For years, a group of Colorado’s legislators tried—without success—to enact a statewide paid family and medical leave (PFML) program. Facing gridlock at the statehouse, advocates of PFML opted to take the issue directly to the people in the form of Proposition 118, a first-of-its-kind ballot initiative, which Colorado’s voters passed by a wide margin on November 3, 2020.

Proposition 118 provides for 12 weeks of paid family and medical leave funded through a payroll tax paid 50/50 by employers and employees. An additional four weeks of paid leave are available for pregnancy or childbirth complications, bringing the maximum potential amount of paid leave to 16 weeks.

Having passed as a ballot initiative, Proposition 118 will now become law. However, as discussed in more detail below, benefits under the program do not begin until 2024.

How is PFML Under Proposition 118 Funded?

A payroll tax on employers and employees using a 50/50 split will fund the PFML benefits under Proposition 118.

For the first two years of the program (2023 and 2024), the payroll tax is set at 0.9% of the employee’s wage, with 0.45% paid by the employer and 0.45% paid by the employee. Employers have the option of paying a larger percentage of the cost up to 100%. In 2025, and in each subsequent year, the law will adjust premiums so that the total amount of premium contributions to the program equals 135% of the previous year’s claims and 100% of the administration costs, up to a cap of 1.2% of each employee’s wages.

Employers will submit these contributions into a family and medical leave insurance fund, that also will include bonds issued by the state. A newly created, state-run Family and Medical Leave Insurance program (the “program”), will administer the fund and pay out benefits to eligible individuals.

Which Employers are Covered by Proposition 118?

Proposition 118 applies to any employer which has at least one employee in Colorado.

However, the Proposition lessens the cost burden on smaller employers, defined as those with fewer than 10 employees.¹ These smaller employers are not required to pay the employer’s share of the premium, although they still must withhold and pay the employees’ contribution into the fund.

Local governments, independent contractors, sole proprietors, partners, and joint ventures, are not required to participate in the PFML program. However, they may elect coverage for a period of not less than three years by filing a notice of election with a newly created state agency, the Division of Family and Medical Leave Insurance (the “Division”).

Which Employees are Covered by Proposition 118?

Most Colorado employees will be covered by Proposition 118. The Proposition provides PFML to any person who:

1. Earned at least $2,500 in wages subject to PFML premiums; and
2. Has been employed by the employee’s current employer for at least 180 days prior to the commencement of the PFML.

These individuals are referred to as “Covered Individuals.”

For What Reasons Can a Covered Individual Take PFML?

Beginning in 2024, Covered Individuals will be able to take leave for the following reasons:

1. Caring for their own “serious health condition,” meaning an illness, injury impairment pregnancy, recovery from childbirth, or physical or mental condition that involves inpatient care in a hospital, hospice or residential medical care facility, or continuing treatment by a health care provider;
2. Caring for a new child during the first year after the birth or adoption or for foster care of a new child;
3. Caring for a family member with a serious health condition;
4. When a family member is on active duty military service or is called for active-duty military service; and
5. When the individual or the individual’s family member is a victim of domestic violence, stalking, or sexual assault, as defined under Colorado law.²

These covered reasons are broader than those provided under the federal Family and Medical Leave Act (FMLA), which does not necessarily provide for leave relating to domestic violence, stalking, or sexual assault.

What Amount of PFML do Covered Individuals Receive?

A Covered Individual may receive up to 12 weeks of PFML, with an additional four weeks of PFML for pregnancy or childbirth complications. PFML provides for partial wage replacement during leave.

More specifically, individuals receive 90% of their average weekly wage (AWW) for the portion of wages that are less than or equal to 50% of the state average weekly wage (SAWW) and 50% of the portion of their wages that exceed 50% of the SAWW. In practice, this generally means that the more individuals make, the smaller the percentage of wage replacement they earn. For example, the following table shows the weekly wage, weekly benefit, maximum annual benefit, and percent of weekly wage based on a sliding scale of wages:

What Other Protections Does Proposition 118 Offer?

In addition to making PFML mandatory for Covered Individuals working for Covered Employers, Proposition 118 also bars retaliation against Covered Individuals who take PFML.

Covered Individuals who take PFML are entitled to return to the same position or a position with the same pay, benefits, and seniority or status. Further, while Covered Individuals are on PFML, the employer must maintain any health care benefits the Covered Individual had prior to taking leave for the duration of the leave. The Covered Individual will continue to pay their share of the cost of any health care benefits during leave.

However, Covered Individuals taking PFML do not accrue any other seniority or employment benefits during their leave.

What Happens if an Employer Violates Proposition 118?

If an employer either refuses to provide PFML for a covered reason or retaliates against a Covered Individual who takes PFML, Proposition 118 permits the Covered Individual to bring a civil action in court, with no administrative prerequisite. An employer that is found to violate the PFML requirements is subject to damages mirroring the federal FMLA, which include back and front pay, liquidated damages, equitable relief (such as reinstatement), and reasonable attorneys’ fees.

The statute of limitations for bringing a claim for a violation of Proposition 118 rights is two years, and three years if the violation is willful.

How Does Proposition 118 Interplay With Other Leave Programs?

Colorado employers now need to navigate a thicket of mandatory and discretionary leave programs, including the federal FMLA; short- or long-term disability programs; paid sick leave under the Healthy Families and Workplaces Act; and other general or specific paid time off policies. The Proposition addresses each of these programs in distinct ways:

• FMLA. Employers may require that PFML under Proposition 118 run concurrently with qualifying leave under the FMLA. Thus, as long as employers specify that the leave runs concurrently, an individual will not be able to “stack” leave by first taking up to 16 weeks of PFML, and then an additional 12 weeks of unpaid—but job-protected—FMLA leave.
• Disability Insurance Programs. If an employer offers a disability insurance policy, PFML may “be made or taken concurrently or otherwise coordinated with payment made or leave allowed under the terms of a disability policy.” The state will need to clarify how exactly this coordination between PFML and disability programs will work in practice. We anticipate this will occur when the Division publishes regulations implementing Proposition 118.
• Vacation Leave, Sick Leave, and Other Paid Time Off. Employers cannot require Covered Individuals to use accrued vacation leave, sick leave, or other paid time off before or while receiving PFML under Proposition 118. However, employers and Covered Individuals can agree that an Covered Individual can use accrued paid time off while they are utilizing PFML to “top off” their pay. Covered Individuals cannot, however, receive more in compensation than their average weekly wage.
• Other Preexisting Agreements and Policies, Including Collective Bargaining Agreements. Nothing in Proposition 118 diminishes employee rights under a collective bargaining agreement, employer policy, or employment contract.
• Workers’ Compensation and Domestic Violence Leave. Proposition 118’s text provides that the state “shall determine by rule the interaction of benefits or coordination of leave” between the PFML requirement and (1) domestic violence leave under Colo. Rev. State. § 24-34-402.7; and (2) workers’ compensation. Additional clarity on how this coordination will work must await the forthcoming regulations implementing Proposition 118.

What Notice Requirements Exist for Employers?

Proposition 118 requires that the Division develop a “program notice” detailing program requirements, benefits, claims process, payroll deduction requirements, job protection rights, benefits continuation, protection from discrimination and retaliation, and other information. Once the Division creates this notice, employers must post the notice in a prominent location in the workplace and notify employees of the program upon hiring and upon learning that a Covered Individual experiences a triggering event under the program.

Does Proposition 118 Permit Employers to use a Private PFML Plan in Lieu of the Public Plan?

Yes. Employers can elect to provide a privately run PFML plan rather than the state-administered plan. However, the private plan must offer at least the same rights, protections, and benefits as the public plan, and employers must also obtain approval from the Division in order to utilize a private plan.

When Does Proposition 118 Take Effect?

Colorado employers have some time before being required to implement PFML into their policies. Employers and employees do not start paying into the program until January 1, 2023, and Covered Individuals are not eligible to take PFML under the new proposition until January 1, 2024.

What Else do Colorado Employers Need to Know About Proposition 118?

The Proposition requires that rules and regulations necessary for the implementation of PFML be adopted and promulgated by January 1, 2022. Thus, Colorado employers will get more information in a little over a year regarding how exactly to meet Proposition 118’s PFML requirements.

Further, by July 1, 2022, the state will be conducting outreach to educate the public about the PFML program.

Notably, Proposition 118 is statutory, not constitutional. Thus, the legislature could in theory amend—or even repeal—the Proposition either before or after it takes effect. While employers should certainly prepare for Proposition 118 to take effect in its current form, they should also be aware that its precise requirements could change in the three-year period between its passage and when Covered Individuals are first eligible to receive benefits and when deductions need to be made to fund the program.

We are closely monitoring this new law, and will provide updates on significant developments as additional information becomes available.