The FAMILY Act: What Small Businesses Need to Know

Sponsored by Sen. Kirsten Gillibrand (D-N.Y.) and Rep. Rosa DeLauro (D-Conn.), the proposed Family and Medical Leave Insurance (FAMILY) Act would create an insurance program enabling workers to take up to 12 weeks of paid time away from work in order to care for a loved one or bond with a new child.

This document is intended to answer any questions small employers might have about the proposed program and its effects on small business owners and their workers.

What is the Family and Medical Leave Insurance Act?

  • The FAMILY Act would establish the first national insurance program that would provide workers with partial wage replacement for up to 12 weeks to take care of their own serious health condition, the serious health condition of a family member, the birth or adoption of a child or to address certain issues related to family members’ military service. A family member constitutes a child, parent, spouse or domestic partner.

Which employers would be covered under the law?

  • The proposed FAMILY Act would apply to all employers, regardless of size. Freelancers and self-employed entrepreneurs are also eligible to participate in the program.

How would the new program work?

  • The FAMILY Act would establish the Office of Paid Family and Medical Leave within the Social Security Administration. Payroll contributions for the program would cover both insurance benefits and administrative costs.
  • The FAMILY Act would enable workers to earn 66% of their monthly wages, up to a capped amount. The capped monthly benefit would be indexed to inflation. The program would be funded by small contributions by employers and employees of just two-tenths of 1% each (two cents per $10 in wages), or about $1.50 per week for a typical worker.

What effects will FAMILY have on businesses?

  • Based on the experience of businesses in California and New Jersey, states that have paid family medical leave programs in place, such a program is unlikely to have a significant effect on businesses across the nation. Many small businesses that previously could not afford to offer paid leave to their employees would be able to offer the benefit through such a program. This helps small businesses compete for the best employees, and gives employers peace of mind that they are doing what’s best for their workers. Employers that already offer paid family leave can expect to see cost savings.
  • A recent poll conducted for Small Business Majority found 7 in 10 small business owners and operators support the FAMILY Act. Additionally, most small business owners (61%) support state-administered paid leave programs funded by contributions shared by employees and employers—with each contributing approximately two-tenths of 1% of an employee’s wage.
  • What’s more, a majority of small businesses have some type of policy—formal or informal—in place when it comes to family medical leave—time an employee would take to care for a family member with a serious illness or caregiving need. More than 7 in 10 (72%) small business owners have either a formal written policy, a consistent but not written policy or informal policy provided on a case-by- case basis to provide family medical leave. Of the small business owners who do offer family medical leave, 61% offer full or partial pay and 22% offer pay depending on the employee.

Are there any examples of successful paid family leave programs?

  • Yes. California New Jersey  and Rhode Island have paid family and medical leave insurance programs, and New York will begin a paid family leave program in 2018. California’s Paid Family Leave program has been in effect for more than 10 years. New Jersey’s Family Leave Insurance program has been in effect for seven years, and Rhode Island’s Temporary Caregiver Insurance program has been in effect for three years. All programs have been implemented successfully. Evidence suggests that neither California , nor New Jersey nor Rhode Island’s program has imposed a burden on businesses, and all have had significant benefits for employees. Moreover, many employers find that the program is actually good for their businesses, boosting employee loyalty and lowering turnover.

What effects would FAMILY have on employees?

  • Employees who need to take leave to care for a loved one or welcome a new child would be able to do so without having to worry about whether they will be able to pay their bills.

Where can I find additional information about family medical leave?