Throughout 2022, the paid family and medical leave (PFML) program was in financial trouble. In response, the Legislature acted in 2023 to change the program’s rate structure and appropriated $200 million from the general fund–state to seed a reserve for the  program. Financial data presented to the PFML advisory committee this month indicates that no cash deficits are expected at this time.

On Friday, the House Labor & Workplace Standards Committee approved SHB 1959. The substitute bill would repeal the PFML exemption for employers with fewer than 50 employees, effective Jan. 1, 2025. There is no fiscal note for the bill.

The PFML program is funded by a premium that is assessed on employee wages. (In 2024, the premium rate is 0.74%.) By statute, the employee is responsible for the full amount of family leave premium and 45% of the medical leave premium. Employers are responsible for 55% of medical leave premiums. (Effectively, in 2024, employers pay 28.57% of the total premium and employees pay 71.43%. That said, employers may choose to cover the full premiums rather than making any deductions from employee wages.)

However, under current law, employers with fewer than 50 employees in Washington do not have to pay the employer portion of the premiums. Such employers may choose to do so; if they do, they are eligible for a state grant (employers are eligible for these small business assistance grants with up to 150 employees). The statute notes,

The legislature recognizes that while family leave and medical leave benefit both employees and employers, there may be costs that disproportionately impact small businesses. To equitably balance the risks among employers, the legislature intends to assist small businesses with the costs of an employee’s use of family or medical leave.

PFML customer data shows that employees of businesses with fewer than 50 employees represent 19% of all PFML customers, even though they represent 27% of eligible Washington workers.