How Mandatory Sick Pay Laws Hurt Small Business
If news reports are an accurate reflection of where the country is at, we’re in a period of increased conflict in employer-employee relations.
The most visible of these conflicts has been the public protests demanding a $15 per hour minimum wage. Yet there’s another battle going on that’s capturing fewer headlines, but could have a bigger impact in the short and medium term: state and local sick pay mandates.
Connecticut, the District of Columbia, Jersey City, New York City, Portland, Oregon, San Francisco and Seattle have all passed legislation requiring virtually all employers to give paid sick days. Similar bills are pending in Alaska, Arizona, California, Florida, Hawaii, Illinois, Iowa, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina and Washington.
On the other side of the battle, several states have passed legislation that prevents cities and counties from enacting their own sick pay laws: Arizona, Florida, Georgia, Indiana, Louisiana, Kansas, Mississippi, North Carolina, Tennessee and Wisconsin.
The battle lines are drawn.
Both sides of the debate
Proponents argue that these workers – including part-time and temporary employees – need the pay for financial and job security reasons. Further, it is a matter of public policy because without paid sick leave, employees often go to work ill and spread disease, attorney Nancy Delogu told Bloomberg DNA.
The National Federation of Independent Business cites a study done on the Massachusetts law that says 16,000 jobs would be lost and the state’s economy would take a cumulative hit of some $8.4 billion by 2016. But perhaps the worst finding is that two-thirds of the job losses and about half the drop in sales would come from small business.
While all of these proposed laws differ, they all come with additional paperwork and record keeping requirements and sometimes the formulas used to calculate entitled sick days can be rather Byzantine. For example, due to state and city laws governing sick pay in New York City, a domestic worker who puts in 20 to 29 hours per year in the previous year is entitled to three and one-third sick days. The usefulness of one-third of a day is, at best, debatable.
Small vs big business
Among bigger businesses and government, sick days are expected to be part of the benefits package. In fact, this has been the case for so many years that sick days are generally viewed not as a “benefit” but as a right. The problem is that sick days have a different operational impact on small business. In large companies – with the exception of long-term illnesses – there are usually no additional payroll costs when an employee misses work.
Big businesses can stay open and function when employees call in sick. The work can be delayed or staff members juggled around. However, when there are only a handful of employees, this isn’t so easily accomplished. The missing employee needs to be covered through overtime or by bringing in someone to cover. The small business owner pays both the sick pay and the cost to have someone else do the work.
It seems like many of our elected officials are unable to discern the different economic ecosystems in which big business and small business are able to thrive and when they legislate the write laws they assume every businesses is able to play by the same rules as larger corporations.
Small business owners need to help educate their representatives so lawmakers can truly appreciate what it takes for startups, solopreneurs, family businesses and other small ventures to survive in the long term.
