What Employers Need to Know About Colorado's Paid Family and Medical Leave Law

Colorado voters approved Proposition 118 in the November 2020 election—creating the Paid Family and Medical Leave Law, which is much more generous to employees than the federal Family and Medical Leave Act. Employers and employees will begin paying into the state program on January 1, 2023, and benefits will become available to workers beginning on January 1, 2024. This post discusses how the program works, under what conditions an employee can take the state-protected leave, and what employers should do now to fulfill their obligations under the new law. 

Paid Family and Medical Leave Law Structure

The law applies to all Colorado employers who employ at least one person. Nearly all Colorado employees will be “covered individuals” under the law. According to the proposition, a covered individual is anyone who has been employed with the current employer for 180 days and has earned at least $2,500 in wages. 

The law creates a state-run insurance program for family and medical leave. Under this program, an eligible employee will receive 12 weeks of leave (4 additional weeks for pregnancy complications) funded through a payroll tax paid 50/50 by employers and employees. 

Beginning January 1, 2023, each employer must collect and remit a new payroll tax to the fund to provide for these benefits. Initially, the payroll tax is set at 0.9% of the employee’s wage, with 0.45% paid by the employer and 0.45% paid by the employee. Employers can pay a larger percentage of the cost up to 100%, if they choose.

Starting in 2025, premiums will adjust up to a cap of 1.2% of each employee’s wages, at a rate to fund 135% of the benefits paid out to the worker during the previous calendar year. 

Under the law, smaller employers (with nine employees or less) are not required to contribute the employer’s share of the premium, though they must still withhold the employee’s contribution. Benefits are not payable until the worker has accumulated at least eight hours of leave insurance benefits. Employees will receive between 65% and 90% of their wages based on the Act's formulas.

Qualifying Conditions and Job Security

According to the law, an employee may take paid family and medical leave for a worker’s serious health issue, a family member's serious health issue, military deployment of a family member, safe leave because of domestic violence, stalking, abuse, or assault, or for the birth, adoption, or placement through foster care of a child.

Employers are required to reinstate workers who take family and medical leave to their previously held or equivalent positions with equivalent pay and terms and conditions of employment. Employers are also required to maintain healthcare benefits during the worker’s leave.

The law prohibits retaliation and interference in leave rights. It creates an entirely new division at the Colorado Department of Labor and Employment (the Division of Family and Medical Leave Insurance) to run the program, enforce it, and provide an appeal process for employees who believe their rights have been violated.

Employer Compliance

Colorado employers should prepare now for compliance with this new law. Employers should consider creating timelines for implementing the new payroll tax. Employers should also look for regulatory guidance to be issued on this new program in the months ahead. Consider developing a mechanism to track when employees become eligible for family and medical leave. Employers should also prepare to communicate upcoming changes to employees and provide notice of the new program. Finally, employers should be sure their human resources departments understand what the regulations require and can implement the changes. Employers, particularly for businesses that are very small, will also have to consider how to address the problems of business interruption when an employee can be out for an extended leave, but cannot be let go or permanently replaced.

For specific employment law questions related to Colorado’s Paid Family and Medical Leave Law, employers should reach out to experienced legal counsel. 

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Featured Image by Rebecca Sidebotham.