Should employers be compelled to provide paid sick leave? Connecticut, San Francisco, Washington D.C., and Seattle clearly concluded that they should. Each place has enacted a law requiring employers to provide paid sick leave. However, much of the country remains divided. Whether to legislate paid sick leave is a question that has been, and continues to be, repeatedly debated at all levels of government.
What drives the debate? The fact that approximately 38% of all private sector workers do not receive paid sick leave through their employers as a benefit of employment or by law.1 The percentage of low-income service employees that lack paid sick leave is significantly higher, exceeding 70%.2 From a government perspective, inducing sick employees to stay home serves the public interest by minimizing the spread of infectious diseases. Employees, especially those with families, seek paid sick leave to create a better work-life balance without having to lose their jobs. Struggling to survive and keep costs down, businesses oppose the passage of these laws that would impose additional burdens on them. Determining the true impact of these laws is challenging with just four of them in existence. Yet, those studies that have been done in the aftermath of San Francisco’s paid sick leave mandate have found minimal negative effect on employers.
The Paid Sick Leave Laws
Compulsory employer paid sick time is distinct from the leave required by the Family and Medical Leave Act. The latter pertains to unpaid leaves prescribed when a new child is introduced into a household and for serious illnesses. The laws discussed herein require that employees be paid by the employer for a certain amount of sick days taken. These sick days may be taken for any type of employee illness as well as to seek medical aid and to care for a sick family member. Each law also includes safe time needed to protect victims of domestic violence. Here is a brief overview of what these laws require:
Seattle, Washington: This bill was just approved on September 12, 2011 and it will go into effect on September 1, 2012. Minimum standards for paid sick leave are set based on the size of the employer. Employers with 5 to 249 employees must provide an hour of paid time for every 40 hours worked.3 Large employers, with 250 plus employees, must provide one hour of paid time off for every 30 hours worked. Paid leave may not exceed specified maximum days for each level of employer.
Washington, D.C.: The “Accrued Sick and Safe Leave Act of 2008” is similar to Seattle’s statute. Interestingly, restaurant wait staff and bartenders are explicitly excluded from the Act’s provisions. Additionally, it leaves employers the option of applying for an hardship exemption. For those employers that are covered, the requirements again vary based on employer size. Employers with 100 plus employees must provide one hour of paid leave for every 37 hours of work, not to exceed seven days per calendar year.4 Employers with 25 to 99 employees must provide one hour for every 43 hours of work, not to exceed five days per year.5 Employers with 24 or fewer employees must provide one hour of paid leave for 87 hours worked, not to exceed three days of paid leave.
San Francisco: As the first city to implement this type of law, San Francisco enacted the “Paid Sick Leave Ordinance” in 2007.6 All employers must provide paid sick leave to each employee who “performs work in San Francisco.”7 This definition of employee includes part-time and temporary employees. For every 30 hours worked, all employees will accrue one hour of paid sick leave. There is a limit of 40 hours for small employers with fewer than ten employees. All other employers have a cap of 72 hours of accrued sick leave.
Connecticut: The one and only state to require its businesses to provide paid sick leave is Connecticut. It is a very recent addition, having only been signed into law in June 2011. The Connecticut statute is more limited in scope than its municipal counterparts. “Service sector employers with more than 50 workers” are subject to the law.8 Additionally, the law only applies to hourly workers. Those workers earn one hour of paid sick time for every 40 hours worked.9 The number of days that may be earned is capped at five.10 Several types of employers are exempted, such as manufacturers and non-profit organizations.
Many other states and cities, including California* , New York City, and Massachusetts, have considered similar laws. Voters in Milwaukee, Wisconsin passed a paid sick leave law that was later overturned by Governor Walker.11
Public Policy Position
Paid sick leave reduces the spread of infectious diseases by allowing workers to stay home without worrying about their financial security. Without it, some employees would be forced to quit their jobs in order to care for family members. Moreover, if sick employees stay home, exposure to co-workers and members of the public is reduced and correspondingly, the spread of infectious disease is slowed.12 Those employees with sick children and paid leave will more likely keep them home from school and daycare, thereby protecting other children from the spread of disease.
Some proponents of paid sick leave also assert that the lack of paid sick days drives up healthcare costs. Employees without paid sick leave often wait until after working all day to seek care and might thus be forced to use the emergency room.13 Employees with paid sick leave may also have increased loyalty and higher morale, which may lead to improved job performance and reduced turnover.14
Lastly, it is argued that ill employees cannot perform at their peak, resulting in lost productivity to the employer.15 These employees will be more prone to injury and mistakes.16It is thus posited that paid sick leave is less costly to the employer than the costs of ill employees working.
Business leaders generally oppose the passage of these paid sick leave laws, contending that such legislation slows economic growth and will result in a rise in unemployment. This contention is based on the increased compensation costs directly resulting from having to pay for sick leave in a prescribed manner. As of March 2009, the Bureau of Labor Statistics found that “the average cost for sick leave per employee hour worked for private-sector employers was 23 cents.”17 The cost of providing the benefit to higher-level employees is greater, as high as 53¢.18 For service employees, the cost is as low as 8¢ per hour worked.19 At a time when businesses are fighting to survive, adding costs seems burdensome. Income essential to keeping the business operating may have to be diverted to compensation costs.20 Employers may either have to terminate current employees or fail to hire new employees to cover the increased costs.21 Small businesses would be the least able to bear these increased costs, particularly in the difficult economic climate that currently exists.
Employers further argue that these laws penalize those companies that already provide paid sick leave. The paid sick leave laws dictate specific rules for how sick leave is earned. The rules may be at odds with company sick leave policies already in place. These conflicts are problematic when the company has to apply different rules for different employees, depending on the location of the employee.22 Additionally, some companies provide employees with general paid time off rather than divide it into particular categories. That division may better serve the needs of its business. With the imposition of a paid sick leave law, their way of doing business will have to be curtailed in order to comply.23
Impact Studies Post Passage
Two studies have evaluated the impact of paid sick laws on the economy of San Francisco since its passage in 2007. The Drum Institute, a think tank in support of progressive policies, evaluated the employment data coming out of San Francisco in the years following the passage of its paid sick leave ordinance. The purpose was to assess whether such policies negatively impacted employment and business growth. It found that job growth in San Francisco outpaced employment in the three neighboring counties that did not have mandated paid sick leave.24 The report similarly found that business growth increased more in San Francisco than its neighboring counties.25 Neither jump was significant but it did demonstrate that businesses were not negatively impacted by the mandate.
Similarly, the Institute for Women’s Policy Research surveyed 727 San Francisco employers regarding the Paid Sick Leave Ordinance.26 It found that the typical worker used only three paid work days notwithstanding an entitlement to five or nine days.27 Furthermore, “six out of every seven San Francisco employers did not report negative profitability effects” from the ordinance.28 Smaller businesses, i.e. those employers with less than 10 employees, had the most resistance to implementing the ordinance.
Mandatory paid sick leave, while currently applying to a very limited amount of people, is almost constantly being discussed somewhere in this country. In a hard economic climate, it is understandable that businesses are wary of incurring additional costs. However, information gathered in the wake of the implementation of these laws indicates that these costs may be insignificant. Furthermore, some data suggests that these costs may be wholly mitigated by increased productivity and lower turnover rates.29