Business divide on family leave
Employees want the paid benefit, but small firms worry about the details: What will it cost? Who will provide it? How do I cover for the worker?
Mowa Haile, president and CEO of Sky Blue Builders in Aurora, has a lot of worries on his plate right now, the latest being the spread of the novel coronavirus, the health impact on his employees and the slowdown in construction work it could trigger.
Supporters of paid family and medical leave, which is under consideration in Colorado, argue that the current coronavirus pandemic makes a strong argument for why paid leave is needed.
“It is a valuable benefit for people, and there is no evidence that people are abusing it,” said Elise Gould, a senior economist at the Economic Policy Institute.
Gould argues that paid leave would allow workers to handle the two weeks required to get over a coronavirus infection, or to care for loved ones who might fall ill, or watch children if schools are closed.
But Haile and many business owners remain skeptical of Colorado adopting paid leave. They worry about the hit to the bottom line and losing the staffing flexibility they now have.
“A lot of small-business owners are living month to month. We are not all rich by any means,” he said. “If you implement paid leave this year, it will cause havoc, even at Sky Blue.”
Haile fears that he might have to cut an employee out of his workforce of 45 to accommodate the higher costs associated with providing paid leave, and that’s separate from what happens if the economy slips into a recession because of the outbreak.
For the fifth time in six years, the state legislature is looking at legislation that will require most employers in the state to provide paid leave as a benefit. If a bill is introduced and passes this time around, a big if, Colorado would become the ninth state in the nation to require that benefit.
Most employers agree that providing paid family and medical leave is good, both for their employees and society, said Roger Hays, president of Premier Employer Services in Arapahoe County.
“We are all humans; we want to make sure we take care of everybody. We see everybody as family,” adds Haile, who emigrated to the U.S. from Eritrea when he was 9 years old.
It’s not the concept
The struggle is not with the concept, but with the costs and balancing competing interests, Hays said. Employers ask questions such as how flexible will the rules be, how much time off must be provided, what are the safeguards to prevent abuse and above all how much will it cost and how will coverage be provided. Workers and labor groups ask a different set of questions, such as how can every employee be covered, can the risk and costs be spread evenly, what are the consequences for employers who don’t comply, and how broadly can family be defined.
“For our members, it is the top issue,” said Kelly Brough, president and CEO of the Denver Metro Chamber of Commerce. “They are anxious.”
In interviews, business owners listed several concerns. They don’t want another state program, especially given that a private insurance market — one they are familiar with — already exists to provide benefits. They also want a larger exclusion for small businesses that matches federal rules — meaning employers with fewer than 50 workers wouldn’t have to comply with the new mandate. And they would prefer a phase-in to give them time to adjust to any new requirements.
The federal Family and Medical Leave Act of 1993 provides workers with up to 12 weeks of unpaid leave after they have exhausted their sick days and vacation time and job protection so they can return. Employers with fewer than 50 workers are excluded.
Versions of the state bill have required coverage for six or 14 weeks for firms with 20 or more employees initially, and then 10 or more. That means many smallbusiness owners who weren’t required to offer even unpaid leave could soon find themselves having to offer paid leave in Colorado, Brough said.
About 19% of U.S. workers had paid leave last year, up from just 10% in 2010, according to the U.S. Bureau of Labor Statistics. But those workers tend to hold higher-paying white-collar jobs.
About a quarter of U.S. workers lack paid sick leave for themselves, much less any paid time off to take care of a new baby, aging parents or a sick spouse.
Hays said administering and paying for a new employee benefit can be intimidating for a small firm, given all the other programs and mandates they must already comply with.
Also, even if costs prove minimal, there is the issue of replacing the workers who go on leave. For large firms, that could involve splitting the tasks of a worker on leave among multiple co-workers. Small firms typically don’t have that luxury.
Often, they cross-train their employees to handle multiple tasks. Someone who handles accounting might also do human resources and fill customer orders. Finding a temporary worker who can take on a variety of duties is not easy. Turning to talent agencies or staffing firms carries an added expense.
“Forget about the money that is paid into the program,” said Mike Donahue, manager at Spectrum Properties LLC at Metro Brokers in Lakewood. His worry is what happens if more than one employee requests leave at the same time.
“Losing that much of a workforce and trying to replace it with temporary people, that is really problematic,” he said. Setting rules in stone eliminates the flexibility that now exists in trying to balance the need of the employer and the employee.
A paid family leave bill hasn’t come out yet, and it remains uncertain whether the legislative session will resume after a recess triggered by the coronavirus outbreak. It may not see the light of day this year.
The specifics of the bill also remain in flux as sponsors try to balance requests from different groups, but three options are possible. Employers, if they can afford to do so, will have the option to self-insure, meaning they will pay for leave on an as-needed basis. Those who don’t self-insure can look for coverage with private insurance carriers regulated by the state.
Employers who are rejected by private carriers or otherwise can’t find a policy would be able to access a state-run plan. It is likely that the state-run option would also cover workers at exempt firms who want to buy coverage.
Publicvs. private coverage
“The governor has been clear with us that he supports paid family leave,” Brough said. In turn, the business community has been clear that it wants a private marketplace to supply that coverage.
The more than 210 members of progressive-leaning business organization Good Business Colorado support a social insurance model akin to unemployment insurance and are adamantly opposed to a private mandate that forces companies to deal with insurance companies if they don’t have the wherewithal to selfinsure.
Edwin Zoe, a Good Business Colorado member and owner of the Zoe Ma Ma restaurants in Boulder and Denver’s Union Station neighborhood, is passionate about the topic. Zoe knows as much about it as any business owner in the state, given that he served on the task force lawmakers established last year to study the issue and make recommendations to the legislature.
“One of the reasons I got involved is I felt like the large business organizations have not spoken to my values in terms of the need for certain equity in the marketplace for low-wage workers,” Zoe said.
Zoe identifies as a fiscal conservative. A Taiwanese immigrant, he studied international business and finance at the University of Colorado and founded a tech company before launching his Boulder restaurant alongside his mother, Anna Zoe, in 2010. For him, the motivation to push for a paid leave program comes from hearing President Ronald Reagan’s speech comparing America to a shining city upon a hill.
“I feel like we really have not lived up to our promise,” he said. “If a person is willing to work hard, willing to work a full-time job and be a productive member of society, they should have some basic decency afforded to them.”
That means not having to choose between taking time away from work to care for a sick loved one or paying rent.
There is another quote Zoe heard recently that he feels speaks to the debate going on around the yet-to-be-introduced bill. “In God we trust. Everyone else, bring data.” He points to an actuarial study completed by consultants in December examining policy options considered by the task force.
The study has an 87% confidence rate that a social insurance option funded by a 0.71% premium charged on employees’ wages can be solvent. The task force, which disagreed on a lot, unanimously supported a universal social insurance program implemented and managed by the Colorado Department of Labor and Employment.
By Zoe’s calculations, if a company spends 30% of its revenue on labor, a 0.71% premium charged on payroll breaks down to just 10 cents on every $100 in revenue a business brings in if that premium is split between workers and their employers. Some companies spend that on paper towels, he said. Based on cost caps he has heard that are being considered for the private insurance bill, plans could be so expensive being forced to pay for them could threaten the existence of small businesses like his.
Zoe also expressed skepticism that a competitive private insurance market would materialize. He hasn’t seen any data on that, whereas California and New Jersey have had functional programs for years relying on a social insurance model. He applauded Rep. Monica Duran and Sen. Angela Williams for dropping off the bill as sponsors last month, noting that it takes courage to admit that you’re on the wrong path when things are this far along in the process.
“If it’s a private mandate, absolutely it should not pass. It’s a huge bow down to the insurance lobby,” Zoe said. “Low-margin businesses with low-wage workers just do not have the resources to make this happen. We know what the most efficient system is.”
Edie Sonn, a vice president of public affairs at Pinnacol Assurance, said that when it comes to workers’ compensation coverage, Colorado has a system that blends private providers and a quasipublic insurer.
That insurer, Pinnacol, is the provider of last resort in Colorado and although it isn’t private, it ranks as the state’s largest source of coverage, a testament to its ability to compete. With some changes in state law, Pinnacol has argued that it could take on anoth
er insurance line, paid leave, saving the state of having to reinvent the wheel and add another layer of administrative costs.
As is the case with workers’ compensation insurance, Pinnacol initially argued that the risk should be underwritten. Industries that used more paid-leave should pay higher premiums. But that did not sit well with the task force, who favored spreading the risk out across the entire pool.
In the end, progressive groups opposed Pinnacol’s involvement, and so did private insurers, who don’t want to see it expand into other areas of coverage. Sonn said what is likely to come out is a complicated system that in its effort to please everyone will please no one. “The latest version of the plan is a real headscratcher,” she said.
Better benefits promote loyalty
At a time when Colorado’s unemployment rate is as low as it has been in over 20 years, a company’s ability to provide family and medical leave for workers could be the difference between hiring the talent and seeing it walk out the door to an opening elsewhere.
By requiring family and medical leave, the state could help small businesses better compete with larger firms, an indirect benefit that could compensate for the added complexity.
At the Denver offices of online payroll and benefits services company Gusto, Mel Miller is coming up on her due date for a baby girl. When the baby arrives, Miller will have 16 weeks of primary parental leave and access to funds to pay for meal delivery and housekeeping services giving her even more freedom to, as she puts it, “learn to be a mom.”
Miller joined Gusto five years ago, and the family leave policy played a factor in her decision in a Denver tech market that has only gotten more competitive when it comes to labor.
“At the time, I had just gotten engaged, so family leave was top of mind,” she said.
Miller is Gusto’s head of customer onboarding, helping the company’s smallbusiness clients select benefit packages they can afford to offer their workers. Clients are asking questions about how mandatory family and medical leave might impact them in Colorado, she said.
“Most of the questions that we’ve been getting around that are largely around cost and complexity,” Miller said.
For now, Gusto doesn’t connect its customers with insurance options for longterm employee leave instead focusing on more conventional benefits like standard paid time off allowances, Miller said.
But one of Gusto’s key focuses is making it possible for small businesses without the resources of giant corporations to offer benefit packages that make them a competitive and viable option for workers deciding on their next job. Company officials argue there is societal benefit in small businesses — a major driver of the U.S. economy — having that ability.
“Benefits are a crucial way to ensure work empowers a better life,” Danielle Brown, Gusto’s chief people officer, wrote in an email.
“Our goal is to create a world in which employees don’t have to choose between a great job or a job with great benefits.”