BILL ANALYSIS
SB 1661
Page 1
SENATE THIRD READING
SB 1661 (Kuehl)
As Amended August 23, 2002
Majority vote
SENATE VOTE :22-15
INSURANCE 11-7 APPROPRIATIONS 13-8
-----------------------------------------------------------------
|Ayes:|Calderon, Chavez, Diaz, |Ayes:|Steinberg, Alquist, |
| |Dutra, Frommer, Horton, | |Aroner, Cohn, Corbett, |
| |Keeley, Koretz, Nakano, | |Diaz, Firebaugh, |
| |Vargas, Washington | |Goldberg, Negrete McLeod, |
| | | |Pavley, Simitian, |
| | | |Washington, Wiggins |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Bogh, Briggs, John |Nays:|Bates, Ashburn, Daucher, |
| |Campbell, Dickerson, | |Maldonado, Robert |
| |Havice, Mountjoy, Richman | |Pacheco, Papan, Runner, |
| | | |Zettel |
-----------------------------------------------------------------
SUMMARY : Permits disability compensation for any individual who
is unable to work due to the employee's own sickness or injury,
the sickness or injury of a family member, as defined, or the
birth, adoption, or foster care placement of a new child; and
establishes, within the state disability insurance program, a
family temporary disability insurance (FTDI) program to provide
up to six weeks of wage replacement benefits to workers who take
time off work to care for a seriously ill child, spouse, parent,
domestic partner, or to bond with a new child. Specifically,
this bill :
1)Expands disability insurance rights and benefits due to an
employee's need to provide care for any sick or injured family
member, as defined, or the birth, adoption, or foster care
placement of a new child.
2)Creates a FTDI program to provide up to six weeks of wage
replacement benefits to workers who take time off work to care
for a seriously ill child, spouse, parent, domestic partner,
or to bond with a new child.
3)Defines "family care leave" to mean any of the following: a)
SB 1661
Page 2
leave for reason of the birth of a child of the employee or
the employee's domestic partner, the placement of a child with
an employee in connection with the adoption or foster care of
the child by the employee or domestic partner, or the serious
health condition of a child of the employee, spouse or
domestic partner; or, b) leave to care for a parent, spouse,
or domestic partner who has a serious health condition.
4)Defines "serious health condition" to mean an illness, injury,
impairment, or physical or mental condition that involves
inpatient care in a hospital, hospice, or residential health
care facility, or continuing treatment or continuing
supervision by a health care provider.
5)Provides that an individual shall be deemed eligible for FTDI
benefits on any day that he or she is unable to perform his or
her regular or customary work because he or she is caring for
a new or seriously ill child, parent, spouse, or domestic
partner. This eligibility is subject to a waiting period of
seven consecutive days during each FTDI benefit period with
respect to which waiting period no benefits are payable.
6)Requires the certificate to establish medical eligibility to
contain the following: a) a diagnosis and diagnostic code
prescribed in the International Classification of Diseases,
or, where no diagnosis, has yet been obtained, a detailed
statement of symptoms; b) the date, if known, on which the
condition commenced; c) the probable duration of the
condition; d) an estimate of the amount of time that the
physician or practitioner believes the employee is needed to
care for the child, parent, spouse, or domestic partner; and,
e) a statement that the serious health condition warrants the
participation of the employee to provide care for his or her
child, parent, spouse, or domestic partner.
7)States that the term "Warrants the participation of the
employee" includes, but is not limited to, providing
psychological comfort, and arranging "third party" care for
the child, parent, spouse, or domestic partner, as well as
directly providing, or participating in, the medical care.
8)Makes it unlawful to falsely certify the medical condition of
any person in order to obtain FTDI benefits, to knowingly
present or cause to be presented any false or fraudulent
statement in support of any claim for FTDI benefits, or to
SB 1661
Page 3
knowingly solicit or receive any payment for soliciting a
claimant to apply for FTDI benefits.
9)Requires the Director (director) of the Employment Development
Department (EDD) to increase the rate of worker contributions
by .08% for the 2004 and 2005 calendar years to cover the
initial cost of FTDI benefits
10)Provides that the maximum amount payable to an individual
during any disability benefit period for FTDI shall be six
times his or her "weekly benefit amount," but in no case shall
the total amount of benefits payable be more than the total
wages paid to an employee during his or her disability base
period.
11)Provides that no more than six weeks of FTDI benefits shall
be paid within any 12-month period.
12)Provides that an individual is not eligible for FTDI benefits
with respect to any day that another family member is able and
available for the same period of time that the individual is
providing the required care.
13)Specifies that an individual who is entitled to leave under
the federal Family and Medical Leave Act (FMLA) and
California's Family Rights Act (CFRA) must take FTDI leave
concurrent with leave taken under the FMLA and the CFRA.
14)Specifies that as a condition of an employee's initial
receipt of FTDI benefits during any 12-month period in which
an employee is eligible for these benefits, an employer may
require an employee to take up to two weeks of earned but
unused vacation leave prior to the employee's initial receipt
of these benefits.
15)Provides that if the director finds that any individual
falsely certifies the medical condition of any person in order
to obtain FTDI benefits, with the intent to defraud, the
director shall assess a penalty against the individual in the
amount of 25% of the benefits paid as a result of the false
certification. Specifies that penalties collected shall be
deposited in the contingent fund.
EXISTING LAW :
SB 1661
Page 4
1)Provides for the offering of a non-occupational disability
insurance program.
2)Establishes the State Disability Insurance (SDI) program
covering approximately12 million workers in California. Some
employees are exempt from SDI (i.e., railroad employees, some
employees of non-profit agencies, employees who claim
religious exemptions, and most government employees). Some
local government workers, including school employees, may be
entitled to SDI benefits as a function of collective
bargaining. Self-employed individuals may elect, under
specified conditions, to be covered.
3)Authorizes EDD to pay SDI benefits as partial wage replacement
to employees who are disabled.
4)Defines "disability" as any mental or physical illness or
injury that prevents an employee from performing his or her
regular or customary work. (This includes elective surgery
and illness or injury resulting from pregnancy, childbirth or
related conditions.)
5)Permits an employer to offer employees a voluntary disability
plan (VP) in place of SDI coverage.
6)Mandates a VP to provide all the benefits of SDI and at least
one benefit superior than SDI. Requires director to approve a
VP. Also requires a majority of the employees to consent to
the plan. (Neither an employee nor his or her employer is
liable for worker contributions to the Disability Fund while
the worker is in a VP. However, an employer must pay into the
Disability Fund an amount equal to 14% of the amount employees
would have otherwise paid into the fund had the employee not
been in a VP.
7)Makes it an unlawful employment practice for an employer to
refuse to allow a female employee affected by pregnancy,
childbirth, or related medical condition to take a leave on
account of pregnancy for a reasonable period of time, not to
exceed four months. "Reasonable period of time" means the
amount of time the female employee is disabled on account of
pregnancy, childbirth, or related medical condition. (The Fair
Employment and Housing Act (FEHA)).
8)Establishes that it is an unlawful employment practice for any
SB 1661
Page 5
employer to refuse to grant a request by any employee with
more than one year of service and who has worked at least
1,250 hours during the previous 12-month period, to take
family care and medical leave for up to 12 workweeks: a) in
connection with the birth or adoption or serious health
condition of the employee's child; b) to care for a parent or
spouse who has a serious health condition; or, c) because of
the employee's own serious health condition. This provision
applies to an employer who employs 50 or more employees within
75 miles of the employee's work-site, the state, and any
political or civil subdivision of the state, and cities.
(CFRA).
9)Provides that any employer authorizing sick leave for an
employee must permit the employee to use, in any calendar
year, the employee's accrued and available sick leave
entitlement. This sick leave shall be in an amount not less
than the sick leave that would be accrued during six months at
the employee's then current rate of entitlement, to attend to
an illness of a child, parent, spouse, or domestic partner of
the employee.
FISCAL EFFECT : EDD estimates this bill will result in costs of
$73.2 million in 2003-04 and $117.7 million in 2004-05 from the
Disability Fund; offset by rate revenues.
COMMENTS : It is the author's intent to create the FTDI Program
to help reconcile the demands of work and family. In
recognition of the shared benefit, the program will be
implemented through employee contributions and the provision of
benefits by employers, and shall be administered in accordance
with the policies of the SDI program.
The United States is one of the few developed countries in the
world without a national paid parental leave program. One
hundred and thirty countries have leave policies. Just three of
those countries - Ethiopia, Australia and the United States -
provide only unpaid leave.
SDI is financed through a mandatory employee payroll
contribution that is paid into the Disability Trust Fund. The
director of EDD determines the contribution rate, based upon a
statutory formula. On or before October 31 of each calendar
year, the director is required to prepare a public statement
declaring the rate (rounded to the nearest one-tenth of one
SB 1661
Page 6
percent) of worker contributions for the calendar year and
promptly notify all employers of covered employees.
A claimant employee establishes medical eligibility for each
uninterrupted period of disability by filing a first claim for
disability benefits supported by the certificate of a treating
physician or practitioner.
The current contribution rate is 0.9% of wages not to exceed
approximately $46,300 per year (i.e., the worker's contribution
is about $ 417). In 2003, the wage base will increase to about
$56,900. The maximum contribution rate cannot exceed 1.3%.
The weekly benefits replace 55% of base period earnings, from
$50 per week to a maximum of $490. Future SDI benefit increases
are tied to the level of workers' compensation temporary
disability benefits for work-related injuries. Workers'
compensation temporary disability benefits are scheduled to
increase from $490 to $602 for injuries occurring on and after
January 1, 2003, to $728 for injuries occurring on or after
January 1, 2004, and to $840 for injuries occurring on or after
January 1, 2005. Commencing January 1, 2006, and each January 1
thereafter, the maximum and minimum benefit is increased by an
amount equal to the percentage increase in the "state average
weekly wage" as compared to the prior year.
Every claim is assessed a seven-day non-payable waiting period.
Benefits may be collected for up to 52 weeks.
An employer is not required to hold a job simply because an
employee is receiving SDI benefits. An employee does have the
right to return to his or her job if the employee is covered by
mandatory leave laws such as pregnancy leave or family care and
medical leave.
For 2001, total first claims paid for disability insurance
equaled 656,400. Of these claims, 145,700 were for
pregnancy-related first claims.
The average duration for a claim in 2001 was 13.87 weeks. The
average weekly benefit amount was $292.60 in 2001.
Voluntary Plan : An employer may assume all or part of the cost
of a VP and may deduct wages for the purpose of providing
benefits. An employee's rate of contribution cannot exceed the
SB 1661
Page 7
amount paid by an employee who is covered by SDI.
EDD Pregnancy Disability Policy : EDD allows up to four weeks
pre-partum and six weeks post-partum disability leave without
requiring the worker to obtain additional information from her
treating physician beyond stating that the disability is for a
normal pregnancy. EDD has based this policy on established
medical guidelines for medical disabilities and accepted
practice in the medical community to allow four weeks pre-partum
and six weeks post-partum leave.
Pregnancy Disability Leave (PDL) : An employer is not required
to pay an employee on PDL unless the employer pays for other
types of disability leave. If an employer pays for other
disability leave, the employer must pay an employee on PDL up to
six weeks paid leave. PDL applies to any person that regularly
employs five or more persons, or any person acting as an agent
of an employer, directly or indirectly, the state or any
political or civil subdivision of the state, and cities, with
specified exceptions.
Family Care and Medical Leave : Under the CFRA, an employee's
pregnancy is not considered a serious health condition that
would allow her to take CFRA leave. However, the employee can
take CFRA leave for reason of the birth of a child of the
employee. CFRA leave is unpaid leave.
Sick Leave : All conditions and restrictions placed by the
employer upon the use by an employee of sick leave also apply to
the use by an employee of sick leave to attend to an illness of
his or her child, parent, spouse, or domestic partner.
No employer can deny an employee the right to use sick leave. In
addition, no employer can discharge, threaten to discharge,
demote, suspend, or in any manner discriminate against an
employee for using, or attempting to exercise the right to use,
sick leave to attend to an illness of a child, parent, spouse,
or domestic partner.
However, although an employee cannot be discriminated against
for taking time off to care for a child, parent spouse, or
domestic partner, an employer may have an "absence control
policy" that allows the employer to discipline an employee for
excessive absenteeism. Therefore, all conditions and
restrictions placed by the employer upon the use of sick leave
SB 1661
Page 8
also apply to the use by an employee of sick leave to attend to
an illness of his or her child, parent, spouse, or domestic
partner. An employer may use these latter absences as part of an
absence control policy.
Coverage : The SDI program and this bill do not cover government
employees, with limited exceptions.
Local public employers, including public school employers, may
elect SDI coverage for employees of a specified bargaining unit,
provided the election is the result of a negotiated agreement.
Employees of the State of California, California State
University and the California Legislature are not eligible for
the SDI program and, instead, are provided non-occupational
disability payments through the Non-Industrial Disability
Insurance (NDI) program that is funded through the General Fund.
The NDI program was created in 1976 and the formula for
establishing weekly benefits was tied to the average state
employee's salary at the time. Since 1976, NDI weekly benefits
have been increased once, by $10 per week. The weekly maximum
benefit under NDI is $135. Unlike SDI, however, NDI benefits are
taxed as income. Further, while SDI benefits continue for 52
weeks, NDI benefits are available for only 26 weeks.
PDL applies to employers with five employees or more. CFRA
applies to employers with 50 or more employees within a 75mile
radius. These thresholds were established to balance the needs
of the employee against undue hardship to the employer caused by
the employee's absence.
SDI covers private sector employees regardless of the size of
the establishment within which the employee works.
Benefits Period : Existing law and the amendments to existing
law by this bill apply to benefits payable up to 52 weeks. The
new program created by this bill relating to seriously ill
family members limits benefit payment to 12 weeks.
Job Security : An employer is not required to hold a job for an
employee who is receiving SDI benefits. There are approximately
5,368,000 private sector employees who work for enterprises
employing less than 50 workers, i.e. not covered by CFRA, and,
therefore, do not have job protection for taking sick leave.
SB 1661
Page 9
Financing : The new program created by this bill provides that
50% of the benefits are to be provided by the employer to the
employee, either directly or by means of insurance procured by
the employer. An employer may elect to contribute an amount
equal to the employee's FTDI premium into the Disability Fund.
Those employers who can pay the benefit directly or obtain
insurance will do so, presumably, because the cost would be less
that contributing into the Disability Fund. In essence, such
employers would not be paying their "fair share." Employers
must furnish benefits in excess of SDI.
SUPPORT ARGUMENTS: SB 1661 helps families to help themselves by
expanding the State Disability Insurance Program to provide up
to 12 weeks of paid leave to care for a seriously ill family
member or new child. This Family Temporary Disability Insurance
Program will be fully funded by equal contributions from
employees and employers.
EDD studied the fiscal impact of extending disability benefits
to employees granted family care and medical leave. In EDD's
June 2000 report to the Legislature, they estimate that
providing this expanded benefit would cost a maximum of $46/year
per employee, or less than $1 a week.
The need for family temporary disability insurance benefits has
intensified. This is particularly evident as both parents'
participation in the workforce has increased, and the number of
single parents in the workforce has grown. The need for partial
wage replacement for workers taking family care leave will be
exacerbated as the population of those needing care, both
children and parents of workers, increases in relation to the
number of working age adults.
Developing systems that help families adapt to the competing
interests of work and home not only benefits workers, but also
benefits employers by increasing worker productivity and
reducing employee turnover.
FMLA and CFRA entitle eligible employees working for covered
employers to take unpaid, job-protected leave for up to 12-work
weeks in a 12-month period. Under the FMLA and the CFRA, unpaid
leave may be taken for the birth, adoption, or foster placement
of a new child; to care for a seriously ill child, parent, or
spouse; or for the employee's own serious health condition.
SB 1661
Page 10
SDI benefits currently provide wage replacement for workers who
need time off due to their own non-work-related injuries,
illnesses, or conditions, including pregnancy, that prevent them
from working. SDI does not cover leave to care for a sick or
injured child, spouse, parent, domestic partner, or leave to
bond with a new child.
The majority of workers in this state are unable to take family
care leave because they are unable to afford leave without pay.
When workers do not receive some form of wage replacement during
family care leave, families suffer from the worker's loss of
income, increasing the demand on the state unemployment
insurance system and dependence on the state's welfare system.
The California Labor Federation, the sponsor of this bill,
states that while federal and state laws guarantee unpaid family
and medical leave for childbirth or family illness, many
families simply cannot afford to take time off. This is a
family values issue. This legislation will go a long way in
supporting working families in their efforts to cope with work
and family.
The California Medical Association (CMA) states that the program
proposed in this bill could offset costs of hospitalization or
skilled nursing services for persons that could be cared for at
home in a hospitable and less costly setting. Perhaps, even
more importantly, it would promote caring for family members and
loved ones by family members and loved ones.
The California National Organization for Women argues that most
people cannot afford to take time off work without pay and are
therefore unable to help family members who are in urgent need
of care. Employees who have family responsibilities should not
be put in the position of having to choose between a paycheck
and a loved one.
Growing Elder Care Needs : In 1997, one in four Americans had an
elderly relative to care for, and many reduced their work hours
or took at least a brief leave to care for that person. In the
coming years, the need for this type of family leave will only
become more urgent. Nearly two-thirds of American men and women
under the age of 60 believe that they will have to care for an
older relative in the next decade.
SB 1661
Page 11
Risk to Newborns : With only unpaid leave available, parents of
new babies are forced to rush back to work, often leaving their
babies in less-than-optimal care. When babies are six or even
eight weeks old, it is extremely difficult to find care for them
in a licensed center. Most states prohibit centers from taking
babies under six weeks old, and for good reason. A young
infant's immune system is not yet mature, making babies highly
susceptible to infection .
OPPOSITION ARGUMENTS: The California Manufacturers and
Technology Association (CMTA) is not opposed to establishing,
within the state disability insurance program, a family
temporary disability insurance program to provide up to 12 weeks
of wage replacement benefits to workers who take time off work
to care for a seriously ill child, spouse, parent, domestic
partner, or to bond with a new child.
However, the bill also proposes to pay for the additional
benefits through additional employee contributions, and by
requiring employers to provide benefits either directly, through
private insurance, or by an election to contribute to the
Disability Fund. CMTA is opposed to the mandate on employers to
provide these additional benefits in any form except on a
voluntary basis. "Our past experiences with proposals similar to
SB 1661 have all indicated that it is an expensive program that
may be greatly expanded by aggressive utilization."
The state disability insurance program is an employee-paid
program through payroll deductions. If employees are interested
in adding dependent coverage, "I don't believe CMTA would oppose
it even though it would add more administrative costs and
disruptions of work due to more employee absences." However,
along with making the decision to add dependent coverage,
employees should expect to have to pay more for the coverage.
The California Chamber of Commerce opposes this bill because it
mandates the establishment of a new paid leave benefit program
paid for by new taxes levied on all employers and their workers.
The California Chamber strongly opposes SB 1661's establishment
of two new taxes to pay for the proposed paid leave benefit
program; a proposed increase in the current state disability
insurance tax formula; plus the proposed new 14% "regulatory
fee" to be levied on voluntary employer SDI plans.
SB 1661
Page 12
The Chamber avers that the SDI Trust Fund is nearly bankrupt;
and, according to EDD, the SDI Trust Fund reserve adequacy level
has dropped
The Chamber notes that legislation enacted in 1999 permanently
linked the level of SDI benefits to workers' compensation
benefits. At the time, EDD advised that the linkage would
reduce SDI Trust Fund reserves from a high of 91 percent in 1996
to only 54 percent by the end of 2001 and that annual average
worker SDI taxes would increase from $191 to $278 (a 53%
increase).
In 2000 the administration imposed a two-tier SDI tax increase
on all workers to avoid SDI Trust Fund bankruptcy. The Chamber
believes SB 1661 places additional strain on an already stressed
program.
The Chamber argues that earlier EDD cost projections have proved
inadequate and far too optimistic. According to the Chamber, new
EDD information shows that as of January 1, 2002, the SDI Trust
Fund reserves plummeted to only 15.4 (a drop of nearly 70% ).
In addition, over the same period, California worker-paid SDI
taxes have more than tripled. Because the legislature recently
increased the workers' compensation benefits, SDI benefits must
increase to match the increased workers' compensation benefit.
Worker taxes will need to increase to meet the demands of the
higher benefits. Proponents of SB 1661 now want to increase the
percentage SDI taxes paid by workers; plus impose additional,
new taxes on both workers and businesses.
Moreover, the Chamber believes that SB 1661's new paid leave
benefits, paid for by new mandated taxes is impermissible under
federal law. The Chamber claims that the federal Employment
Retirement and Income Security Act (ERISA) forbids states from
establishing mandated employee welfare benefits such as those
contained in SB 1661.
Finally, the Chamber notes that employers are concerned that SB
1661 does not contain any size limitation. The proposed leave
program will apply to all employers regardless of size. The
Chamber believes that this is unnecessary and will harm small
businesses in our state. The Chamber claims that bills like SB
1661 make it even more difficult, and certainly much more
expensive, to do business in California.
SB 1661
Page 13
Prior Related Legislation : AB 109 (Knox), Chapter 164, Statutes
of 1999, stipulates that any employer who provides sick leave
for employees must permit an employee to use, in any calendar
year, the employee's accrued and available sick leave
entitlement, in an amount not less than the sick leave that
would be accrued during six months at the employee's then
current rate of entitlement, to attend to an illness of a child,
parent, spouse, or domestic partner of the employee. ("Domestic
partner" was added by AB 25 (Migden), Chapter 893, Statutes of
2001.)
AB 2815 (Kuehl), allowing employees of the State of California,
the California Legislature and the California State University
to be covered by the State Disability Insurance program, was
vetoed by the Governor. The Governor stated in his veto message,
"To the best of my knowledge, this bill conveys no new rights or
benefits to employees. Whether or not this bill becomes law,
employees have the very same rights to negotiate at the
bargaining table for these benefits."
SB 118 (Hayden), providing that an employee may take family care
and medical leave to care for a grandparent or sibling, or
domestic partner, as defined, as well as an adult child, who has
a serious health condition or to care for an individual who
depends on the employee for immediate care and support, who
shares a common residence with the employee and who has a
serious health condition was vetoed by the Governor. In his
veto message, the Governor stated: "This measure, while
well-intentioned, extends the right (to take time off) far
beyond what any other state has permitted to a relationship
outside the family - specifically, to individuals who live
together to share expenses if one of those individuals
subsequently becomes seriously ill."
SB 1149 (Speier), providing that the CFRA applies to employers
who employ 20 or more employees within 75 miles of the work-site
where that employee is employed.
SB 1149 (Hayden), vetoed by the Governor, was essentially the
same as SB 118 (supra), providing that an employee may take
family care and medical leave to care for a grandparent or
sibling, or domestic partner, as defined, as well as an adult
child, who has a serious health condition, but does not include
the provision relating to caring for an individual who depends
SB 1661
Page 14
on the employee for immediate care and support, who shares a
common residence with the employee and who has a serious health
condition. The Governor stated in his veto message: "As I said
when I vetoed an earlier bill by this author [i.e. SB 118], I
would be pleased to consider reasonable changes to the Domestic
Partner Act next year."
SB 656 (Solis), Chapter 973, Statutes of 1999, Increases the
maximum disability benefit from $336 to $490 per week, making
SDI benefits equal to weekly benefits for workers' compensation
temporary disability and indexes SDI levels to future workers'
compensation temporary disability increases. Also requires EDD
to conduct a cost study and report to the Legislature by July 1,
2000, on expanding the definition of "disabled" for the purpose
of qualifying for SDI benefits individuals on leave pursuant to
the Family Rights Act (FRA).
AB 1844 (Washington), allowing a pregnant woman to be eligible
for disability benefits for a period of 10 weeks, as specified,
died in the Senate Appropriations Committee (2000).
SB 1197 (Romero), prohibiting a public or private employer from
adopting an absence control policy that disciplines employees
for use of sick leave to attend to an illness of an employee's
child, parent, or spouse was vetoed by the Governor. In his veto
message, the Governor stated: "I agree employees should have a
right to use one half of their paid sick leave to attend to a
sick child, parent or spouse. That is why I signed those
provisions into law in 1999 (AB 109 Knox)."
SB 1471 (Romero), prohibits a public or private employer from
adopting an absence control policy that disciplines employees
for use of sick leave to attend to an illness of an employee's
child, parent, or spouse.
Analysis Prepared by : Michael Mattoch / INS. / (916) 319-2086
FN: 0006969