RD49 - Paid Family and Medical Leave Study – September 2020

Executive Summary:

Pursuant to the Appropriations Act approved during the 2020 Session of the General Assembly, the Secretary of Commerce and Trade and the Chief Workforce Development Advisor were directed to study the development, implementation, and costs of a statewide paid family and medical leave program for all employers. This report contains the findings of this study across five main areas as required by the authorizing budget language:

1. Research regarding paid family and medical leave programs that have been established in other states across the country;

2. An assessment and quantification of the economic impact on businesses and workers if a paid family and medical leave program were implemented;

3. An operating plan which includes a designated agency or entity, staffing needs, technology requirements, implementation timeline, and business practices;

4. An identification of what resources are necessary to implement a statewide program; and

5. Research regarding start up loans for paid leave programs in other states and loan payback.

Additionally, the Appropriations Act required that the Secretary of Commerce and Trade and the Chief Workforce Development Advisor—in completing their required study—convene a workgroup of industry stakeholders. As the Secretary and the Chief Workforce Development Advisor conducted their study, they engaged with the participants of the industry stakeholder workgroup to understand their unique perspective on the potential impacts of a paid family and medical leave program. The insights garnered from discussions with these participants have informed the study and shaped this report.

The Secretary and the Chief Workforce Development Advisor also sought to collect public comment through a survey that received nearly 5,500 responses. This survey was shared with businesses, employees, and associations across the Commonwealth. A summary of the responses is provided in the Appendix C.

Findings on the impacts of a paid family and medical leave program are divided into distinct sections around benefits and costs. In general, research indicates that paid family and medical leave programs are associated with economic benefits including improved employee retention, increased employee productivity, and greater labor force attachment for women. Published research on this issue also indicates that such programs are associated with possible benefits to health outcomes. Paid family and medical leave programs also result in costs to businesses and workers, which can include an increased tax burden on employers and workers, administrative costs to employers, and potential business disruptions. As will be described later in this report, this study estimates that financing this program would result in a contribution rate of 0.5 percent of wages that would be split between employees and employers. For example, an employee earning annual wages of $60,000 would be required to contribute .25 percent of wages, which equals approximately $2.89 per week. Likewise, the employer for that covered employee would also be required to contribute $2.89 per week. While the administrative costs and the cost of potential business disruptions are indeterminate, this study offers a general estimation of costs to employers and employees in the form of premiums paid into the program. The estimated startup cost to implement this program during Year 1 and Year 2 are $55,600,000, with estimated ongoing annual costs of $43,500,000.

In addition to studying the laws and programs implemented in other states with paid family and medical leave programs, the Secretary of Commerce and Trade and the Chief Workforce Development Advisor engaged in numerous conversations with staff and stakeholders in other states, including Washington, Massachusetts, Rhode Island, Connecticut, Oregon, and the District of Columbia. Based on an examination of the policies implemented and considered by other states, it is clear that there is no singular model for paid family and medical leave. There are numerous policy differences across the states in their approaches to structure, benefits, financing, eligibility requirements, and implementation plans. These differences have varying effects on the workers and businesses covered under each respective program. This variety makes evident that if a paid family and medical leave program is a public policy that the Commonwealth seeks to pursue, there is room to craft this policy in a way that fits Virginia’s unique needs and provides the most benefit to working Virginians and the economy while also limiting the impacts of costs.

After researching many other states’ development and implementation plans, convening a workgroup for guidance, and receiving over 5,500 survey responses, if there is a desire to pursue a paid family and medical leave program in Virginia, the following considerations are offered:

1. The Virginia Employment Commission would be the most appropriate agency to have oversight of the Paid Family and Medical Leave Program because of the similarity of technology and process in collection of unemployment insurance premiums, relationship with the business community, enforcement and familiarity with fraud and adjudication processes.

2. For additional oversight of the program, a Paid Family and Medical Leave Board should be formed to advise the Commissioner. This Board would include small and large business owners, business organizations, members of the General Assembly, government officials, labor, and citizen members. Members of this Board would be appointed by the Governor and General Assembly.

3. An Office of the Paid Family and Medical Leave Ombuds should be created and physically located at the Virginia Employment Commission. The Ombuds would be appointed by the Governor and serve as an independent third party to investigate, report, and help settle complaints from employers and employees.

4. A full, independent actuarial study should be conducted within the first six months after the bill has passed to ensure that the authority has sufficient time to project the necessary funds for a solvent trust and determine the payroll tax rate necessary to achieve such an amount.

5. Both covered employees and employers should jointly fund the program.

6. Premiums should be paid into the Paid Family and Medical Leave Trust at least one year in advance of awarding benefits.

7. The Commonwealth should consider a grant fund that supports small businesses’ administrative, technology, and personnel replacement costs needed to implement Paid Family and Medical Leave.

8. The Commonwealth should consider an exemption for small businesses from contributing to the program; however, employees who pay into the program at such exempted business should still be eligible for benefits.

9. The Commonwealth should consider exemptions for businesses who currently have equal or more generous paid leave policies.

10. Regulations and guidelines should align as closely as possible to the federal Family Medical Leave Act to eliminate confusion of eligibility, leave time and administration. Using the same terminology, forms, technology, and reporting will help employers navigate the new program.

11. An outreach and public education campaign is essential to ensure all employers and employees are aware of the new program’s contribution and benefits structures as well as the requirements and responsibilities of the program.

12. Future deliberations regarding a statewide paid family and medical leave proposal should consider how such a program would interact with existing state policies and benefits offered to state employees. State agencies should not be exempted from full benefits, but there should be discussion around how existing state benefits may fit into the policy.

13. As more states begin enacting statewide paid family and medical leave programs, further discussions should include input on how this affects attracting economic development projects to the Commonwealth of Virginia.