To date, 13 states and Washington, D.C., have passed paid family and medical leave laws, including two new additions this year.1 These laws provide covered workers with wage replacement benefits when they need time away from work to address their own serious health need, care for a seriously ill or injured loved one, or bond with a new child.
Most, but not all, 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.
This issue brief explains the status of coverage for self-employed workers under state paid leave programs. Future pieces in this series will explore in more detail why these workers need paid leave and the benefits it provides.
The availability of paid leave in the states
For employees, coverage under state paid leave laws is generally automatic: Employees have a legal right to the coverage, and they, and/or their employers, are legally required to contribute. In contrast, no existing state paid leave program automatically covers self-employed workers.2 Where states have extended the opportunity for paid leave coverage to self-employed workers, they have done so on a voluntary, opt-in basis.3
Twelve of the 14 existing state paid leave programs allow—or will allow, when they are up and running—self-employed people to voluntarily opt in to coverage: California,4 New York,5 Washington state,6 Massachusetts,7 Connecticut,8 Oregon,9 Colorado,10 Maryland,11 Delaware,12 Minnesota,13 Maine,14 and Washington, D.C.15 Nationwide, about a quarter, or 24.7 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 32 percent.16
Opting in to a state paid leave program typically means submitting an application or notice to a state agency or enrolling through an online portal, providing documentation, and then complying with the state’s rules.17 When self-employed people opt in to 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 when they are unable to work as a result of covered health or caregiving needs, set as a percentage of their self-employment income. More information is provided in the following subsections.
State paid leave programs provide cash benefits, out of an insurance fund, to those who cannot work due to serious health or family needs.18 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 in relation to military deployment or sexual or domestic violence.19 If self-employed people opt in and meet the eligibility requirements, they can apply for and receive cash benefits to cover 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. This can be either a flat rate, where all workers receive the same percentage of their income, or a progressive rate based on income.20 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.21 This creates a sliding scale, where lower-income workers—including lower-income self-employed workers who opt in to coverage—receive a higher percentage of their own income.
Benefits are available for a period of weeks, with 12 weeks being one common maximum time limit per need. The exact available duration varies by state and may vary by purpose.22 If appropriate, self-employed workers may be able to take benefits on an intermittent basis, rather than as a single unit, to cover recurring absences, such as those due to medical appointments.23
State costs to opt in to coverage vary widely. Contributions are typically set as a percentage of a self-employed person’s income, adjusted annually. Rates vary by state: On the low end, contribution in Washington, D.C., is currently 0.26 percent of income,24 and on the high end, opting in to coverage in California typically costs an astronomical 6.9 percent of income.25 All other programs are below 1 percent, with most between 0.45 percent and 0.65 percent. (see Table 1) In every program except Washington, D.C.’s, contributions are capped, usually by only applying the contribution to income up to a certain amount, most commonly at or about the maximum amount subject to taxation for Social Security26—which is currently $160,200.27
In five state programs, self-employed people pay the same amount as employees with the same income. This can mean either that costs are split between employees and employers but self-employed people pay only the employee share—as in Colorado, Oregon, Washington, and Maine28—or that only employees contribute, and self-employed people pay the same amount as employees, as is the case in Connecticut.29
In at least six other programs,30 self-employed workers must pay a higher share of income than employees. In four states, employers and employees both contribute,31 but self-employed workers must pay both the employer and employee shares, potentially resulting in much higher rates than employees pay.32 In Washington, D.C., employees do not contribute to the cost of the program, but self-employed people who opt in pay the full employer contribution.33
Eligibility and waiting periods
For employees, eligibility is typically dependent on meeting a minimum amount of covered earnings or time worked over a fixed period of time prior to the use of leave.34 For the self-employed, except in Colorado,35 eligibility for benefits is typically tied to requirements that workers must meet following opting in to the program. These could include a minimum time that must pass following opting in; a minimum period of time or minimum dollar amount for which the worker must pay into the system; or both.36 In Washington, D.C., and New York, workers who fail to opt in within a certain period of time following becoming self-employed face a longer waiting period—one year in Washington, D.C., and two years in New York.37 In order to opt in, most programs require self-employed people to commit to staying in the program for a certain period of time, typically three years.38
How many self-employed people have opted in?
The number of self-employed people who opt in has remained shockingly low across all programs that offer the option. The six fully implemented programs that allow people to opt in report that for the most recent available time period, an approximate 120,828 total self-employed people opted in out of 6.7 million nonemployer small businesses in those states—an opt-in rate of about 1.80 percent. While opt-in rates vary, even Massachusetts, with the highest opt-in rate, has numbers equivalent to only 7.39 percent of total nonemployer small businesses; rates in the other fully implemented states are much lower. (See Table 2)
Why usage remains so low merits further research and examination. One likely driver of low usage is low awareness: Workers cannot use a program they do not know exists. Low awareness is an ongoing challenge for paid leave programs generally for both employees and self-employed workers, requiring continual outreach and educational investments. Because of the opt-in system, the stakes are even higher for self-employed workers, as they must deliberately enroll in the program, typically for some period of time prior to using it. However, many self-employed workers do not seek out information about paid leave until they have an urgent need for it, at which point it may be too late. More research is needed to identify best practices in education and outreach to engage self-employed workers as well as implement these practices in all states.
Even where workers are aware of programs, however, other barriers may exist. In California, for example, the cost of opting in puts coverage out of reach for many self-employed people. In 2023, covered employees must pay in at a rate of 0.9 percent of their income up to a maximum contribution of $1,378.48 per year, based on maximum income subject to the contribution of $154,164 per year.39 California’s program is fully employee funded, with no employer contribution, so this contribution represents the full amount being paid into the fund on behalf of employees. However, someone who opts in to the program for self-employed workers must typically pay 6.93 percent of their net profit on their first $154,164 in income—nearly eight times the rate of an employee making the same amount.40 However, in exchange, self-employed people are eligible for fewer weeks of benefits—a maximum of 39 weeks compared with 52 weeks for employees.41As a result, self-employed people must pay much more for less.
In New York, self-employed workers face a different challenge. Those who wish to opt in to the state’s paid family leave program must do so within 26 weeks of becoming self-employed. If they do not, they face a mandatory two-year waiting period after electing paid family leave coverage before they can access the benefits—in other words, they must pay premiums for a full two years before becoming eligible for these benefits.42 This deadline is not widely known, and many self-employed people inadvertently miss their window to opt in without triggering the waiting period.43 As noted above, other programs have waiting periods after workers opt in but before they qualify for benefits, but none are close in length to New York’s two-year period.
More work remains to ensure that opportunities to opt in to state paid leave programs are well understood and designed in a way that meets the needs of the self-employed workforce. In addition, the two state paid leave programs that do not currently allow self-employed workers to opt in to coverage—New Jersey and Rhode Island—should be amended to add this option.