BILL ANALYSIS                                                                                                                                                                                                    Ó





          SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               AB 908       Hearing Date:    June 24,  
          2015
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          |Author:    |Gomez                                                |
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          |Version:   |June 18, 2015                                        |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Deanna Ping                                          |
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           Subject:  Disability compensation: family temporary disability  
                                     insurance.


          KEY ISSUE
          
          Should the Legislature extend the paid family leave program  
          benefits from 6 weeks to 10 weeks? 

          Should the Legislature increase the wage replacement rate for  
          PFL benefits from 55% to either 65%, 75%, or 80% depending on an  
          individual's wage level?

          Should the Legislature establish a $250 minimum weekly benefit  
          amount for the paid family leave program? 

          ANALYSIS
          
           Existing law  established a family temporary disability insurance  
          program, Paid Family Leave (PFL) that provides up to six weeks  
          of wage replacement benefits to workers who take time off work  
          to care for: 
                 a seriously ill child, spouse, parent, or domestic  
               partner, siblings, grandparents, grandchildren, and  
               parents-in-laws or to bond with a minor child in connection  
               with foster care or adoption. (Unemployment Insurance Code  








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               §3301) 

           Existing law  establishes the State Disability Insurance (SDI)  
          Program for individuals who are unable to work due to sickness  
          or injury, the sickness or injury of a family member, or the  
          birth, adoption, or foster care placement of a new child.  

           Existing law  requires a claimant for SDI or PFL benefits to  
          establish his or her medical eligibility for each period of  
          disability by obtaining a certificate from a treating physician  
          or practitioner that establishes the sickness, injury, or  
          pregnancy of the employee, or the condition of the family member  
          that warrants the care of the employee.  As part of the  
          certificate of eligibility to care for a family member, the  
          physician or practitioner must provide an estimate of the time  
          needed by the employee to care for the child, parent, spouse, or  
          domestic partner.  
          (Unemployment Insurance Code §3301)  
           
           Existing law  requires each employee to contribute to the  
          Disability Fund to pay the costs of DI benefits.   The rate of  
          these employee contributions ranges from 0.1% to 1.5% of wages,  
          and are calculated and announced annually by the Director of the  
          EDD based on the financial condition of the disability fund.  
          (Unemployment Insurance Code §3301)

           Existing law  states that an individual is eligible to receive  
          temporary disability insurance benefits equal to one-seventh of  
          his or her weekly benefit amount for each full day during which  
          he or she is unable to work due to caring for a seriously ill or  
          injured family member or bonding with a minor child within one  
          year of the birth or placement of the child in connection with  
          foster care or adoption. (Unemployment Insurance Code §3301)

           
            This Bill  increases the level and duration of benefits provided  
          in the Paid Family Leave (PFL) insurance program.  Specifically,  
          this bill:  


          1)Increases the maximum duration of PFL insurance benefits from  
            6 to 10 weeks.


          2)Establishes a minimum weekly benefit amount of $250.







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          3)Increases the wage replacement rate for PFL benefits from 55%  
            to:


               a.     80% for those who make up to 25% of the full-time  
                 minimum wage.


               b.     75% for those who make between 25% and 75% of the  
                 full-time minimum wage.


               c.     65% for those who make more than 75% of the  
                 full-time minimum wage.


          4)Defines the annual "full-time minimum wage" as product of the  
            California minimum wage and 2,000 hours.


          COMMENTS
          
          1.  Background on the Paid Family Leave Program  .   

             In 2002 Senate Bill 1661 was enacted, making California the  
            first state in the nation to provide Family Temporary  
            Disability Insurance, more commonly known as Paid Family  
            Leave. Established within the State Disability Insurance  
            program and administered by the Employment Development  
            Department, PFL provides benefits to individuals who take time  
            off of work to care for a seriously ill child, spouse, parent,  
            or registered domestic partner, or to bond with a new minor  
            child due to birth, adoption, or foster care placement.  
            Approximately 13.1 million Californians are covered by PFL. In  
            2013 Governor Brown signed SB 770 (Jackson) which extended PFL  
            to workers who take time off of work to care for a seriously  
            ill parent-in-law, grandparent, grandchild, or sibling. In  
            calendar year 2013, 203,732 PFL claims were filed, and  
            approximately 90% of which were filed to take time off to bond  
            with a newborn child.  It is important to distinguish the  
            difference between the PFL program (which provides only wage  
            replacement during leave) and job protection legislation such  
            as the federal Family & Medical Leave Act (FMLA) and the  







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            California Family Rights Act (CFRA). The PFL program itself  
            does not provide job protection but the program itself nearly  
            covers all employees, aside from some self-employed and public  
            sector persons, regardless of the size of the employer.  
            However, a claimant could have such job protection benefits if  
            they also qualify under the requirements of FMLA or CFRA. 
                                                         
            PFL is funded by an employee-paid payroll tax with benefit  
            levels indexed to inflation, built upon California's long  
            standing State Disability Insurance system, which has provided  
            income support for employees' medical and pregnancy-related  
            leaves for many years. However, unlike SDI benefits, income  
            from PFL has been deemed taxable by the Internal Revenue  
            Service. Under the PFL program, workers can claim a cash  
            benefit set at 55% of "base period" wages for up to 6 weeks.   
            The maximum weekly benefit is currently set at $1,104 and is  
            adjusted every year based on the statewide average weekly  
            wage.  The average claim in 2013 paid $527 per week for 5.4  
            weeks.  National data show that two-thirds of women were  
            working during their last pregnancy and that 70% of women took  
            maternity leave with an average duration of 10 weeks.  

            Studies have shown paid family leave policies have positive  
            impacts on infant and maternal health, have been associated  
            with greater labor-force attachment (women retaining jobs into  
            their pregnancy and returning to work after giving birth), and  
            have resulted in increased wages for some women. 

          2.  Funding PFL  .  

             The PFL insurance program is part of the State Disability  
            Insurance (SDI) program that is paid for by the proceeds of an  
            employee payroll deduction which are deposited in the  
            Disability Insurance (DI) Fund.  PFL claims are approximately  
            12% of total payments from the DI Fund.  The SDI contribution  
            is set at 0.9% of the first $108,160 of wages in 2015.  Both  
            the rate and the wage ceiling are adjusted by EDD according to  
            a formula every year.  At the end of 2014, the DI fund was  
            projected to have reserves ($3.3 billion) that are over 60% of  
            annual program costs.  EDD guidelines suggest that a reserve  
            of 25% is adequate to ensure the ongoing solvency of the DI  
            Fund.  

          3.  Need for this bill?








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             California's PFL program is funded through worker  
            contributions and provides partial wage replacement (55% of  
            prior wage levels) for up to 6 weeks for bonding with a new  
            child or caring for a seriously ill relative. According to the  
            author, although the PFL benefit enhances security for  
            claimants who take leave to bond with children or care for  
            sick family members, the benefit is simply insufficient to  
            offer meaningful wage replacement for workers, especially  
            those whose only source of paid leave is PFL. The author  
            brings attention to one survey, in which nearly a third of  
            respondents who were aware of PFL did not apply for it when  
            family needs arose because the wage replacement level was too  
            low - making it difficult for workers that live pay check to  
            paycheck to meet their basic needs. The author notes that  
            these workers cannot absorb the pay cut imposed by the current  
            PFL benefit limits, particularly when it is coupled with the  
            increased financial burdens that accompany supporting a  
            newborn child or caring for a relative.  The author also notes  
            that these workers should be able to use the PFL insurance for  
            which they pay.  

            AB 908 would increase the maximum benefit to 10 weeks, as well  
            as increase the wage replacement rate based on wage level  
            ranging from 65% for a higher wage level to 80% for a lower  
            wage level, as well as increase the minimum weekly benefits to  
            $250. According to the author these changes to the PFL program  
            will make PFL a real option for most working families by  
            reducing the financial burden when having a baby or caring for  
            an ill relative.   




          4.  Proponent Arguments  :
            
            Proponents note that California's PFL program is wholly funded  
            through worker contributions and covers all private sector  
            workers and some public sector workers. Proponents bring  
            attention to research that shows that paid family leave not  
            only improves the ability of working families to meet the  
            obligations of their family members, but employers benefit  
            from reduced turnover as families that benefit from paid  
            family leave are more likely to stay in the workforce.  
            Proponents also highlight a recent study that found that women  
            who take paid family leave are 39 percent less likely to  







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            receive public assistance and 40 percent less likely to  
            receive food stamps in the year following a child's birth. 

            Proponents argue that AB 908 will make paid family leave work  
            for all workers by addressing two critical aspects of the  
            benefit design. For many workers, the 55 percent wage  
            replacement level is simply insufficient to offer meaningful  
            wage replacement, especially when PFL is the only source of  
            paid leave. They argue that PFL's current wage replacement  
            level of 55 percent coupled with increased financial burdens  
            when having a baby or caring for a relative makes it  
            financially impossible for workers to use their PFL benefits.  
            Proponents argue that in addition to wage replacement levels,  
            the 6 weeks of paid leave offered by PFL is far less than  
            nearly every other developed county. Proponents bring  
            attention to the fact that in comparison to the thirty-eight  
            Organization for Economic Co-operation and Development (OECD)  
            countries, the median amount of fully-paid leave available for  
            mothers is over five months. Proponents also argue that longer  
            paid leave is associated with a range of positive physical and  
            mental health benefits for families and children, as well as  
            improved early child development.  

          5.  Opponent Arguments  :

            None on file. 

          6.  Prior Legislation  :

            SB 1661 (Kuehl) Chapter 901, Statutes of 2002 created the PFL  
            program which began on January 1, 2004.  

            SB 727 (Kuehl), Chapter 797, Statutes of 2003 made changes  
            that clarified the role of EDD in maintaining the program as  
            well as ensuring the accumulation of enough funds to pay for  
            the benefits.  

            SB 727 (Kuehl) of 2007, proposed to extend the PFL Program to  
            caring for grandparents, grandchildren, siblings, and  
            parents-in-law, was vetoed by the Governor. 

            AB 804 (Yamada) of 2011, proposed to extend the PFL program  
            Program to caring for grandparents, grandchildren, siblings,  
            and parents-in-law and was held in the Assembly Appropriations  
            Committee.







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            SB 770 (Jackson), Chapter 350, Statutes of 2013 expanded the  
            definition of family to include in-laws, siblings and  
            grandparents.


          SUPPORT
          
          Alliance of Californians for Community Empowerment
          American Association of Retired Persons
          American Association of University Women
          American Federation of State, County and Municipal Employees,  
          AFL-CIO
          Breastfeed LA
          California Alliance for Retired Americans
          California Black Health Network
          California Breastfeeding Coalition
          California Child Care Resource and Referral Network
          California Domestic Workers Alliance
          California Employment Lawyers Association
          California Partnership
          California WIC Association
          California Women's Law Center
          California Work and Family Coalition
          Career Ladders Project
          Center for Law and Social Policy (CLASP)
          Child Care Law Center
          Children Now
          Communications Workers of America, AFL-CIO District 9
          Communications Workers of America, AFL-CIO Local 9003
          Community Clinic Association of Los Angeles County
          Congress of California Seniors
          Congress of California Seniors
          County of Los Angeles Board of Supervisors
          County of Monterey Board of Supervisors
          County of Santa Cruz Board of Supervisors
          Courage Campaign
          Equal Rights Advocates
          Family Caregiver Alliance, National Center on Caregiving
          First 5 California
          Glendale City Employees Association (GCEA)
          Health Officers Association of California
          Jewish Labor Committee Western Region
          Legal Aid Society- Employment Law Center
          Mujeres Unidas y Activas







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          National Association of Social Workers-California Chapter
          National Association of Working Women, California Chapter
          National Council of Jewish Women
          National Council of La Raza (NCLR)
          Next Generation
          Organization of SMUD Employees
          Parent Voices
          Raising California Together
          Restaurant Opportunities Center of Los Angeles 
          San Bernardino Public Employees Association
          San Diego County Court Employees Association
          San Francisco Breastfeeding Promotion Coalition
          San Luis Obispo County Employees Association
          School Employees Association of California
          Small Business Majority
          Small School Districts' Association
          St. Anthony Foundation
          Teamsters Local 986
          The Center for Popular Democracy
          The Health Officers Association of California
          The Women's Foundation of California
          Tradeswomen Inc.
          Tulare County Breastfeeding Coalition
          Tuolumne County Breastfeeding Colition
          UFCW Western States Council
          Ultra Violet
          Western Center on Law and Poverty
          Western Regional Advocacy Project
          Zero to Three, National Center for Infants, Toddlers, and  
          Families
          9 to 5 California

          
          OPPOSITION
          
          None on file. 

                                      -- END --