Paid Leave Oregon: Everything Employers Need to Know

The state of Oregon has enacted a new paid family and medical leave program which goes into effect on January 1, 2023. The program is known as Paid Leave Oregon. Paid Leave Oregon is a state-run wage replacement program meant to provide short-term compensation to employees who need to take time off work for medical or family reasons. Covered employers will want to start preparing for and understanding the new law now.
 

Basics of the Program

Who are Covered Employers? Employers with 25+ employees anywhere in the world with at least one eligible employee in Oregon are subject to the new law. Importantly, “one employee in Oregon” does include remote employees.

What are the Qualifying Leave Reasons? Taking time off for any of the following reasons qualifies under this law:
 
  • Family Leave
    • To care for and bond with a child following the child’s birth, adoption, or foster care placement (must be taken within 12 months of birth/placement)
    • To care for a family member with a serious health condition
  • Medical Leave
    • To recover from a serious health condition or care for a family member with a serious health condition
  • Safe Leave
    • To take leave if the employee or an employee’s family member has experienced domestic violence, sexual assault, harassment, or stalking.

Who is Eligible? Oregon employees may be eligible to take leave whether they work full-time, part-time, a seasonal job, or for more than one employer. The following criteria must be met for an employee to be eligible for Paid Leave Oregon benefits:
 
  • Must be employed in Oregon.
  • Must have earned at least $1,000 in wages in the four out of five quarters before starting leave under Paid Leave Oregon.
  • Cannot simultaneously receive workers’ compensation and/or unemployment insurance benefits.
  • Independent contractors, volunteers, and work training/work-study program participants are not considered employees and, thus, are excluded from the program.

Who are Covered Family Members? The law includes an expansive list of family relationships that qualify as individuals needing care for whom an employee may take Paid Leave. This includes:
 
  • Child (of any age)
  • Spouse or Domestic Partner
  • Sibling (including step-siblings and in-laws)
  • Parents (includes step-parents and in-laws)
  • Grandchild
  • Grandparent
  • Any individual related by blood or affinity whose close association with a covered individual is the equivalent of a family relationship
 

Program Benefits

What are the Benefits? Paid Leave Oregon benefit highlights include:
 
  • Employees may take up to 12 weeks of paid leave per year.
  • In certain situations, an employee may take an additional two weeks (for a total of 14 weeks)
  • Leave may be taken continuously or in partial increments (one week, one day, etc.).
  • Benefit amounts are based on a formula that considers the income of the individual.
  • Leaves are job-protected for employees who have been employed with an employer for at least 90 days.

What is the Benefit Amount? Paid Leave Oregon is responsible for calculating benefit amounts paid to employees. The below information is for general education purposes. The benefit payable under the law depends on the ratio of the individual’s Average Weekly Wage (AWW) to the State Average Weekly Wage (SAWW).
 
  • If AWW <= 65% of SAWW, benefit = 100% of AWW
  • If AWW > 65% of SAWW, benefit = 65% of the SAWW + 50% of the AWW above that amount
  • Benefit Cap = 120% of SAWW (Initial benefit cap: $1,469.78 per week for 2023)
AWW: Defined as the total wages earned in the base year divided by the number of weeks in the base year.
SAWW: $1,224.82 for 2022 and 2023.

For example, assume an average weekly wage of $1,000. This example illustrates how the formula works when the AWW exceeds 65% of the SAWW:
 
Step #1: Take 65% of $1,224.82 (SAWW) = $796.13
Step #2: Subtract the Step #1 result from the AWW ($1,000 - $793.13) = $203.87
Step #3: Calculate 50% of the Step #2 result ($203.87*0.50) = $101.93
Step #4: Add the Step #1 result to the Step #3 result ($796.13 + $101.93) = $898.06

Program Funding and Contribution Details

How is it Funded? Employers and employees must contribute to the Paid Leave Oregon state fund. The total contribution rate will be determined annually by the Oregon Employment Department (OED). There is a statutory maximum of 1% of wages.

How is the Funding Split? The law outlines a split contribution between employers and employees as follows:
 
  • Employees contribute 60%
  • Employers contribute 40%

Can Employers Pay More? Yes. Employers may choose to go beyond the statutory requirement of 40% and pay both the employer and employee contributions, as an employee benefit. If employers pay the employee portion of contributions, a written agreement with the employee must be in place.

What is the Initial Contribution Rate? The contribution rate for 2023 is 1%. Contributions are paid on all compensation up to the wage base ($132,900 for 2023).

What are the Contributions and Benefits? The following chart illustrates the contributions and benefits at various income levels:
 

Annual Earnings

Average Weekly Wages

Annual Employee Contribution

Annual Employer Contribution

One Week’s Paid Leave Benefit

Minimum Wage Employee

$28,080

$540.00

$168.48

$112.32

$540.00

Median Income Employee

$67,058

$1289.58

$402.35

$268.23

$1,032.86

High Income Employee

$132,900

$2,555.78+

$797.40

$531.60

$1,469.78



Who Collects Contributions? Employers are responsible for collecting and submitting employee contributions as well as their employer contributions.

Who Pays the Benefits? Income replacement benefits while an employee is on a leave are paid by Paid Leave Oregon (not by employers).

How Are Contributions Made? Employer contributions will be made through Frances Online, the Oregon Employment Department’s new employer portal for reporting employer taxes, unemployment insurance taxes, and Paid Leave Oregon contributions.

What Must be Done Now? Employers should consider two action items for implementing this new law:
 
  • Register with Frances Online
  • Coordinate with the payroll service provider to ensure that correctly calculated employee contributions are withheld from paychecks starting January 1, 2023.
 

Employer Obligations

Employers have four important obligations in the administration of the Paid Leave Oregon program.
 
Notice Requirement: Employers must display a notice in a public space at the worksite containing the disclosure information outlined below. The Oregon Employment Department will release a sample poster in the near future. Posters must display the following information:
 
  • Benefits of the program
  • Claims process
  • Notice requirements for leave
  • Rights to job protection and benefits continuation
  • Protection against retaliation
  • Right to appeal a decision
  • Confidentiality of information received related to a leave

Job Protection and Anti-Retaliation: These protections apply to employees employed by their employer at least 90 days before taking leave:
 
  • Right to restoration to the same position (or equivalent if the position no longer exists)
  • No employee benefits loss, including seniority or pension rights, accrued before the date on which the leave commenced.

Health Benefits: Employers must maintain health care benefits during the leave period on the same basis as if continuously employed.
 

Important Dates to Know

  • January 1, 2023: Employee contributions start
  • January 1, 2023: Employer contributions start
  • September 3, 2023: Employees may begin applying for Paid Leave Oregon benefits
     

Claims Administration

What Must Employees Do? To request leave, employees must initiate a claim under the Frances Online system. Standard claimant information, identification verification, employment information, and leave details must be provided. Employees must provide their employer with 30 days’ notice if the leave is foreseeable or 24 hours’ notice if the leave is unforeseeable.

What Must Employers Do? Employers must engage with Paid Leave Oregon to administer the claims for employees who have filed a claim. Upon being notified of a claim (by Paid Leave Oregon), employers must provide verification details within 10 days.
 

Private Plan Arrangements

Can Employers Establish a Private Plan? Yes. Employers are permitted to opt-out of making contributions to the Paid Leave Oregon program if they establish an “equivalent” private program that is approved by the Oregon Employment Department.

What is an Equivalent Plan? An equivalent plan is a plan the Oregon Employment Department approved, which provides benefits that are equal to or greater than the benefits Paid Leave Oregon provides. Employers who already offer paid leave to their employees can apply for it to be considered an equivalent plan. To be an equivalent plan, the following criteria must be met:
 
  • Offer the same or more benefits than Paid Leave Oregon offers
  • Employee contributions less than or equal to contributions to the Paid Leave Oregon program
  • Be approved by the Oregon Employment Department.

What is the Application Process? The Paid Leave Oregon website provides detailed information on the requirements for private/equivalent plans and on submitting an application (Paid Leave Oregon Website). Plans may be fully insured or employer-administered (proof of solvency is required for employer-administered plans). The approval process takes approximately 30 days, so the Oregon Employment Department recommends that applications be submitted by November 30, 2022, to avoid withholding contributions as of January 1, 2023. Approved plans must then reapply annually for the first three years. The Oregon Employment Department has released an Equivalent Plan Checklist and an Equivalent Plan Guidebook to assist employers in the application process.

What is a Declaration of Intent? If an employer intends to submit an application but is not yet ready, it may submit a Declaration of Intent form through Frances Online certifying that the employer will have an approved equivalent plan by May 31, 2023.

By submitting a declaration of intent, the employer will not have to withhold contributions starting January 1, 2023. However, if the employer’s equivalent plan application is denied, the employer will be liable for contributions from January 1, 2023, until an approved plan is in effect. The last day an employer may file a declaration of intent is November 30, 2022.

If an employer does not use an equivalent plan in 2023, it may submit equivalent plan applications in future years. Similarly, employers may choose to cease using an equivalent plan and use Paid Leave Oregon in future years.

When is an Equivalent Plan Most Advantageous? As a rule, smaller employers will likely not establish an equivalent plan or apply to have an existing paid leave/disability insurance program approved as an equivalent plan. Larger employers are more likely to engage in this process. Also, to the extent that disability insurance premiums plus the cost of self-funded paid leave programs (for non-disability related leaves) exceed the initial 1% premium, an employer may be better served by simply participating in the Paid Leave Oregon program, especially in the initial years as the program establishes itself and actual claims experience becomes solidified.

Are there Insurance Company Solutions? Many insurance companies are working to put together consolidated solutions for employers that handle leave management, combining both the disability element and the leave management for non-disability leaves. Expect to see new solutions in this space to address this growing need for employers.

Now or Later? Many employers are taking a “wait and see” approach to the equivalent plan option, at least for the first year. Employers that have existing programs that would likely be deemed equivalent may want to amend their current plans to clarify that internal self-funded leave benefits will be integrated with the Paid Leave Oregon program. This is necessary to avoid paying directly for leaves (in addition to paying the employee/employer contributions for all or a portion of the leave).
 

Small Employer Exemption and Grants

What is the Small Employer Exemption? Small employers (with fewer than 25 employees) are exempt from making the 40% required contribution under the Paid Leave Oregon program.

Do Small Employers Need to Do Anything? Yes. All Oregon employees participate in the Paid Leave Oregon program (regardless of the size of their employer). While small employers do not need to make the 40% employer contributions to the program, they still must collect and submit the required 60% employee contributions. Even though employers do not make contributions, employees of small employers still receive the same benefits.

What are the Small Employer Assistance Grants? Small employers who elect to pay the 40% employer contribution (even though they are not required to do so), are eligible to receive assistance grants. Key elements of the assistance grants include:
 
  • If an employee takes family and medical leave, a small employer who pays their share of contributions may apply for one grant per employee, up to a maximum of 10 grants per year.
  • Employers must continue to pay their share of contributions for 8 consecutive calendar quarters.
  • Small Employer Assistance Grants provide up to $3,000 towards the cost of hiring temporary workers to replace employees on leave and up to $1,000 to reimburse the employer for significant additional wage-related costs incurred while an employee is on leave.
 

Interaction with Other PTO/Sick Leave Benefits

How does the Plan Interact with Other Programs? Paid Leave Oregon benefits are in addition to benefits payable under other leave programs such as the Oregon Family Leave Act (OFLA) and the Family and Medical Leave Act (FMLA.) Employees cannot receive Paid Leave Oregon benefits if they are receiving worker’s compensation or unemployment insurance benefits.

How do the Programs Differ? Paid Leave Oregon’s requirements are similar, but not identical, to the requirements of the OFLA and the FMLA, which respectively provide protected but unpaid state leave and federal leave. For example, leave related to domestic violence survivors is covered under Paid Leave Oregon, but not under the OFLA or the FMLA.

If an employer does not use an equivalent plan, the OED will administer Paid Leave Oregon benefits. The OED will notify the employer when an employee applies for or is approved to take leave under Paid Leave Oregon. The employer administers OFLA and FMLA benefits, and it must track an employee’s use of OFLA, FMLA, and Paid Leave Oregon leaves. Given the overlay of these three leave programs, employers would be prudent to review policies and procedures to see whether they need to be updated and/or how they need to be harmonized.

How is Sick Leave and PTO Integrated? Employers may permit an employee to use accrued paid sick leave, vacation leave, or any other paid leave to top off Paid Leave Oregon benefits up to 100% of the employee’s weekly wages. Employees may not receive more than 100% of their average weekly wage.

An employee may also use accrued paid time off and paid sick leave to top off Paid Leave Oregon benefits if the weekly benefits are less than the employee’s weekly wages.

How Do Leave Programs Differ? There are differences in essentially every category of comparison between the Paid Leave Oregon program, the Oregon Family Leave Act, and FMLA as summarized below:
 

Paid Leave Oregon
Oregon Family Leave Act
FLMA
Covered Employer
All employers
25+ Oregon employees in 20+ calendar weeks
50+ employees in 20+ workweeks in current or preceding calendar year
Employee Eligibility
  • $1,000 in base period
  • 180 days tenure
  • 25 hours/week average
  • 12 months of service
  • 1,250 hours of service during preceding 12 months
  • 50+ employees within 75 miles
Amount of Leave
  • 12 weeks
  • Additional 2 weeks for pregnancy-related limitations
  • 12 weeks
  • Additional 12 weeks for pregnancy disability
  • Additional 12 weeks for sick child if 12 weeks of parental/bonding leave used
  • 12 weeks
Intermittent leave
  • May be taken in one workday increments
  • Not specified
  • Smallest increment allowed for other types of leave
  • No greater than one hour
Reasons for Leave
  • Birth, adoption, or foster placement of a child
  • Serious health condition of employee
  • Care for family member with serious health condition
  • Safe leave
  • Birth, adoption, or foster placement of a child
  • Serious health condition of employee
  • Care for family member with serious health condition
  • Pregnancy disability leave
  • Sick child or if school or childcare provider is closed due to a statewide public health emergency
  • Military family leave
  • Bereavement leave (up to 2 weeks)
  • Birth, adoption, or foster placement of a child
  • Serious health condition of the employee
  • Care for family member with a serious health condition
  • Qualifying exigency for family member due to military active duty

 
How Does it Interact with Other Paid Time Off? Employees may choose to exhaust their accrued paid time off or protected sick leave under the Oregon Paid Sick Time Law before applying for Paid Leave Oregon benefits. However, employers may not require employees to exhaust paid time off and paid sick time before applying for Paid Leave Oregon benefits.
 

Annual Reporting Requirements

All employers, including those using approved equivalent plans, must abide by Paid Leave Oregon’s reporting requirements related to employee population and contributions withheld from employee wages. Employers must renew their applications for equivalent plans every three years. All mandatory reports and applications must be submitted through Frances Online.
 

Integration with Short-Term Disability

Will Premiums be Reduced? Employers can expect the Paid Leave Oregon program to reduce the cost of insured short-term disability insurance premiums. It stands to reason that when a significant portion of the benefit under a disability insurance policy will now be integrated with the Paid Leave Oregon program, the premiums will be commensurately reduced. But how much of a premium reduction can employers expect? Importantly, only two of the four qualified reasons for a leave would be covered under a disability insurance policy (disabilities related to the birth of a child or the serious illness of an employee). The other qualified leave reasons wouldn’t trigger a disability benefit in the first place.

How Much Might Premiums be Reduced? Because of the complexities outlined above, it is difficult to project at this early juncture how much of a premium reduction might be expected. Insurers have experience with integrating disability benefits with state-paid leave programs, such as those in CA, HI, NY, NJ, and RI. However, the actual experience of the Paid Leave Oregon program must ultimately be taken into consideration. Lastly, to the extent that average wages exceed or significantly exceed the Paid Leave Oregon income threshold, the impact of the program on disability premiums will be lessened. Said another way, the potential premium reduction will be higher to the extent that a higher percentage of wages will be replaced by the Paid Leave Oregon program.
 

Action Items for Employers

For Employers with No Employees in Oregon: Pay attention anyway. It is likely that other liberal states will follow Oregon’s example and pass new paid leave programs in the future. Both the program’s structure and administrative processes are likely to be mirrored, so there may be early lessons to be gleaned by observing and understanding Oregon’s program.

For Employers with Employees in Oregon: There are important preliminary steps to take in the last months of 2022 to prepare for this law to become effective:
 
  • Confirm Covered Employer status
  • Register with Frances Online
  • Confirm if a private/equivalent option is right for you (submit an application if necessary)
  • Work with payroll vendor to implement payroll contribution process
  • Create an internal procedure for payment of ongoing employee/employer contributions
  • Communicate with employees regarding new payroll contributions that will be happening in 2023
  • Post required notifications in the workplace(s)


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