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California’s mandatory employee leave programs — State Disability Insurance (SDI) and Paid Family Leave (PFL) — are among the most generous in the country and create obligations for California employers that have no federal equivalent and no equivalent in most other states. Understanding these programs — what they require, how they’re funded, and what California employers must do in administering them — is essential for any California business with employees.
State Disability Insurance
California’s SDI program provides partial wage replacement for California workers who are unable to work due to non-work-related illness, injury, or pregnancy. SDI is funded entirely by employee payroll deductions — the employer does not pay a direct SDI premium. The 2024 SDI withholding rate is 1.1% of all wages with no wage cap (removed effective January 1, 2024). SDI benefits replace approximately 60-70% of a worker’s wages for up to 52 weeks, depending on income level.
The employer’s obligations in the SDI program are primarily administrative: withhold the correct SDI rate from employee wages, remit withholdings to the EDD with other payroll taxes, and cooperate with EDD claim processing by providing employment information when requested. Employers also must not discriminate against employees exercising SDI rights and must maintain employees’ health benefits during SDI leave in certain circumstances.
Paid Family Leave
California’s PFL program provides partial wage replacement for workers who take time off to bond with a new child (birth, adoption, or foster placement) or to care for a seriously ill family member. Like SDI, PFL is funded by employee payroll deductions — the current PFL contribution is combined with the SDI contribution in the 1.1% rate. PFL provides up to 8 weeks of partial wage replacement per benefit year. Beginning in 2024, employees can use PFL intermittently and in combinations with other leave.
California Family Rights Act Leave
The California Family Rights Act (CFRA) requires employers with 5 or more employees to provide up to 12 weeks of unpaid, job-protected leave per year for qualifying reasons: the employee’s own serious health condition, care for a family member with a serious health condition, or bonding with a new child. Unlike federal FMLA (which covers employers with 50+ employees), California’s CFRA covers employers with as few as 5 employees — capturing nearly all California employers. CFRA leave is unpaid, but employees on CFRA leave can receive SDI or PFL benefits for the qualifying portions of their leave. The employer’s obligation is to maintain the employee’s job (or an equivalent position) and group health benefits during CFRA leave, and to reinstate the employee upon return.
The Administration Challenge
Coordinating California’s multiple overlapping leave programs — SDI, PFL, CFRA, FMLA (where applicable), pregnancy disability leave, and any applicable local leave requirements — is genuinely complex. Many California employers with significant employee leave events engage HR professionals or employment law attorneys to navigate specific situations and ensure they are complying with all applicable requirements. The cost of compliance is real; the cost of non-compliance — reinstatement orders, back pay, damages, and attorney’s fees — is far higher.
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