FAMLI Matters: Colorado Employers Prepare for New Paid Leave Law

In November 2020, Colorado voters approved Proposition 118, a sweeping new employment law that created a state-run paid Family and Medical Leave Insurance (FAMLI) program. The state began collecting payroll deduction premiums to fund the new program in January 2023. However, the substantive provisions of FAMLI take effect in January 2024. The requirements under FAMLI may have a significant impact on most Colorado employers, all of whom should ensure that they are prepared to be in compliance with the new law.

Scope of Coverage and Premiums

FAMLI applies to all Colorado employers who employ at least one person. Most Colorado employees will be “covered individuals” under the law. 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. This means that that smaller Colorado employers who have not had to worry about complying with the federal Family Medical Leave Act (FMLA) (which only applies to employers with 50+ employees), will now have to comply with FAMLI, which has requirements that are broader than those of FMLA. And employers that already have FMLA-compliance policies must ensure that those policies comply with FAMLI.

FAMLI created a state-run insurance program for family and medical leave. Under this program, an eligible employee will receive up to 12 weeks of paid leave (as well as four additional weeks for pregnancy complications) funded through a payroll tax paid 50/50 by employers and employees. Each employer must collect and pay 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. Employers can contribute to the state-run program or to private insurance programs, but so far, private insurance programs do not appear to be ready, since the state has not issued clear regulations.

Under current regulations, 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. This exemption may be subject to change in the future and even small employers may be required to contribute to the premium.

Employees will receive between 65% and 90% of their wages, based on their income. This will likely have the effect of incentivizing lower-wage workers to take leave that they otherwise would not have taken, even under FMLA, which is unpaid leave. This is a benefit to employees, but an administrative and staffing burden on employers.

Benefits for Employees and Restriction on Employers

Under FAMLI, an employee may take up to 12 weeks of paid leave for any of the following reasons:

1. The employee is caring for a new child during the first year after the birth, adoption or placement of that child;
2. The employee is caring for a family member¹ with a serious health condition²;
3. The employee has a serious health condition;
4. The employee’s family member’s active duty service or notice of an impending call or order to active duty in the armed forces requires the employee to provide for the care or other needs of the military member’s child or other family member, make financial or legal arrangements for the military member, attend counseling, attend military events or ceremonies, spend time with the military member during a rest and recuperation leave or following return from deployment, or make arrangements following the death of the military member; or
5. The employee or the covered individual’s family member is the victim of domestic violence, the victim of stalking, or the victim of sexual assault or abuse.

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. Unlike with FMLA, there are no exceptions for key employees. Employers are also required to maintain healthcare benefits during the worker’s leave.

The law prohibits retaliation and interference in leave rights. This means that employers cannot take any adverse action against an employee for requesting or enjoying leave benefits under FAMLI. The law also created 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.

Act Now Before It’s Too Late

With now a month or less before FAMLI goes into effect, Colorado employers who do not currently have policies and procedures for complying with FAMLI should take immediate action to get in compliance. Employers should be sure that their human resources departments understand what the regulations require and can implement the changes. Smaller businesses will also have to consider the significant problem of how to address the problems of business interruption when an employee may be out for an extended leave but cannot be let go or permanently replaced. The government website’s chirpy advice is to hire temporary workers, but that is unrealistic, particularly for skilled workers. For specific employment law questions related to Colorado’s Paid Family and Medical Leave Law, employers should reach out to experienced legal counsel licensed in Colorado.

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¹ Under FAMLI, a “family member” includes the following categories of persons: (a) a biological, adopted or foster child, stepchild or legal ward, a child of a domestic partner, a child to whom the employee acts as a parent, or a person to whom the employee acted as a parent when the person was a minor; (b) a biological, adoptive or foster parent, stepparent or legal guardian of an employee or employee’s spouse or domestic partner or a person who acted as a parent when the employee or employee’s spouse or domestic partner was a minor child; (c) an employee’s spouse or a domestic partner; (d) a grandparent, grandchild or sibling (whether a biological, foster, adoptive or step relationship) of the employee or employee’s spouse or domestic partner; and (e) any other individual with whom the employee has a significant personal bond that is or is like a family relationship, regardless of biological or legal relationship.

² Under FAMLI, a “serious health condition” is an illness, injury, impairment, pregnancy, recovery from childbirth, or physical or mental condition that involves inpatient care in a hospital, hospice or residential medical care facility, or continuing treatment by a healthcare provider.

Featured Image by Rebecca Sidebotham.