The District of Columbia has recently begun the first stage of implementing its new Paid Leave rules, which created a new benefit for employees and a new tax on employers.
The DC Paid Leave Act provides up to:
- 8 weeks to bond with a new child
- 6 weeks to care for a family member with a serious health condition
- 2 weeks to care for your own serious health condition
On July 1, 2019, DC began the collection of taxes from employers and on July 1, 2020, DC will begin administering paid leave benefits.
In order to actually be subject to the new 0.62% payroll tax, you must be a “covered employer” and have “covered employees.”
Any business performing services in the District of Columbia, that also pays Unemployment Insurance (UI) taxes for its employees, will be considered a covered employer required to pay paid family leave contributions. This also includes non-profit organizations and household employers that pay UI tax. Self-employed individuals who wish to be eligible for the benefits may choose to opt into the program (during certain enrollment periods) and be subject to the tax. Note that self-employed individuals include sole proprietors, independent contractors, and members of partnerships. The US, DC, and any employer that DC is not authorized to tax under federal law are excluded.
The size of a business has no bearing on whether an employer is required to contribute to the paid family leave program. Employers with their own paid leave benefits, including short-term disability plans, are required to participate in the program. Employers can’t restrict their employees’ right to access benefits under DC’s PFL program. However, employers have the right to modify their plans, including requiring that employees take their leave concurrently with District-provided leave.
The tax is a quarterly payroll tax of 0.62% of the total gross wages of covered employees. Employers will report the same wages they currently report for UI; however, there is no cap on wages subject to the PFL contribution.
Covered employees may fall into one of the following 2 categories:
- Workers who spend more than 50% of their work time for that employer working in DC
- Workers whose employment for the employer is based in DC, and they regularly and customarily spend their workday at the DC site of the covered employer and not more than 50% of their work time for that covered employer in another jurisdiction.
If an employer pays UI tax on an employee for a quarter, then the employee will automatically be presumed to be a covered employee for paid family leave. Covered employers can rebut this presumption by submitting documentation showing that the employee does not meet the PFL definition for a covered employee for that quarter. The documentation should show that the employee:
- Worked at least 50% of their work time in a single jurisdiction outside of DC, and
- Their work time in the jurisdiction was not incidental in nature, temporary or transitory in nature, or consisting of isolated transactions.
Presumption rebuttals for covered employees will be decided on a case-by-case basis.
Additional rules have been provided for self-employed individuals.
Contributions that are not paid when due will incur interest charges. Additionally, if contributions and wage reports are not made within 1 month of the quarter-end, there will be penalties assessed.
Some administrative matters:
- Employers will use the same account they currently use for Unemployment Insurance via the Employer Self Service Portal (ESSP).
- The first collection of paid family leave contributions was July 1, 2019 for wages paid to covered employees from April 1 through June 30.
- For self-employed individuals who opt into the PFL program during the first 90 days after the Office of Paid Family Leave begins to collect contributions, the first collection of paid family leave contributions begins October 1, 2019 for income earned between July 1 through September 2019.
- Employers are subject to notice and recordkeeping requirements.
For more information, please reach out to us at firstname.lastname@example.org or 800.899.3633.