Will a Federal Sick Leave Law Send Small Business to the ICU?

I think that small business owners must sometimes feel like contestants in The Hunger Games, except that there’s never a winner. I say this because it seems like small business owners are always running around like crazy with a target on their backs.

Consider mandatory paid sick leave. In the last couple of years and continuing today, small business owners all across the country are being forced to deal with new and proposed regulations that make paid sick leave mandatory. These new laws have been enacted at the city level and the state level. However, not to be left out of the game, President Obama joined the fray in his State of the Union Address.

"Send me a bill that gives every worker in America the opportunity to earn seven days of paid sick leave," President Obama told Congress and the nation, adding, "It's the right thing to do."

The Golden State’s new law

California is the most recent state to enact a far-reaching mandatory paid sick leave law. Generally, employees who work 30 days or more within a year must be given paid sick leave at a rate that’s not less than one hour for every 30 hours worked. If you do the math on California’s law, an employee who puts in a 40-hour week would accrue just under nine days of sick pay per year.

President Obama is throwing his support behind the Healthy Families Act. It would require businesses with 15 or more employees to grant an hour of paid sick leave for every 30 hours worked. This proposed federal law caps paid sick leave at 56 hours per year.

The Employment Policies Institute pointed to a study done by the Institute for Women’s Policy Research – a group in favor of paid sick leave laws. They looked at employment in San Francisco after that city passed a mandatory paid sick leave law and found that “nearly 30 percent of San Francisco’s lowest-wage employees reported layoffs or reduced hours at their place of work.”

Further, an Urban Institute survey looked at similar situations in Connecticut and Seattle and found that some employees lost their jobs or suffered reductions in hours. The Employment Policies Institute contends that these laws have unintended consequences that actually make employment conditions worse for many on the lower end of the wage scale.

The costs are real

There are costs associated with every new regulation that small businesses are required to follow and that money comes from somewhere. Often it comes from adjusting work schedules and/or the number of employees. Unfortunately, a certain level of abuse also accompanies paid sick leave. Employers who offer this benefit know this, but it is difficult to stop. Making this mandatory, creates additional opportunities for abuse.

Many small business owners already give their employees sick days or “flex” days that can be used for sickness or vacation. (Flex days, by the way, eliminate the abuse that accompanies paid sick leave.) Adding city, state or federal mandates creates more regulatory hoops to jump through and perhaps even upsets systems that everyone is happy with, e.g. how would the federal law view flex time?

Recent studies have shown that the United States isn’t even in the top 10 of free economies and the same poor ranking is true if you want to start a business. When your representatives in Congress hold public meetings in your community, let them know how important it is to foster a climate that is conducive to starting and running a small business.

This post originally appeared on THE Small Business Expert blog here.