Questions surround proposed FAMLI rules as program preps for January launch

A family hikes in the Colorado mountains.

Colorado officials are closing in on two key deadlines for their new Family and Medical Leave Insurance program and continuing to finalize rules for how the program will work, leaving both business and worker-advocacy groups with questions that they hope to have answered quickly.

Voters approved creation of the FAMLI program in 2020, allowing any Colorado worker to take as much as 12 weeks of partially paid leave each year to be with newborns or adopted children, care for themselves or family members with serious conditions or escape domestic violence. State officials began taking deductions from employers and from employees’ paychecks in January to fund the expected $1.2 billion program, and workers can begin taking their leave, if approved by the FAMLI division, at the start of 2024.

Employers can choose to participate in the state-run insurance pool or to create or purchase private insurance plans that must offer benefits as generous as state requirements but that will let plan administrators make decisions on approving or denying leave.  Those who want to operate such private plans have until Tuesday to submit an application to the FAMLI division of the Colorado Department of Labor and Employment and, if approved, be refunded for the fees they have paid into the program since the start of the year.

Employers have long held concerns with the workings of the program, and business groups like the Colorado Chamber of Commerce opposed legislative proposals with various iterations of the program, saying it interferes with employer-employee relationships and adds to the excessive amount of new regulations the state has developed in recent years. But with the program now set to launch, employers and attorneys are focusing their attention on specific questions about how the program will operate.

Outstanding questions about FAMLI

Those companies participating in the state insurance pool, for example, will not get to approve or deny requests by workers for leave, as that responsibility will lie with the newly created FAMLI division. Workers may submit applications for leave up to 30 days prior to the benefit state date and employers will then be notified within five days — unless the need for leave is due to an unexpected condition and may be submitted up to 30 days after leave begins — and the timeline has caused some concerns among employers about whether it’s long enough.

Workers can take leave at any time after they begin their jobs, though their jobs are protected for their return only if they have worked for the company for at least 180 days before the leave starts. Self-employed state residents can choose to pay into the fund and receive benefits, but they must stay in the insurance program for at least three years if they opt into it.

A recent change to the proposed rules alters the way that the one-year period for the use of maximum benefits is calculated. Rather than calculating the 12-month period backward from the date an employee first uses benefits, the division has proposed it be calculated forward beginning on the first day that FAMLI leave is taken and ending 12 months later.

Erica Hunter, statewide leave and disability manager for the Colorado Department of Personnel and Administration, warned that this methodology could allow a worker to take one week of leave, take another 11 weeks at the end of their 12-month period and then immediately be eligible for another 12 weeks, giving them almost half a year of paid leave at one time. Such a scenario is unsustainable and could prove a hardship especially for smaller employers, she said at an Oct. 17 rulemaking hearing.

Time is ticking

David Gartenberg is a shareholder at Littler Mendelson.

David Gartenberg, a shareholder and employment-law expert at Littler Mendelson, said he’s not worried as much about lengthy absences so much as he is about the fact that the rule leaves the FAMLI benefits out of alignment with unpaid Family and Medical Leave benefits allowed under federal law.

But he and clients are more concerned, he said, that such rules have yet to be finalized only two months before workers can begin taking leave. Some employees, particularly those expecting to give birth in the coming months, need to begin planning leave at the start of 2024, and the portal through which they will request leave isn’t expected to open until late November.

“Leaving aside the substance of the rules and what people think overall about the program, we’re sort of at the point where we need answers one way or the other,” Gartenberg said.

Employee eligibility and private plans

Dan Block, a shareholder of Robinson Waters & O’Dorisio, said another area of unanswered questions has to do with how workers are considered “localized” and eligible for benefits. The current proposal notes that employees whose service is performed in Colorado are considered localized, but it doesn’t address whether remote workers of in-state employers who live in other states but may field sales or service calls of Colorado residents must be covered.

“It’s really unclear, and I would say there’s going to be problems when an employer has a remote worker,” Block said. “If the employee is never physically in Colorado but performs services to people in Colorado, does that mean they perform services in Colorado?”

Dan Block is a shareholder at Robinson Waters & O’Dorisio.

Employers had numerous concerns early on that the state would make the use of private plans too restrictive, but Gartenberg said he believes there has been “good progress” in that area, evidenced by the growing numbers of insurers now selling such plans. There remain disagreements between workers’ groups and employer groups about how closely those plans should be monitored, however.

The latest proposal requires private-plan operators to submit reports on their operations annually rather than quarterly with information such as applications received and benefits paid, reducing an administrative burden for companies. But the newest proposed rules also require more detailed information in those reports, including the race, ethnicity and preferred languages of individuals for whom leave both was approved and denied — information that one insurance executive said that third-party plan administrators won’t have.

Concerns of worker-advocacy groups

Jared Make, vice president of paid-family-leave advocacy organization A Better Balance, said that while he supported the increased details in the reporting as a way of allowing the FAMLI division to monitor compliance of private plans, he believes the reports should come quarterly. Other groups that have supported FAMLI echoed similar sentiments, with Towards Justice policy director Nina DiSalvo asking officials also to expand the new division’s investigative authority so that it doesn’t have to wait for complaints to begin looking into employer leave records.

“We believe that to continue growing our state’s strong economy, we must have economic policies centered on our workers,” said Sophie Mariam, labor policy analyst for the Colorado Fiscal Institute.

Employers can choose whether to require that workers use short-term disability benefits concurrently with FAMLI leave or get to use them separately. Employers can not, however, require workers to use other paid time off before they use FAMLI benefits.

Other important FAMLI rules

Tracy Marshall is director of Colorado’s Family and Medical Leave Insurance division.

The definition of a family member in the state law is much broader that the definition in the federal FMLA, as state law does not limit leave to care for people related only by marriage, blood or birth. “That person may be your next-door neighbor, it may be your best friend, it may be your spouse, it may be your sibling,” FAMLI division director Tracy Marshall said during an Oct. 16 town-hall meeting in Denver.

And while the law requires employers to contribute an amount equal to 0.45% of each worker’s weekly paycheck and then take the same amount from the employee, employers with less than 10 workers do not have to contribute the employers’ share of the 0.9% fee to the fund.

“We’ve designed this program to benefit employees, but we want to make sure we’re helping small businesses as well,” said Erin Bustamante-Trinidad, senior policy advisor for the FAMLI division, during the Denver town-hall meeting.