Come January 2018, businesses in California need to be prepared for updates to the Unemployment Insurance Code in the form of AB 908. Originally passed in 1935 and superseded by the 1953 Code, the UIC relates to unemployment and disability compensation. AB 908, though effective January 1, 2017, will increase, for periods of disability beginning on or after January 1, 2018, the benefits provided to individuals in the Paid Family Leave (PFL) and State Disability Insurance (SDI) programs.

Unemployment compensation is currently determined by a standard formula. The updates to the UIC will revise this formula and remove the seven-day waiting period before which individuals would be eligible for family temporary disability benefits. Currently, the PFL program provides up to six weeks of wage replacement benefits to workers who take time off work to care for a seriously ill or injured family member or to bond with a minor child with one year of birth or placement of the child in connection with foster care or adoption. The SDI program provides benefits to individuals who are unable to work because of their own illness or injury. Proponents of the new bill argue that Paid Family Leave provides families with the opportunity to continue meet their financial obligations while taking care of personal family matters and that, in the long run, it actually saves money as women who take paid family leave are 39% less to receive public assistance and 40% less likely to receive food stamps following the child’s birth. Opponents have long argued the cost: increasing the benefit duration and wage replacement will likely cost an additional $994 million by 2021.

How this affects employers

While on leave under existing law, an employee receives 55% of his or her usual salary, up to a maximum of $1,129/week, for a period of up to 6 weeks.  These benefits are paid for by employees through mandatory payroll deductions payable to the state’s SDI program and the benefits begin after a 7 day waiting period. Under AB 908, the level of benefits will increase to 60% or 70%, depending on the applicant’s income. For example, an employee earning below about $20,000/year will now receive 70% of his or her usual salary.  A higher income worker will receive 60% of his or her usual salary, up to a maximum benefit of around $1,260/week. Additionally, as of January 1, 2018, the 7 day waiting period will no longer be required.[4]  It is crucial that your business is prepared.

For more information on how to prepare your business for these changes in employee compensation, contact the experienced business lawyers at Dennis Law Group today.