From the January 2003 issue of Entrepreneur

Where California goes, so goes the nation eventually. This time, we may be heading toward paid family leave.

In September, Governor Gray Davis signed legislation making California the first state to require paid leave for employees who want to take care of an ill relative, newborn or newly adopted child. The program-funded by payroll deductions and administered through the state's disability insurance program-allows employees to take up to six weeks at half salary after using two weeks of vacation, and goes into effect January 2004. At least 27 other states-including Massachusetts, New Jersey and New York-are also considering legislation.

Proponents point toward cost savings for employers. A report by UC Berkeley economists estimates California employers could save $89 million a year in turnover costs, and the average cost per employee will be $2.10 per month. Paid family leave is a win-win for employers and employees, says Netsy Firestein, executive director of the Labor Project for Working Families, a Berkeley organization working to pass family leave legislation. Employees will bear the burden of applying through the state and getting a doctor's certification, and the law doesn't require small employers to keep a job open, meaning employees won't take the leave lightly.

Critics fear small employers won't have the flexibility to cover for employees on leave. Plus, it's a regressive tax that will encourage employees to ask for raises so their pay isn't affected, says Scott J. Witlin, a partner at Proskauer Rose in Los Angeles. "Employers will have to make up that cost," he says.

If a paid leave law passes in your state, you'll have to keep close track of time accrued and how much has been used. "Tracking can be a nightmare," says Mary Topliff, an employment law attorney in San Francisco. "It'll be interesting to see how this flies."

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