United States

District of Columbia Mayor Bowser allows paid leave bill to become law

Legislation provides expansive paid leave for employee and family care

TAX ALERT  | 

On Feb. 15, 2017, District of Columbia Mayor Bowser returned the Universal Paid Leave Amendment Act of 2016 (Act) to the D.C. Council unsigned, effectively allowing the bill to become law. The Act provides for expanded paid leave protections to private-sector workers in the District. The D.C. Council previously approved the bill by a veto proof margin of 9 to 4 on Dec. 20, 2016, and transferred to the mayor’s desk for signature on Feb. 2, 2017.

In order to collect paid leave under the Act, an ‘eligible individual’ must be a covered employee during some or all of the 52 calendar weeks immediately preceding the qualifying event for which paid leave is being taken. A self-employed individual can be an eligible employee if they have opted into the paid leave program or have earned self-employment income for work performed more than 50 percent of the time in the District during some or all of the 52 calendar weeks immediately preceding the qualifying event.

The Act provides for the following benefits for eligible individuals dealing with particular qualified events:

  • Eight weeks of paid leave to care for a newborn, adopted or fostered child
  • Six weeks of paid leave to care for family members diagnosed or experiencing a serious health condition
  • Two weeks of paid leave for an individual diagnosed or experiencing a serious health condition

An eligible individual may receive benefits under any one single qualified event or a combination of qualified events. However, eligible individuals are only entitled to receive payment for eight work weeks total in a 52-work-week period.

Eligible individuals who earn less than 150 percent of the District’s minimum wage are entitled to benefits at 90 percent of that eligible individual’s weekly wage. Eligible individuals who earn more than 150 percent of the District’s minimum wage are entitled to benefits at 90 percent of 150 percent of the District’s average minimum wage plus 50 percent of the individual’s wage that exceeds 150 percent of the minimum wage—up to the maximum weekly benefit amount of $1,000.

In order to fund the program, covered employers will be required to contribute .62 percent of the annual salary of each of its covered employees. Contributions will be pooled into a Universal Paid Leave Implementation Fund (Fund). The District’s mayor is tasked with establishing a program to administer the paid leave benefits. Once the Act goes into effect, the mayor has 180 days to propose rules regarding the manner in which contributions to the Fund are specifically collected. According to the legislation’s fiscal notes, the tax is estimated to generate over $240 million per year and pay out about the same in benefits. To provide for adequate time to establish the Fund, the payroll tax is not scheduled to begin until 2019, with benefits estimated to be first payable in 2020.

Critics of the Act, including Mayor Bowser, have argued that business taxes would pay for benefits to workers located outside of the District. Some studies have projected that over half of the Act’s monetary benefits will go to residents of Maryland and Virginia who work in the District. D.C. Council members offered an amendment to fund the program alternatively through an employer mandate, but the effort ultimately failed in a 5 to 8 vote.

The Act will next be transmitted to Congress to undergo a 30-day period of review.

Takeaway

The Act is one of the most generous family paid leave programs in the nation, joining other jurisdictions that have enacted paid family leave including California, New Jersey, New York and Rhode Island. Accordingly, district-based businesses should speak to their tax advisors with questions about the new payroll tax and leave administration policy.

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