California Paid Family Leave Requirements for Employers

California employers don’t fund Paid Family Leave, but they carry real compliance work around it: posting notices, distributing brochures, withholding State Disability Insurance (SDI) from every paycheck, responding to Employment Development Department (EDD) claim notices on a tight deadline, and coordinating the leave with state and federal job-protection laws. The California Paid Family Leave requirements for employers are administrative rather than financial, and the penalties for missing them are steep enough to warrant a clear process. Here is what you need to have in place.

Required Notices and Brochures

Post the Notice to Employees (DE 1857A) where every worker can see it. The poster covers Unemployment Insurance, Disability Insurance, and Paid Family Leave rights together.¹

You also have to hand out the Paid Family Leave brochure (DE 2511) at specific moments:²

When a worker is hired.
When an employee requests leave to bond with a new child by birth, adoption, or foster placement.
When an employee requests leave to care for a seriously ill spouse, registered domestic partner, parent, child, grandparent, grandchild, sibling, or parent-in-law.
When an employee requests leave tied to a qualifying family member’s deployment abroad with the U.S. armed forces.

Distribute the Disability Insurance Provisions brochure (DE 2515) to new hires and to employees requesting medical leave as well, since both programs run off the same SDI fund.² Both brochures are free from the EDD.

Payroll Withholding

Withhold SDI from employee wages and remit it to the EDD. The 2026 rate is 1.3%, and since January 1, 2024, there is no taxable wage ceiling — the rate applies to all wages.³ Employees see this as “CASDI” on pay stubs.⁴

The rate changes most years, so update payroll systems each January. The elimination of the wage ceiling in 2024 caught some employers who were still capping withholding at the old threshold and ended up underpaying.

Your financial role stops there. Employers do not contribute their own money to PFL.⁵

Responding to a PFL Claim

Employees file their own PFL claims directly with the EDD using form DE 2501F. You don’t approve or deny anything. Once a claim is filed, the EDD sends you a Notice of Paid Family Leave Claim Filed (DE 2503F), and you must complete and return it within two business days.⁶

That window is the single most common place employers slip. Assign someone in HR or payroll to watch for DE 2503F notices and respond with wage and employment information the same day they land.

You cannot require an employee to burn through accrued sick leave or PTO before PFL benefits start. As of January 1, 2025, that practice is explicitly prohibited.⁷ An employee may voluntarily use PTO to supplement PFL if both sides agree.

A quick note on the benefit itself: PFL pays up to eight weeks of wage replacement in a 12-month period, roughly 70% to 90% of prior wages up to $1,765 per week in 2026, with no waiting period.⁴ You don’t calculate or pay this, but you’ll field questions about it. Note that PFL only pays benefits. It does not protect the employee’s job.

Coordinating PFL With Job-Protected Leave

This is the area that produces the most expensive mistakes, because PFL, the California Family Rights Act (CFRA), and the federal Family and Medical Leave Act (FMLA) overlap but don’t match.

Which Laws Cover Your Business

CFRA applies to employers with five or more employees.⁸ FMLA applies to employers with 50 or more employees within a 75-mile radius.⁹ Each gives qualifying employees up to 12 weeks of job-protected leave per year for reasons that include bonding with a new child and caring for a seriously ill family member.¹⁰

A California employer with five to 49 employees is covered by CFRA but not FMLA. At 50 or more, you’re likely covered by both. Where both apply, qualifying reasons and family-member definitions aren’t identical, and you must follow whichever rule is more generous to the employee on any given point.

Run the Leaves Concurrently, and Designate

When the reason for PFL also qualifies for CFRA or FMLA leave, run the periods concurrently. PFL supplies up to eight weeks of wage replacement; CFRA and FMLA provide up to 12 weeks of job protection. The PFL pay covers part of the protected period, and the employee can take the remaining weeks unpaid under CFRA or FMLA.

Designation is where this goes wrong. Tell the employee in writing that the absence is counted as CFRA leave, FMLA leave, or both. Time off that was never formally designated as protected leave often doesn’t count against the annual allotment, which means the employee can claim additional weeks later.

Keep Health Insurance in Place

An FMLA-covered employer must maintain the employee’s group health coverage on the same terms as if the employee were still working: same plan, same employer contribution, same deductibles.¹¹ CFRA imposes a parallel requirement under state law. Dropping coverage during protected leave can trigger regulatory penalties and a private lawsuit.

Federal Tax Treatment

PFL benefits are federal taxable income. The IRS confirmed this in Revenue Ruling 2025-4, treating state family leave payments as gross income under Section 61. They are not wages for federal employment tax purposes, so the state does not withhold Social Security, Medicare, or federal income tax on them.¹²

The state, not you, issues the Form 1099 when PFL payments reach $600 or more in a tax year.¹² You generally don’t put PFL benefits on the W-2. One exception: if you voluntarily pick up part of the employee’s SDI contribution (an “employer pick-up”), those amounts are wages for federal employment tax purposes and go on the W-2.¹³

Penalties for Non-Compliance

The EDD penalty structure runs on a 15% charge that attaches across most employer failures and stacks when multiple violations overlap:¹⁴

Late or underpaid SDI contributions: 15% of the amount due.
Quarterly reports more than 60 days overdue: an additional 15% on top of the late-payment penalty.
Failure to file returns: 15% of assessed contributions, with no good-cause exception.
Negligent or intentionally deficient filings: another 15% that stacks on the failure-to-file penalty.
Fraud or intent to evade: 50% of assessed contributions, also stacked on other applicable penalties.

The EDD will consider a good-cause waiver on the standard late-payment and underpayment penalties if you can show a reasonable explanation. Fraud penalties carry no waiver. An employer who files late, underpays, and submits an inaccurate report can take the 15% hit three times on the same contributions, plus interest.

Voluntary Plan Alternative

If you want more control over claims, you can apply to the EDD for a Voluntary Plan (VP), a privately administered plan that replaces state SDI for both disability and PFL. To get EDD approval, the plan must:¹⁵

Match every state SDI benefit and improve on at least one.
Keep employee contributions at or below the current SDI rate.
Secure written approval from a majority of eligible employees before taking effect.

A VP shifts administrative work onto the employer or its third-party administrator rather than removing it. VP employers also pay the EDD an assessment equal to 0.182% of covered wages (the worker contribution rate times 14%).¹⁶

Recordkeeping

Federal law requires employers to keep employment tax records for at least four years after filing the fourth-quarter return for the year, which covers the SDI withholding records tied to PFL.¹⁷ California’s wage and payroll recordkeeping rules generally align with or exceed that federal minimum.

Hold on to more than just payroll. Keep copies of DE 2503F notices you received and the responses you sent, any leave designation letters, and documentation showing when and how you distributed the required brochures. If an employee or the EDD later disputes whether you met your notification or response obligations, those records are your defense. Keep them organized and quickly retrievable.

1
Employment Development Department. Required Notices and Pamphlets
2
Employment Development Department. Employer Requirements for Disability Insurance and Paid Family Leave
3
Employment Development Department. SDI Contribution Rate 2026
4
Employment Development Department. Calculating Paid Family Leave Benefit Payment Amounts
5
Employment Development Department. Paid Family Leave Benefits and Payments FAQs – Section: Who Pays for PFL?
6
Employment Development Department. Paid Family Leave
7
Employment Development Department. FAQs – Paid Family Leave Eligibility
8
California Civil Rights Department. Family Care and Medical Leave Fact Sheet
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U.S. Department of Labor. Fact Sheet 28 – The Family and Medical Leave Act
10
California Civil Rights Department. Family Care and Medical Leave Quick Reference Guide
11
eCFR. 29 CFR 825.209 – Maintenance of Employee Benefits
12
Internal Revenue Service. Revenue Ruling 2025-4
13
Internal Revenue Service. Notice 2026-6 – Extension of Transition Period for Revenue Ruling 2025-4
14
Employment Development Department. Penalty Reference Chart (DE 231EP)
15
Employment Development Department. Become a Voluntary Plan Employer
16
Employment Development Department. Contribution Rates and Benefit Amounts
17
Internal Revenue Service. Employment Tax Recordkeeping