Under the new law, workers may take six weeks off to care for a newborn, a newly adopted child or ill family member. They will be eligible to receive 55 percent of their wages during their absence, up to a maximum of $728 a week.
The benefit will be funded by a payroll tax on employees.
"I don't want Californians to choose between being good parents and good employees," said Davis, a Democrat running for re-election in November.
Federal law already grants up to 12 weeks of unpaid leave for workers at businesses with more than 50 employees. But supporters of the California law argued that many workers simply cannot afford to take time off without pay.
The bill originally called for businesses and workers to share the costs, but intense employer opposition in the California legislature led to an amendment that put the costs entirely on workers. Despite that, employers continued to oppose the measure.
Under the final version of the law, workers will be allowed to start taking time off as of July 1, 2004. The payroll deductions will average about $27 a year and range up to $70 a year for those earning more than $72,000 annually, according to the AP.
Businesses with fewer than 50 employees are not required to hold a job for a worker who goes on paid family leave, according to the union AFL-CIO, which helped write the bill.
ifornia Gov. Gray Davis signed a bill Monday that makes his state the first to offer workers paid family leave, the Associated Press reports.