Joining just a handful of other states with similar laws, Colorado voters approved a ballot initiative in the November 2020 election—Proposition 118—creating a state-run insurance program that will provide paid family and medical leave to employees in the state. The program will be funded through a new payroll tax split evenly between employers and employees, with the tax initially set at 0.9% of an employee’s wages (up to an applicable limit discussed below). Employers and employees will begin paying into the program on January 1, 2023, and benefits will be available to workers beginning January 1, 2024.
How the new paid leave program will work
Colorado legislators failed to pass the paid family and medical leave program during the 2020 legislative session and subsequently placed it on the November 2020 ballot after securing enough signatures for a ballot initiative in August 2020. As passed by the voters, the program will provide most Colorado employees with up to 12 weeks of partial pay and job security for various family- and medical related absences from work, plus four additional weeks of paid leave if workers have a serious health condition related to pregnancy or childbirth complications.
Qualifying reasons for paid leave under the new program include:
Individuals are generally covered under the program if they earn at least $2,500 in wages subject to premium payments during an applicable period. Covered individuals will receive paid leave amounting to:
The maximum weekly benefit is 90% of the state average weekly wage, except for 2024, during which the maximum weekly benefit will be $1,100.
Who’s paying the benefit costs
As noted above, the payroll tax initially paid by employers and employees under the new program will be 0.9% of an employee’s wages in 2023, up to a $161,700-per-person wage limit. (This limit is the Social Security Administration’s projected contribution and benefit base limit for 2023 – which may change in subsequent years.) In 2023, this rate equates to $1,455 in total insurance premium payments for an employee making $161,700 or more.
The total premium payments will be split evenly between employers and employees such that each pays 0.45% of the individual’s wages as the program’s premium. The employees’ portion of this premium may be deducted from their paychecks. Beginning in 2025, the premium amounts will be adjusted upward to account for the previous year’s claims and costs of administering the program. Notwithstanding any annual increases, premiums will be capped at 1.2% of each employee’s wages.
Businesses with fewer than 10 employees will be exempt from paying the matching employer premiums. Self-employed individuals may opt into the program (and pay only the employee, but not the employer, premium amount), and local governments may opt out. But even when local governments opt out, individual employees of governments may opt back in under certain circumstances.
Employee protections, employer exemptions
The new program provides robust job protections for employees who have been employed by their employers for at least 180 days before taking leave. These protections include prohibitions on disciplinary or retaliatory actions against employees who request or use paid leave under the program. After returning from leave, employees are entitled to return to their same position or an equivalent position (in terms of pay, benefits, and other terms and conditions of employment). Employees may not be permitted to lose their health insurance during the leave but must continue paying their portions of the health insurance premiums while on leave.
The new program provides exemptions for employers that offer their own, approved private paid medical and family leave plans. To be approved, a private plan must confer all the same rights, protections, and benefits available under the new program.
Employers may require any paid leave provided under the program to run concurrently with (1) any qualifying (unpaid) leave under the federal Family and Medical Leave Act (FMLA), and/or (2) any leave provided under any company-provided disability policy. Employers can’t require employees to use or exhaust any accrued vacation leave, sick leave, or other paid time off before or while receiving paid medical and family leave under the new program.
The state-run program will be administered under the auspices of a new Division of Family and Medical Leave Insurance within the Colorado Department of Labor and Employment. The division will create processes for collecting premiums, administering the program, determining and reviewing claims, and permitting appeals of denied claims.