Washington, D.C. – Legislation proposed in Congress would mandate that firms provide seven paid sick days per year to employees who work 30 hours or more weekly. Naturally, employer groups are alarmed that lawmakers are moving to impose benefit mandates on firms.
Seems 30 is the new 40 on Capitol Hill.
Section 5 of Senator Edward Kennedy’s (D-Massachusetts) “Healthy Families Act,” S. 910, requires that employers with 15 workers or more provide them paid sick leave. The bill pro-rates the paid leave for those who work less than 30 hours. Rep. Rosa DeLauro (D-Connecticut) has introduced a similar bill in the House.
Some business owners are extremely troubled by the proposed mandate.
"The cost of mandated seven days paid-time off is pure overhead cost. It is money taken away from money we could use to improve productivity," responds Michael Fredrich, President of Manitowoc Custom Molding, a Wisconsin-based manufacturer.
According to Fredrich, there is no way U.S. firms can compete with China and other countries on labor costs. The only way to compete is on productivity, he says, which is a function of capital employed. Fredrich says the proposed mandate would make the U.S. even less competitive.
Like many companies, Fredrich’s firm doesn’t differentiate between vacation and sick days. They provide paid time-off (the maximum is three weeks at Fredrich’s firm), which the employee self-manages for sick days or vacation. Adding seven guaranteed sick days (or seven additional vacation days as Fredrich refers to them) would cost his firm about $80,000, which includes the extra days as well as new overtime costs.
He did not include payroll taxes in his totals.
“No small company can afford extra staff. We could do a lot with that money and it sure as hell is not in our budget for 2007,” says Fredrich.
With respect to using paid sick leave, S. 910 allows it to be counted “on an hourly basis” meaning employees can take the sick leave in small increments for doctor appointments or other health-related reasons for themselves, or “for the purpose of caring for a child, a parent, a spouse, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.” Employers would have to keep track of these increments.
Already, businesses that are required to comply with the Family and Medical Leave Act (FMLA) are experiencing difficulties with respect to the administration and unforeseen use of “intermittent leave.” Due to the vagueness in which the FMLA was written, employees are sometimes utilizing leave in hourly — even less — increments.
In response to the “intermittent leave” issue, legal challenges to the FMLA and other contentious areas such as medical certification and their impact on existing benefit programs, the U.S. Labor Department issued a request for information from the public late in 2006. The department is currently studying the feedback to determine if modifications are needed.
Opponents of S.910 note its provisions will greatly exacerbate FMLA challenges. Ambiguous provisions in the FMLA are included in S.910 (albeit in the context of paid sick leave). The overlay of S.910 on top of FMLA could be a human resources nightmare and costly from a legal perspective as well.
Are employers really that cold?
In testimony before the Senate HELP Committee in mid-February, C. Roger King, a partner at Jones Day, reported that a significant percentage of employers provide sick leave, including paid leave. About 75 percent provide such time off, according to the U.S. Department of Labor, Bureau of Labor Statistics, and the 2006 Employee Benefits Survey.
“To the extent that positions or employers do not provide paid sick leave, such positions often are entry level in nature or constitute initial or part time employment,” wrote King in his testimony.
In a recent speech before the Society for Human Resource Management, Senator Mike Enzi (R-Wyoming), Ranking Member of the Senate HELP Committee, reminded the audience that well-intentioned legislation always comes with a “price tag.”
“When the government continues to pile expensive unfunded mandates on employers, particularly small employers, it runs a substantial risk of choking off job creation and stifling business expansion. Simply put, paid leave is no benefit to a worker without a job, or a job applicant without any prospects,” warned Enzi.
Is there any good news for small businesses in S.910? Well, you won’t be punished for being excessively generous.
Section 12 reads: “Nothing in this Act shall be construed to discourage employers from adopting or retaining leave policies more generous than policies that comply with the requirements of this Act.”
Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council, a research and advocacy group based in Washington, D.C. that works to protect small business and promote entrepreneurship. She is also founder of Women Entrepreneurs, Inc. , an association helping women business owners succeed through education, networking and advocacy. Kerrigan can be reached at email@example.com .