Are Small Businesses Suffering From Paid Sick Leave?

Do employees have the right to paid sick days?

That’s the question still being debated on both a local and national level. In March, New York City voted yes on paid sick leave, and on the national level Rep. Rosa DeLauro (D-CT) and Sen. Tom Harkin (D-IA) reintroduced the Healthy Families Act, which would grant at least seven paid sick days to employees across the country. Then last week, Philadelphia mayor Michael Nutter vetoed a similar bill in his city, citing business concerns.

“When the fight happens over paid sick leave, the question is always: Is this or is this not a job killer?” says Michael Saltsman, the research director of the Employment Policies Institute. “But this issue is unique, because it doesn’t have to be a job killer in order to have unintended consequences, like raised prices, fewer benefits or lower raises,” says Saltsman.

But advocates like Margot Dorfman, the CEO of the U.S. Women’s Chamber of Commerce, argue paid sick leave is actually good for business, as sick employees reduce productivity overall, and paid sick days prevent illness from spreading to other staffers.

Is Paid Sick Leave Necessary? More than 40 million U.S. workers do not currently have any paid time off, according to A Better Balance, a non-profit organization which advocates on behalf of caregivers. A Better Balance co-president Sherry Leiwant says paid sick leave is especially necessary for those workers who have to take care of children, partners or parents.

“It’s both a public health issue and a workers’ rights issue,” says Leiwant, who says her organization has drafted a majority of the paid-sick leave bills that have been introduced across the country.

Dorfman says the lack of paid sick leave is especially important for women: “They’re typically the caregivers, and the ones who see the impact on their family when they don’t have the option to stay home with a sick child.

“Additionally, [women] are the ones who tend to have the types of jobs that are not supported with paid sick leave or other family-friendly benefits. On top of that, they are getting paid less on the job than their male counterparts, so for them to be penalized yet again is a great hardship,” she adds.

James Freeman, founder of San Francisco coffee chain Blue Bottle Coffee, started offering paid sick leave to employees in 2007, when the California city mandated paid leave for businesses with ten employees or more. The company continued to offer paid sick leave to workers when it opened New York City locations.

Regarding the decision, Freeman says, “It’s the right thing to do. Pretty simple.”

The Effect of Paid Sick Leave on Businesses How has paid sick leave legislation impacted local business? It depends on whom you ask.

One study by the Drum Major Institute, a progress public policy institute, found employment in San Francisco grew after the mandate was passed, while employment fell by nearly an equal percentage in five neighboring counties. And in a letter to the Connecticut Post, Dorfman writes employment grew after Connecticut passed its paid sick leave law as well.

But overall employment numbers may not reflect the reality for individual small business owners.

In terms of unintended consequences, Saltsman points to a study released in March 2009 by the non-partisan Urban Institute, which found some San Francisco employers reclassified vacation time as sick leave or decreased other benefits. The study also showed that small or medium-sized employers were more greatly affected by the law, both in terms of accommodating the increased labor costs and the administrative time necessary to track the days.

Nicole Griffin, executive director of the Connecticut Restaurant Association, agrees with the findings.

“With the system of accruing paid leave – you had to have worked at the job for so long, and the days accrue at a certain rate – it requires a tracking system that many restaurants didn’t have.

Some employers just chose to say, you get five days off and take them as you want, because it was less burdensome,” Griffin says.

Replacement costs are also difficult for smaller businesses. Dan Shackford and his wife have been running a childcare center in Plainville, Connecticut for 27 years. Shackford says the state’s regulations require a certain child to adult ratio, so “if somebody is sick, we need to hire someone else to come in and take their place.”

“It’s a double expense if we need to pay both the sick employee and the other person,” says Shackford. Because of these costs, Shackford and his wife have lowered annual raises for their more than 45 employees, from 5% to 3% increases.

And while Dorfman says a paid leave mandate levels the playing field between employers who have already offered paid leave and those who don’t, Shackford says the YMCA – his biggest competitor – has been exempt from Connecticut’s law. “I can’t raise my prices when my biggest competitor doesn’t have to,” he says.

Leiwant, whose organization drafted the original Connecticut bill, says that Shackford’s experience proves why exemptions shouldn’t be made.

“The bill that got passed had been changed a lot – the YMCA exception was the last thing to go into the bill,” she says.

Regardless, Shackford says employers should decide which benefits to offer – not the government.

“If they don’t want to work for me because I don’t offer it, they can work elsewhere.”