LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

ASSEMBLY, No. 3451

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: DECEMBER 24, 2025

 

 

SUMMARY

 

Synopsis:

Revises law concerning family leave to extend protection by reducing employee threshold from 30 employees to 15 employees in definition of employer.

Type of Impact:

Annual State expenditure and revenue increases to the State Disability Benefits Fund due to the change in employer threshold. 

 

Annual State expenditure and revenue increases to the State Disability Benefits Fund due to reduction in minimum length of employment for benefit eligibility under the Family Leave Act.

Agencies Affected:

Department of Labor and Workforce Development; Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

CY 2026

CY 2027

CY 2028

 

State Expenditure Increase - Revised Employer Threshold

Up to $45.4 million

Up to $89.9 million

Up to $92.6 million

 

State Revenue Increase - Revised Employer Threshold

$0

Up to $169.0 million

Up to $115.8 million

 

State Expenditure and Revenue Increase - Reducing Eligibility for Family Leave Act Benefits from 12 months to six months

Indeterminate

Indeterminate

Indeterminate

 

 

·         The Office of Legislative Services (OLS) estimates that reducing the threshold for protected leave to firms with 15 or more employees will result in expenditure increases of up to $45.4 million in calendar year (CY) 2026, up to $89.9 million in CY 2027, and up to $92.6 million in CY 2028.  State revenues collected from the Family Leave Insurance tax contribution to the State Disability Benefits Fund will be unaffected in CY 2026 but will increase by up to $169.0 million in CY 2027 and up to $115.8 million in CY 2028.

·         The bill also reduces the minimum length of employment from 12 months to six months and the minimum base hours from 1,000 to 500 for an employee to be eligible for benefits under the Family Leave Act.  The OLS determines that this provision will result in an indeterminate annual increase in both State expenditures and State revenues to the State Disability Benefits Fund.

 

·         The bill also specifies an employee, regardless of the size of the employer, who takes temporary disability benefits is entitled to be restored by the employer to the position held by the employee when the leave commenced or to an equivalent position.  Although it is unclear how the Department of Labor and Workforce Development will interpret this provision, if protected temporary disability benefits are extended to all employers, there will be indeterminate increases to both State expenditures for benefit payments and to State revenues generated by employer and employee taxes related to the temporary disability benefits program.

 

 

BILL DESCRIPTION

 

      This bill extends to employees of firms with 15 or more employees the right to be reinstated to employment after taking family temporary disability leave benefits or unpaid family leave, thus ensuring that more workers who pay for family temporary disability leave insurance (FLI) will be able to able to return to work after taking FLI benefits.  Under the bill, these employees will be entitled to 12 weeks of job protected leave, whether that leave is paid or unpaid.

      The bill also reduces the minimum length of employment from 12 months to six months and the minimum base hours from 1,000 to 500 for an employee to qualify for job protection under the Family Leave Act.

      The bill provides that an employee who is eligible for both earned sick leave and either temporary disability benefits or family temporary disability leave benefits will have the option of using either their earned sick leave or whichever is applicable of temporary disability benefits or family temporary disability leave benefits, and may select the order in which the different kinds of leave are taken, but may not receive more than one kind of paid leave simultaneously during any period of time.

      Further, the bill provides that an employee, regardless of the size of the employer, who takes temporary disability benefits is entitled to be restored by the employer to the position held by the employee when the leave commenced or to an equivalent position.  The bill also provides that an employee who takes family temporary disability leave benefits is entitled to be restored by the employer to the position held by the employee when the leave commenced or to an equivalent position, except that the bill is not to be construed as increasing, reducing, or otherwise modifying any entitlement provided to a worker by the provisions of the Family Leave Act to be restored to employment by the employer after a period of family temporary disability leave.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

OFFICE OF LEGISLATIVE SERVICES

 

      For CY 2026, the forecast for employee contributions to FLI is $566.2 million with $625.0 million in benefits expected to be paid.  The CY 2026 contributions are based on a withholding rate of 0.23 percent on the first $171,000 of earnings.  These data are used as the baseline for this analysis.

      The enactment of P.L.2019, c.37 reduced the threshold for job protection from 50 to 30 employees, which increased the number of employees eligible for job protection by about eight percent.  As a result of this change, benefit claim volumes increased approximately in line with the increase in employees eligible for job protection during the first year of implementation.  The OLS assumes the revised threshold for job protection will yield a similar proportional increase in claims. 

      Using both New Jersey-specific and nationwide 2020 U.S. Census Bureau data which tracks employment by enterprise size, the OLS can generate an estimate on the increase in the number of employees eligible for job protection under this bill.  The total number of employees working at firms that employ between 15 and 30 employees is approximately 410,000, or a 14 percent increase in the job-protection eligible workforce.

      The bill’s effective date is six months after enactment.  Assuming enactment in January of 2026, the bill’s provisions will be in force for six months in CY 2026.  The OLS model applies half of the 14 percent increase in the eligible workforce against the forecasted $625.0 million in benefits paid in CY 2026, resulting in an expenditure increase of up to $45.4 million.

      With the CY 2026 withholding rate of 0.23 percent already established, the OLS anticipates no change in State revenue from FLI withholdings in this period.  Given the statutory requirement to maintain a withholding rate of 125 percent of the anticipated annual benefit spending, the OLS estimates that CY 2027 will increase by up to $169.0 million relative to the CY 2026 baseline forecast in order to both balance the new projected payouts as well as attain the 125 percent statutory requirement.

      CY 2028 will only have to account for incremental benefit payments, and contributions will increase by up to $115.8 million relative to the CY 2026 baseline forecast.

      Note that the OLS revenue projections are based on assumptions regarding trust fund balances and claim activity.  The Department of Labor and Workforce Development will align the withholding amounts based on the actual claim experiences within a particular calendar year and adjust the withholding calculation accordingly to create the resulting projected balances to align with statutory requirements.

      The OLS model assumes an increase in administrative spending that is proportional to the base increase assumed by the expanded job protection eligibility.  These numbers, when applied to the $25.0 million in administrative costs in the CY 2026 baseline, yield expenditure increases of $3.5 million in CY 2026, $3.6 million in CY 2027, and $3.7 million in CY 2028, which are included in the OLS estimate.

      The bill also reduces the minimum length of employment from 12 months to six months for an employee to be eligible for benefits under the Family Leave Act.  While this change expands the number of workers eligible for FLI benefits, there are no data reported by either the Department of Labor and Workforce Development or the U.S. Bureau of Labor Statistics that delineate employment duration for the period of one year or less.  Based on the lack of specific reporting, the OLS lacks the informational basis to develop an accurate estimate of this provision and determines that it will result in an indeterminate increase in both benefits paid and contributions.

      The bill also specifies an employee, regardless of the size of the employer, who takes temporary disability benefits is entitled to be restored by the employer to the position held by the employee when the leave commenced or to an equivalent position.  This provision of the bill seems to extend job-protected temporary disability benefits leave to all employees who are eligible for that leave.  Pursuant to current law, leave for temporary disability benefits is only protected if that leave qualifies for protection under the federal Family and Medical Leave Act, which generally only applies to private employers with 50 or more employees.  Although it is unclear how the Department of Labor and Workforce Development will interpret this provision, if protected temporary disability leave is extended to all employers regardless of size, the bill will result in additional, indeterminate expenditures, in proportion to the increase in the number of employees taking leave under the bill.  Growth in temporary disability benefit expenditures will, in turn, lead to increases in temporary disability benefit tax rates for employees and employers.  The increases in these tax rates will lead to an indeterminate increase in State revenue.

 

 

Section:

Commerce, Labor and Industry

Analyst:

John Gaudioso

Associate Fiscal Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).