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DC Paid Family Leave Tax Begins July 1 2019

It has been several years since the Universal Paid Leave Amendment Act of 2016 became law, making it among the most generous paid family leave laws in the country. While employees will not be eligible for benefits until July 2020, the collection of employer taxes to fund this benefit begins in July 2019.

The Act will provide Washington, DC employees with paid leave for a number of medical-related needs, including up to eight weeks of paid parental leave to bond with a new child, six weeks of paid family leave to care for a covered family member with a serious health condition, and two weeks of paid medical leave to care for their own serious health condition.

Paid leave benefits will be funded by a 0.62 percent quarterly payroll tax on employees’ total wages, paid to the Universal Paid Leave Implementation Fund administered by the District. According to regulations published by the District’s Department of Employment Services, an employer who pays unemployment insurance to the District for an employee during any quarter of a calendar year will be presumed to be required to contribute to the Universal Paid Leave Implementation Fund for that same employee for the quarterly period. Employees eligible to receive benefits under the Act include individuals who spend more than 50 percent of their working hours in Washington, DC or individuals who regularly spend a “substantial” amount of their working hours in the District and not more than 50 percent of their working hours for a covered employer in any other jurisdiction.

Employers who already provide equivalent or more generous paid leave benefits to their employees are not exempt from paying the quarterly payroll tax. However, employers who already offer paid leave to their employees may opt to have their paid leave periods run concurrently with paid leave taken under the Act.

The District will begin collecting the paid leave payroll tax on July 1, 2019. On this date, employers must pay taxes on wages paid to covered employees during the second quarter of the year—from April 1, 2019 through July 1, 2019. Employers who have not set aside money to cover the 0.62 percent payroll tax beginning April 1 will nevertheless owe payroll taxes retroactive to that date.

Contrary to information previously distributed by the DOES, employers will not be required to file separate quarterly wage reports. Instead, the same quarterly wage reports submitted to the DOES for unemployment insurance purposes will be used to determine an employer’s paid family leave tax liability.

As a reminder, when this benefit is available beginning in July 2020, it will not provide eligible employees with paid leave benefits at their full wages. Instead, the Act caps maximum weekly benefits at $1,000. Specifically, covered employees with a weekly wage at a rate that is equal to or less than 150 percent of the District’s minimum wage will be entitled to benefits equal to 90 percent of the covered employee’s average weekly wage. Covered employees earning in excess of 150 percent of the District’s minimum wage will be entitled to 90 percent of 150 percent of the District’s minimum wage, plus 50 percent of the difference between the covered employee’s average weekly wage and 150 percent of the District minimum wage.

Employers may opt to require that their existing paid leave policies run concurrently with paid leave benefits under the Act. Additionally, neither the Act nor the DOES regulations currently prohibit employers from enacting policies to offset the amount of an employee’s paid leave benefits by the any monetary benefits the employee simultaneously receives from the Universal Paid Leave Implementation Fund. As the date for employee eligibility for benefits approaches next year, employers may wish to review and update their leave policies to require that employer paid leave benefits run concurrently with paid leave under the Act, and to prevent the unintended consequence of “double dipping” by employees who may qualify for paid leave under the Act and paid leave under their policies.

The Act requires employers to keep payroll records for at least three years. All payroll records must include the following information: the employee’s name and Social Security Number (or individual taxpayer identification number), pay period dates, wages for each pay period, and dates of employment.

Details regarding the administration of the Act continue to evolve as the deadline for tax collections draws near. The Office of Paid Family Leave is a new subdivision of the Department of Employment Services that has been created to administer the Act. Employers should stay apprised of further updates from the OPFL and DOES, and ensure their payroll vendors are aware of, and complying with, the Act’s withholding and payment obligations. Vedder Price will continue to provide updates as the administration of the Act becomes more clear.

If you have any questions regarding the topics discussed in this article, please contact Amy L. Bess at +1 (202) 312 3361, Sadina Montani at +1 (202) 312 3363, Meg Inomata at +1 (202) 312 3374 or any Vedder Price attorney with whom you have worked.