Saturday, November 26, 2022

How Layoff Affects Disability Insurance, Paid Family Leave Benefits

I’m closing down a department in my company and laying off all the employees in that department. One of the employees is on pregnancy disability leave and collecting state disability insurance (SDI). Can I lay her off? Will she lose her SDI benefits? Will she still be able to collect paid family leave in a few months if she’s unemployed?

California’s pregnancy disability leave law (PDL) has very strong job protection rights. In this particular situation, however, you may be able to include this employee in the layoff if you can show she clearly would have lost her job even if she had not been out on a protected leave.

If all the employees in that department are being laid off, she can be laid off at the same time. An employee who is on PDL does not have any greater job protection right in this situation than other employees do.

However, if some employees are being transferred to other departments instead of being laid off, then you will likely have a much more difficult time justifying the layoff and should consult with legal counsel before making any final decisions.

SDI Benefits

When an employee who is receiving SDI benefits is laid off, she does not lose eligibility to continue receiving those benefits. The SDI program does not take into account whether you are holding her job.

Since your employee became disabled by her pregnancy while she was still working, and her SDI claim was approved at that time, she can continue to receive benefits even though there is no longer a job to which she can return.

The SDI benefits will last as long as she is disabled by her pregnancy or until the benefits are exhausted under the terms of the SDI program. Because SDI is funded by employee payroll deductions, there is no cost to you as the employer.

Paid Family Leave Benefits

Your employee also should be eligible for up to six weeks of paid family leave (PFL) benefits for baby bonding after her period of pregnancy disability ends, despite having been laid off.

As long as she was working at the time her SDI claim began, and she transitions directly into a PFL claim, the fact that she has no job to return to should not change her eligibility.

Like SDI, there is no cost to you as the employer because PFL is funded by employee payroll deductions.


Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.

Staff Contact: Ellen Savage

Ellen Savage
Ellen Savage
Ellen Savage joined the CalChamber in 1990 and currently serves as an HR adviser. She has been assisting employers on the Helpline since 1993. She was the editor of eight editions of the California Labor Law Digest and author of the CalChamber's California Hiring to Termination Guide. Her experience also includes practicing at a large Sacramento law firm and presenting at dozens of employment law seminars statewide. She holds a J.D. from Lincoln Law School.

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