Paid-sick-leave mandates for private employers continue to gain momentum across the United States. While there is presently no such mandate at the federal level, eleven states and even more individual cities (as of the date this post was published) have enacted some form of a paid-sick-leave law. The presence of these regulations and the lack of uniformity in their respective requirements are raising concerns and placing significant compliance and administrative burdens on employers and their HR functions. Is your organization affected? Are you prepared for the potential impacts?
Concerns About the Effects of Paid-Sick-Leave Mandates
The concerns that employers cite about the increased emergence of regulations mandating paid sick leave are numerous. Many have drawn parallels to the confusion, complexity, and costs that employers and employees alike experienced with the implementation of the Affordable Care Act in recent years. In part, concerns cited with the advent of new paid-sick-leave requirements include:
• Increased complexity in tracking and managing paid sick leave, stemming from different requirements and administrative details by city or state.
• The potential of lost productivity should employee absences increase as a result of additional time off allowances.
• How mandated paid sick leave may affect PTO and vacation usage – e.g. inadvertently incentivizing individuals to “save” sick time for accrual or using it for unintended purposes.
• Interference in employee-employer relationships; inhibiting the freedom to identify or negotiate the policies or allowances that make the most sense for their circumstances.
Not surprisingly, concerns like those noted above and the likelihood of additional paid-sick-leave laws coming into play in other areas are driving many legal challenges that seek to stop such laws and requirements from going into effect or prevent new laws of this type from being introduced for consideration. However, with no certainty as to how these disputes will be resolved, organizations must determine whether they are or will be affected and, if they are, ensure their ability to comply.
Do Paid-Sick-Leave Mandates Affect Your Organization?
Employers will be affected directly by paid-sick-leave laws if they operate in any areas where such laws have passed. As of August 2019, Arizona, Connecticut, Massachusetts, Michigan, New Jersey, Oregon, Rhode Island, Vermont, and Washington, DC have all enacted statewide paid-sick-leave laws. Meanwhile, California, Maryland, and Washington have also enacted statewide paid-sick-leave laws plus have seen some of their cities pass additional requirements at the local level. Lastly, while no statewide paid-sick-leave law is presently in place in Pennsylvania, Illinois, Minnesota, New York, or Texas, individual cities in these states have passed paid-sick-leave regulations of their own.
Again, each state and city has different rules and requirements as to covered individuals, accrual policies, applicable sick-time usage, waiting periods and more. Variances in each law or statute may include different requirements for select industries, determinations by organization size, and the range of paid-sick-leave days that are mandated. Additionally, there is variance across states and cities as to what the current status of their proposed paid-sick-leave laws are. The current status of three major Texas cities provide good examples of this uncertainty:
• Austin – Austin’s ordinance is on hold after an appeals court deemed it unconstitutional in 2018. The city has asked the Texas Supreme Court to hear the case.
• Dallas – A federal lawsuit was filed on July 30, 2019, two days before the ordinance was set to go into effect, citing that the ordinance “extends regulatory power outside of its city limits.”
• San Antonio – A coalition of business groups has filed a lawsuit against San Antonio, claiming the ordinance is an unconstitutional violation of the state’s minimum wage act. The ordinance was scheduled to take place on August 1, 2019, but it has now been delayed until December 1, 2019. The coalition has asked a court in Bexar County to block the law’s implementation.
Some of the key provisions in the language for the above cities provides for one hour of paid sick time for every 30 hours worked. Full- and part-time employees are eligible if they work 80 hours a year within the respective city limits. Depending on the employer size the employee can carry over 48 to 64 hours in subsequent year. Employers must maintain records establishing the amount of earned paid sick time accrued by, used by, and available to each employee, and provide them with monthly statements of available paid sick leave. If there is a break of service and the employee is rehired by the same employer, whether at the same or a different location, within six months following the break of service the employer needs to reinstate the unused paid sick time available to the employee at the time of separation unless the employer paid the unused paid sick time when the employee terminated. If the employer paid out the sick time when the employee terminated, the employee would start accruing 1 hour for every 30 hours worked within the geographic boundaries of the city.
Ultimately, it is the responsibility of each organization to know whether they are subject to paid-sick-leave laws and what these laws require of them. In many cases, this burden falls on an organization’s HR function. Several outlets can help to inform them, such as state and local government agencies in the areas where they operate, professional human resources associations such as SHRM, external HR experts, payroll and benefits providers/administrators, and legal counsel.
The Impact on HR and the Wider Organization
Paid-sick-leave laws will require the HR functions in organizations to examine a wide range of questions and, in most cases, compel new or updated policies and procedures to ensure compliance and achieve understanding across their employee ranks. Key tactical questions are likely to include:
• Do we have the proper tracking and accrual mechanisms in place for paid sick leave?
• Are we capturing all the information we need to ensure compliance and enable impact analysis?
• Do our current policies need to be updated and communicated anew to our employees?
• What changes, if any, need to be made in our employee handbook, job postings, and other related documents?
In addition to the tactical questions and decisions these regulations compel, organizations will need to assess and determine the wider strategic impacts and how they can best cope with them. These considerations may include:
• What do we expect the impact of these requirements to be on our employees, managers, and operating budgets?
• How can we best minimize or offset additional costs caused by these paid-sick-leave laws?
• Should we comply with only the minimum requirements in each locality or consider adopting a single organizational approach that covers us in all areas?
Naturally, any change of policies and benefits is likely to also foster anxiety in employees. Even the appearance of new benefits such as paid sick leave that employees may largely perceive as positive on the surface can cause them to wonder “what’s the catch?”, or, “am I giving something else up to get this?” Having a locked-in communication and education plan and being available to answer any questions that arise is critical to ensuring a smooth implementation and minimizing business disruption.
Being Prepared, Staying Focused, and Getting Involved
While the verdict is still out on the long-term existence of current paid-sick-leave laws and the extent of new paid-sick-leave laws that will be introduced in other areas, organizations can’t afford to sit idly by and adopt a reactive posture. Administration is going to be complicated and expensive. Executive and Human Resources leaders need to seek out the information and expertise needed to fully understand the applicability and impact of these regulations on their employees and their business. With that in place, they can then take the steps needed to ensure preparedness and compliance without diluting their focus on other critical areas. Some organizations may also want to become involved with those crafting such ordinances in their area to further educate those decision makers on the impact to those companies affected and provide thought leadership on possible alternatives to accomplish stated goals.
Are you unsure how paid-sick-leave laws will affect your organization? Are you unclear whether you’re in compliance and properly prepared? Request a free consultation with a vcfo expert who can help.