California raises wage replacement for new parents, sick workers

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Gov. Gavin Newsom signed a bill Friday that will increase the amount of money workers receive under the state’s paid family and medical leave program, providing a boost that supporters say will ensure lower wage workers are not locked out of a benefit they are already paying for.

Beginning in 2025, the state will pay up to 90% in wage replacement for new parents and those who need to take time off to care for a seriously ill family member or themselves. Senate Bill 951 by Sen. María Elena Durazo (D-Los Angeles) also ensures that the wage replacement will remain between 60% and 70% during the next two years after the rate was scheduled to return to 55% beginning Jan. 1.

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“California families and our state as a whole are stronger when workers have the support they need to care for themselves and their loved ones,” Newsom said in a statement. “California created the first Paid Family Leave program in the nation 20 years ago, and today we’re taking an important step to ensure more low-wage workers, many of them women and people of color, can access the time off they’ve earned while still providing for their family.”

California workers automatically pay into the employee-funded State Disability Insurance program, which includes Paid Family Leave. However, many employees are either unaware of the benefits or say they can’t afford a pay cut in order to take time off. Higher-wage earners were four times more likely to use the paid family leave program in 2020 than workers in the lowest wage bracket, according to the California Budget and Policy Center.

The law will provide 90% wage replacements to lower-paid workers, while all others will receive 70% of their pay.

Newsom vetoed a similar measure last year by former Assemblymember Lorena Gonzalez (D-San Diego), saying the bill “would create significant new costs” and “would result in higher disability contributions paid by employees.”

The state’s disability insurance program was created in 1946 to provide partial wage replacement benefits for employees unable to work due to pregnancy or non-work related illnesses and injuries. California expanded the program to became the first state in the nation to create a paid family leave program in 2004, which provides workers with partial pay in order to bond with a new baby or care for a seriously ill family member.

In 2020, the state increased the length of time a person can qualify for paid family leave from six weeks to eight weeks. Before that, lawmakers raised the wage replacement from 55% to 60% to 70% depending on a person’s average weekly wage, although that increase was scheduled to sunset Jan. 1 if Newsom did not sign AB 951.

The programs are funded entirely by an employee payroll deduction. Under the new law, the state will no longer have a cap on payroll tax contributions, meaning higher-income earners will pay more into the system. However, a legislative analysis of the bill said those added contributions will not entirely offset the approximately $3 billion to $4 billion in new benefits.