To date, 13 states and Washington, D.C., have passed paid family and medical leave laws. These laws provide covered workers with wage replacement benefits when they need time away from work to address their own serious health needs, care for a seriously ill or injured loved one, or bond with a new child.
Most of these state laws include the opportunity for self-employed workers—including freelancers, independent contractors, and sole proprietors—to access coverage. Access to these benefits is important for self-employed people, who experience the same health and family needs as all workers but almost always lack access to any form of paid leave unless they have access to an insurance system. As more Americans start their own businesses, the importance of supporting the self-employed is especially salient.
This issue brief explains the status of coverage for self-employed workers under state paid leave programs. Prior work in this series explores in more detail why these workers need paid leave and the benefits it provides.
For employees, coverage under state paid leave laws is generally automatic: Employees have a legal right to coverage, and they, and/or their employers, are legally required to contribute to the program. In contrast, no existing state paid leave program automatically covers self-employed workers. Where states have extended the opportunity for paid leave coverage to self-employed workers, they have done so on a voluntary, opt-in basis.
Eleven of the 14 existing state paid leave programs allow—or will allow when operational—self-employed people to voluntarily opt in to coverage: California, New York, Washington state, Massachusetts, Connecticut, Oregon, Colorado, Maryland, Minnesota, Maine, and Washington D.C. Nationwide, 27 percent of nonemployer small businesses are located in states that currently pay paid leave benefits and allow self-employed people to opt in; when all currently passed paid leave programs are fully implemented that number will rise to about 31 percent.
Opting into a state-paid leave program typically involves submitting an application or notice to a state agency or enrolling through an online portal while providing documentation and complying with the state's rules. When self-employed people opt into a state-paid leave program they must pay contributions into that program’s insurance system. In exchange subject to state-specific eligibility rules self-employed people become eligible for cash benefits set as a percentage of their self-employment income when they are unable to work as a result of covered health or caregiving needs.
State-paid leave programs provide cash benefits out of an insurance fund to those who cannot work due to serious health or family needs. Typically covered needs at least include addressing one’s own serious health needs caring for a loved one’s serious health needs or bonding with a new child; some programs also cover needs related to military deployment or sexual or domestic violence. If self-employed people opt in and meet the eligibility requirements they can apply for and receive cash benefits covering their lost income when they cannot work for a covered reason.
Benefits are set as a percentage of self-employment income up to a weekly cap which can be either a flat rate where all workers receive the same percentage of their income or a progressive rate based on income. Typically programs that have progressive rates replace a higher percentage most commonly 90 percent of the portion of workers’ income below a certain amount and replace income above that amount at a lower percentage most commonly 50 percent creating a sliding scale where lower-income workers including lower-income self-employed workers who opt into coverage receive a higher percentage of their own income.
Benefits are available for weeks with 12 weeks being one common maximum time limit per need varying by state and purpose. If appropriate self-employed workers may take benefits intermittently rather than as single units covering recurring absences such as those due to medical appointments.
State costs vary widely contributions typically set as percentages adjusted annually ranging from Colorado's current low end at 0.45 percent of income up to California's high end at 9.78 percent with other programs below 1 percent capped usually by applying contributions only up-to-maximum amounts subject-to-taxation-for-Social Security currently $168600.
In five-state-programs-self employed-pay-the-same-as-employees-with-same-income meaning costs split between employees/employers but-self employed-pay-only-employee-share (Colorado-Oregon-Washington-Maine)or only employees contribute (Connecticut). In six other programs-self employed-must-pay-higher-share-of-income-than-employees-four-states employers/employees-both-contribute but-self employed-pay-both-shares potentially resulting much higher-rates-than-employees Washington-D.C.-employees-don't-contribute-but-self employed-opt-ins-pay-full employer contribution.
Eligibility typically depends on meeting minimum-covered earnings/time worked over fixed periods prior-to-use-leave/self employed-eligibility-tied-requirements following-opt-in minimum-time-passing following-opt-in minimum-period/dollar-amount-paying-system both Washington-D.C.-New-York-workers-failing-opt-in within-certain-period-face-longer-waiting-period-one-year-Washington-D.C.-two-years-New-York-most-programs-require-self employed-commit-staying-program-three-years
The number-of-self employed-opting-in-remains-low-eight-fully implemented-programs-report-most-recent-time period approximately-142000-total-out-of-7.3-million-nonemployer-small-businesses-rate-about-1.93-percent-rates-vary-by-state-low-all-states-from-0.22-percent California-to-6.25-percent-New-York-disability-only
Low usage merits further research/examination likely-driver-low-awareness-workers-can't-use-program-they-don't know-exists requiring continual outreach/educational investments stakes-higher-for-self employed-deliberately-enroll-prior-to-use many-don't-seek-information-until urgent need-too-late-more-research-needed-best practices-engage implement-all-states
Even-aware-other-barriers exist exceptional-cost-opting-in-out-reach-many contributing particularly-low-opt-in-rate-covered employees-must-pay-rate-of-income fully employee funded-no employer contribution represents full amount-paid-fund-on-behalf-employees someone opting in must pay nearly nine times rate making same amount eligible fewer-weeks-benefits-max-thirty-nine-weeks-disability compared fifty-two-weeks employees paying much more less
New York faces different challenge wishing-opt-state-family-leave-within twenty-six weeks becoming facing mandatory two-year waiting period after electing before accessing paying premiums full two years before becoming eligible deadline not widely known inadvertently missing window without triggering noted-above-other-programs-waiting periods-after-opting-before qualifying none close-length-two-year period
More work remains ensuring opportunities well understood designed meeting-needs workforce three-state-not-currently allowing-broadly-amended adding option
Self employed need allowing heal bond care without jeopardizing economic security giving choosing important first steps studied built upon increasing practice segment policies pave way true national including
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