of Revenue become due immediately and must be remitted within ten days after the event. If there is an acquiring or continuing business, and the new entity is considered to be the "successor in interest," then these payment obligations will transfer. Special care should therefore be taken when contemplating mergers, sales, or winding up of business operations to ensure that these obligations are appropriately addressed once this law goes into effect.

Again, we hope this information is helpful to you as you navigate these and other changes affecting your business. Watch for more information as the implementing rules are adopted, the sample notices are made available, and more information about voluntary plan submissions is made available by September 1, 2021.

[1] Employers may adopt voluntary plans in lieu of participating in the state-administered program, so long as they are deemed sufficiently equivalent. A voluntary plan must be approved by the OED, and the employer must pay an initial application fee of $250 and reapply each year for the first three years, and then when there are changes thereafter. It must also offer every employee benefits that meet or exceed those under the state plan, including: the same amount of leave as the state plan, equal or better wage replacement, no greater wage withholdings than the state plan would provide, coverage of the same events, and application to the same employees.