Paid Leave for California Freelancers: In-Depth Guide
Updated October, 2023
Christina Couch nailed it in her NY Times guide to parental leave for freelancers - it’s a tough thing to pull off. I know because I’ve done it. Having taken California Disability and Paid Family Leave (PFL) as an employee twice before, and worked for over three years with the CA Work & Family Coalition and the CA Employment Development Department to improve access to Paid Family Leave benefits, you’d think it would have been a breeze for me to line up my third maternity leave now that I’m working as a Social Impact Consultant specializing in work-family systems, but no. We still have a lot of work to do to fully include all ranks of workers in our state’s pioneering Paid Family Leave Program, especially for the growing contingent of freelancers and self-employed folks like me.
There are an estimated 2.83 million independent contractors in California. While a good chunk are gig workers piecing jobs together just to make ends meet, freelancing can be attractive to many parents and caregivers for the increased flexibility it can (but doesn’t always) provide compared to traditional employment. The lack of adequate sick time, rigid schedules, and inadequate lactation accommodation are just a few of the barriers many traditional employees face. Until we make work culture and policies more family-friendly, freelancing can seem liberating. But it’s not without tradeoffs, including being on our own when it comes to health and welfare benefits. What most California freelancers don’t realize is that we do have an option when it comes to paid leave.
“What most California freelancers don’t realize is that we do have an option when it comes to paid leave.”
Even with the growing enthusiasm for paid leave nationally, only half of Californians know about our state’s valuable, but underutilized, Paid Family Leave Program (passed in 2002), and an even tinier fraction of us know that freelancers can participate in the state’s “Disability Insurance Elective Coverage” or DIEC program, which provides both disability insurance benefits and paid family leave for qualifying events, such as caring for a new child, a seriously ill child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or domestic partner, and for reasons related to a family member’s military deployment. That's right folks, California offers a paid leave program for freelancers and the self-employed! (For a price).
I signed up for DIEC and claimed a total of 12 weeks of pregnancy disability and 6 weeks of paid family leave benefits in 2019 (this was before PFL benefits increased to 8 weeks), and I’m glad I did. Rather than seeing my savings dissolve during my leave, those payments gave me financial cushioning to hire a babysitter so I could get to a yoga class, take a shower or just catch up on managing our household of 5 - staving off the threat of postpartum depression.
Here is the Employment Development Department’s (EDD’s) page about the DIEC Program, but let me help you decipher a few key takeaways if you are a freelancer seeking coverage.
DIEC Cost Vs Benefit:
First, the DIEC Program requires that you commit to paying 2 years of premiums (unless you stop self-employment), so you will want to calculate that cost compared to the potential benefits you are likely to draw before signing up.
As of 2023, the DIEC premium rate you’ll be required to pay is 6.93 percent of the first $153,164 reportable for 2022 (your net profits as reported on your 2021 IRS schedule SE or schedule C), and must be paid in quarterly installments (i.e., four times annually).
Some examples:
$15,000 annual income = $1,040 annual premium
$50,000 annual income = $3,468 annual premium
$153,164 annual income = $10,615 annual premium
DIEC pays 60% of income replacement during a qualified leave (and 70% for very low income earners) for up to 39 weeks of disability (including time during pregnancy or following childbirth when you aren’t able to work) and 8 weeks of Paid Family Leave per year (including time taken by parents of any gender to care for their new baby). Beginning in January 2025, the income replacement rate will increase to 70% (and 90% for low and middle income workers), thanks to SB 951.
As you can see, DIEC is not exactly cheap. So is it worth it? Crunch the numbers and see if it makes sense for your situation. In general, I would not recommend the current DIEC program for low-income freelancers or for people who are unlikely to experience pregnancy complications or other medical issues that require them to take an extended leave. For example, a full 8-week caregiving leave to bond with a new child or care for a sick parent may not be enough to justify the premiums and considerable work involved in applying and dealing with confusing paperwork. Unless you’re very risk averse or have reason to believe you will be incapacitated by pregnancy or other medical conditions for an extended period, you may decide it doesn’t make sense to shell out for the insurance.
That said, DIEC is a decent option for higher earning freelancers who are trying to get pregnant or who are in their first couple months of pregnancy (you have to sign up several months before you intend to use any benefits), since they would be more likely to take advantage of both Disability Insurance during pregnancy and following childbirth, as well as Paid Family Leave on top of that.
Just to clarify, Disability Insurance (DI) covers the period when you cannot perform your regular work due to your own disability or medical condition (e.g. during pregnancy, especially in the final weeks, & during recovery from birth). Paid Family Leave (PFL) covers the period when you are bonding with a new child (birth/adoption/foster) or caring for a seriously ill family member, and for qualifying activities related to a family member’s military deployment. Both Disability Insurance and Paid Family Leave are administered by the CA Employment Development Department (EDD) and both pay the same rate of benefits during a qualified leave.
In California today, a typical maternity leave includes 4 weeks of pre-birth disability leave (it can be earlier and/or longer if medically necessary), followed by 6 weeks (vaginal) or 8 weeks (cesarean) of post-birth disability leave. Add to that 8 weeks of Paid Family Leave bonding time, and that totals 18 - 20 weeks of paid leave, as illustrated:
DIEC Return on Investment
To calculate your potential SDI/PFL weekly benefit, divide your annual net profits by 4, and locate your place on this chart. Here are some examples to give you a sense of the potential return on investment with the DIEC program based on current benefit rates (which will be increasing in January, 2025):
As seen from these examples, higher-income DIEC participants pay higher premiums, but they also reap higher benefit payouts, which can make it worth it. Meanwhile, low-income participants likely can’t afford to part with over 6% of their earnings given California’s insane cost of living, especially with a potential benefit that is currently only 60-70% of their regular weekly earnings. But do note that self-employed individuals can continue receiving income/profits from their business during leave/while they collect DI/PFL, which may supplement wage replacement benefits - learn more here, and contact the EDD to understand how this might apply to your situation.
As noted by Annie’s helpful comments below, keep in mind that the PFL portion of your leave benefits are taxable (but SDI payments are not), and this is not factored into the calculations above.
Beyond providing paid leave for pregnancy, bonding, or your own long-term illness/disability, DIEC may also be a good idea for people who have a family member with a chronic serious illness who would need 8 weeks of caregiving multiple years in a row - for example, I might need to carve out time off to care for my mom with Parkinson’s in the coming years. Again, this really comes down to doing some math to see if the potential benefits you are likely to draw will justify your quarterly premiums.
If you think DIEC could be worth it for your situation, keep in mind there are some other critical factors to consider.
Application Process & Timeline
The Employment Development Department uses a “Base Period” framework to determine your eligibility and benefit rate, and has important ramifications for your DIEC application timeline. The EDD now allows for an “Alternate Base Period” that shortens the enrollment lead time. Now, the EDD just requires you to have paid your DIEC premiums for at least 4 months during the 12 months leading up to your SDI/PFL application. That means you need to enroll in the DIEC program more than 4 months before you need to file an SDI/PFL benefit claim. For pregnant freelancers, that means you should try to apply for DIEC coverage by your first or early in your second trimester. Download the DIEC application here.
Note that if you contributed to SDI as an employee during your base period, you may be able to go the easier route of applying like any employee and forego DIEC altogether. Also, for DIEC eligibility, the EDD is going to verify you are correctly classified as a contractor. If it turns out you are actually a misclassified employee, you will need to go through a separate reclassification process. Check out Legal Aid at Work’s new Misclassified Workers’ Guide to Applying for California Disability Insurance and Paid Family Leave.
Transition Planning
As freelancers (and not employees), job protection laws don’t apply, so we have to plan ahead and work with our clients on a transition plan that ensures we have a thriving business to return to. I almost walked away from one of my projects, but decided to propose a team-approach where I set up subcontractors who could continue the work until my return. I provided direction and support before my leave, and then the subcontractors would invoice me for their work, and I would invoice my client so I could pay the team even though I was on leave and not doing the work directly (although I did end up having to provide some support during my leave).
I was concerned that this arrangement might be considered as income/work and disqualify me for benefits, but I verified with an EDD official in advance of my leave that I could still receive benefits while my business brought in revenue, although this still feels like a bit of a gray area.
Overall, this worked really well for me and my client since they didn’t have to start from scratch with a completely new consultant, and I was able to return to a great project with a contract that may be extended for up to 5 years. Christina Couch’s article has more ideas on how to transition into and out of your leave as a freelancer, but certainly, this will depend a lot on your particular industry.
Partner Benefits
If your partner is an employee in California, they have a separate host of protections and benefits you should be aware of. One specific example, non-birth partners who are paying into CA State Disability Insurance (CASDI) through their jobs can take up to 8 weeks of Paid Family Leave, including time to care for you while you are on Disability Leave (before baby is born) if your OB certifies that you need care, which of course you do! However, this requires applying for two separate claims - one “caregiving” claim for the pre-birth period, and another “bonding” claim for the post-birth period (limited to a total of 8 weeks in a 12-month period). This was especially helpful for my family since my doctor had me on notice to deliver for over a week before the baby actually came, and my partner was able to be home to support me and our two older kids in that final stretch. Also, anyone can receive Paid Family Leave benefits on an intermittent basis (as long as bonding leave is completed before the baby turns one), so my partner took 4 weeks around the birth and another 2 weeks several months later – but again, this requires some prowess with the art of paperwork. There are more ins and outs for employees interested in learning about their disability and family leave rights, which you can learn about from Legal Aid at Work and others.
But do note that if your partner is an employee, there is a separate law, the CA Family Rights Act (CFRA), that protects their job during a family leave, and requires serving at least 1 year on the job, 1250 hours in the year before their leave, and working for an employer with at least 5 employees. In other words, they may be eligible for PFL wage replacement benefits from the EDD during a leave, but their job may not be waiting for them when they want to return, so they need to notify their employer 30 days in advance when possible and secure this protection (in a written agreement) with their boss/HR.
As a freelancer, chances are you are good at planning for your business, taking initiative, solving problems, and dealing with paperwork – and if not, DIEC is a great opportunity to develop those skills! And being with your loved ones when it matters most is the greatest motivator.
Build Your Savings
To start with, it’s a good idea to have healthy savings in the bank to help you weather delays with your Disability Insurance or Paid Family Leave claim for benefits. The EDD strives to process claims within 2 weeks, but it could take longer, especially if there are any complications or questions with your claim. Also, there is a mandatory 1-week unpaid waiting period for SDI benefits (but not for PFL), and of course, DIEC provides only partial income replacement (currently 60% for mid- and high-income earners, 70% for low-income earners - but increasing to 70% and 90% respectively in January 2025!).
Don’t File Early or Late
You might think it would be a good idea to apply for SDI/PFL benefits in advance of your leave to help avoid delays – think again! Do NOT submit your claim before you are eligible for benefits or you will be denied. I submitted a pregnancy disability claim on Dec 22nd, but since I wasn’t eligible for benefits until Jan 1st (based on my DIEC enrollment date), the EDD denied my claim, resulting in a big hassle to change my “Claim Effective Date,” and a significant delay in receiving my benefit payments. I did not receive my first payment until February 11th. Also, you have 49 days from your qualifying event to file for benefits, but you will want to file right away to prevent any further delay. (You can also apply beyond 49 days if you have a good reason for the delay.)
Make a Friend at the EDD
When issues like this come up (which they often do), it’s very helpful to make a friend at your local EDD branch office, or any human being who personally communicates with you. The EDD is a total bureaucracy, but with lots of good people who care about their mission. A guy named Roger out of the San Jose office was the representative who initially contacted me regarding my DIEC application, and I stuck to him like hot glue because even I could not figure out how to get the help or information I needed through the EDD’s labyrinthine phone system, and my man Roger was a big help. I also leaned on some of my colleagues at the EDD for help at times, but Legal Aid at Work runs a wonderful free Work & Family Help Line to assist anyone with challenging cases.
Be Proactive & Don’t Wait for EDD to Follow-Up
Expect a lot of paper in the mail, but don’t expect to receive notice of what is needed to complete your claim all the time. Both my partner and I ended up in situations where the EDD did not specify what was missing or how to fix it - be proactive, call, ask questions, don’t sit and wait! In my case, after I reached out for help with my denial, an EDD representative advised me to hand-write a request to change my claim effective date on the denial letter and simply mail it back in. In this day and age, it felt terribly wonky, but I did it, and they fixed it. I guess another lesson here is don’t write off snail mail and good old-fashioned written correspondence - but it’s a good idea to make copies of everything you submit.
Update: Since I first published this guide, the EDD has fortified the DIEC information available on their website, including this helpful FAQ.
Protect Your Sanity and Write Down the EDD Phone Tree
Write down the EDD phone tree so you don’t have to listen to the same long messages over and over every time. At the time I’m writing this, here is the PFL Phone Tree.
After hearing from advocates, the EDD recently reinstated their website’s “AskEDD” feature for Paid Family Leave inquiries, which allows you to submit free-form questions and get a personalized response (usually via email). This is how you navigate to it (at the time of this post):
Visit AskEDD.
Select the Paid Family Leave category, then
Miscellaneous Inquiry sub-category, then
Other (Questions)
Enlist Your Doctor
One last tip - communicate clearly and graciously with your doctor’s office to get all of the right forms filled out for you and your partner. Most OBGYN offices (and fewer pediatricians) will be familiar with this paperwork, but there is no mandatory training on SDI and PFL for Medical Assistants or even HR professionals, so be prepared to help fill in the blanks.
Future of Paid Leave for California Freelancers
Finally, if you are still with me, then you will probably agree, we could use some improvements to our Disability Insurance and Paid Family Leave system, particularly for freelancers. The Disability Insurance Elective Coverage (DIEC) program is somewhat cost-effective for higher-income earners but does very little to meet the needs of lower-income gig workers. Add to that the antiquated application process and customer interface for all SDI/PFL customers, and it seems like a whole ‘nother gig just to figure it all out. The good news is that Governor Newsom is a big champion of paid family leave and government modernization. While great strides are being made to expand paid family leave rights, we cannot overlook the need to improve SDI and PFL programs through a more streamlined application process, more community education, more inclusive and accessible customer service, and by creating a more equitable DIEC option for the growing ranks of gig workers. A Better Balance has suggestions that policymakers can look to moving forward. The way I see it, a simple start would be to decrease the DIEC premiums and improve the EDD phone support system. A more comprehensive solution might be to fold a small paid leave premium into our state’s self-employment tax to bolster the insurance pool and provide meaningful benefits to every freelancer.
The nature of work is changing, but the need to care for our families is not. I hope what I’ve shared makes it a little bit smoother for other freelancers, and sheds some light on the need for thoughtful policy change and effective implementation of paid leave in California.
“The nature of work is changing, but the need to care for our families is not.”
Questions?
If you have questions about your specific situation, I highly recommend contacting Legal Aid at Work’s Work & Family Helpline. They are the best!
Other Resources:
Constructing 21st Century Rights For A Changing Workforce - from A Better Balance
The Changing Nature of Work and Implications for Paid Family and Medical Leave Programs -a webinar with CLASP and Family Values @ Work
It’s no small task to make this information decipherable, so big thanks for editing support from:
Sharon Terman, Iris Wagner, Katherine Wutchiett, Legal Aid at Work
Liz Morris, Center for WorkLife Law at the University of California Hastings College of the Law
Liz Ben-Ishai, LA County Homeless Initiative