How to determine the correct state for paid statutory leave coverage

Here are some guidelines and best practices to help.

As more states pass mandated Paid Family Medical Leave (PFML) laws and as hybrid or fully remote work schedules increase, it may be more difficult than before to determine the right state for your employee’s coverage. Here are some best practices to help you when you are faced with this issue.

Common misconceptions

There are two main misconceptions when it comes to determining the correct paid statutory state:

• A company does not need to have a physical office location in the state for someone to be eligible for a paid statutory leave.
• Eligibility for PFML is not necessarily determined by where someone lives, and instead is determined by where the employee works.

Being aware that someone is eligible for paid statutory leave, based on where they work and does not require a physical worksite in that state, may be the first step for determining where they should be covered. Next, consider the following the steps:

1. Determine the employee’s work state.
   As discussed, paid statutory leave eligibility is predominantly driven from where someone works. To determine an employee’s work state, please consider where most of their work is performed. If the employee works remotely full time, the state they live in is likely also their work state. When things are unclear still, it is recommended that you look at the other payroll taxes collected for the individual, especially Unemployment Insurance, as the state where unemployment is paid is typically the work state for paid statutory leave.
   
   
2. Consider where work is directed from.
   If you did not already discover the answer above, you may have a situation where an employee works in multiple states with regularity. If this is the case, consider if one of these states directs most of the work for the individual. Example: An employee works 50% of their time in Washington and 50% of their time in Oregon, but all work is directed from the headquarter office in Washington. It may make the most sense to consider Washington as the work state.
   
   
3. Potentially consider where the employee lives.
   If the prior steps did not get you an answer, it may be time to look at where the employee lives. If an employee regularly works in multiple states and there is not a clear base of operations in any of the states an employee is working in, you may want to consider their state of residence. Example: An employee lives in California, works for a company headquartered in Texas and splits working time evenly between California and Washington. Work is not clearly directed from California, Washington or Texas. As work is split evenly between two states with paid statutory leave and work is not clearly directed from a particular state, it likely makes the most sense to consider the state of California where the employee works as their work state.
   
   
4. When all else fails, seek professional guidance.
   If you use New York Life Group Benefit Solutions for private plan administration for paid statutory coverage, you may always ask us for our interpretation. If you need assistance, please contact your group representative

If you follow these steps and still can’t figure out an answer, it may be time to seek advice from counsel. There may be more employment implications than just the paid statutory leave coverage that you may want to confirm.