originally published March 2017 in Business Pulse magazine–
Erin Shannon | Center for Small Business & Labor, WPC
Imposing a paid family and medical leave law has emerged as the business issue du jour this legislative session in the Washington state capitol.
While Washington state already has a paid family leave law, it never has been implemented because lawmakers recognize the burden it would create, and they have never been able to agree on a funding source.
The current unimplemented and unfunded Family and Medical Leave Insurance Act mandates benefits of $250 a week for up to five weeks for individuals who regularly work 35 hours a week. Workers with fewer hours would receive a prorated benefit amount. The benefit is only for the birth or adoption of a child, and eligibility begins after working 680 hours.
Since lawmakers could never agree on where the funding for the program should come from, the law has been suspended since 2009 – eight years and counting!
Despite the lack of funding for the existing paid leave law, some lawmakers have consistently pushed for even costlier versions. Previously and repeatedly these efforts failed to gain much traction.
But after unions and worker advocates last year made good on their threat to pass a statewide measure to increase the state minimum wage if the legislature failed to act, lawmakers who historically have been opposed to a paid family and medical leave mandate are now suggesting compromise versions of those policies.
In the Senate, Sen. Karen Keiser (D) sponsored SB 5032, which would provide up to $1,000 a week for 26 weeks for a child’s birth or adoption, or to care for a family member (to go into effect October 2019), and another 12 weeks of paid leave for the individual’s own health condition (to go into effect October 2020).
Workers could apply for both benefits in the same year, meaning they could receive 38 weeks of paid leave with a maximum benefit of $38,000 in one year. Employees would be eligible for the paid leave after working just 340 hours (that’s an average of 6.5 hours a week annually, or 8.5 weeks if working full-time).
Unlike the state’s current paid family leave law, SB 5032 identifies a funding source for the new program.
Employees and workers would pick up the tab by splitting a new payroll tax. The tax rate would be set by the bill for the first two years of implementation. But by 2021 the tax would then be determined annually by the state based on the funds needed to maintain the specified account balance ratio (the program’s account balance divided by total wages paid into the fund).
If the account balance ratio falls below that specified point, employers and workers would be charged a “solvency surcharge” to keep the fund in the black. This means there is simply no way to predict how big the tax hit might be on employers and workers a few years down the road.
While Sen. Keiser describes her proposal as both “modest” and “elegant,” the fact is the paid leave benefits provided by SB 5032 would be, by far, the most generous (meaning the program would likely be the most expensive) in the nation. She may consider that “elegant,” but I liken it more to using a sledgehammer to crack open a nut.
Across the political aisle, Sen. Joe Fain (R) sponsored SB 5149, a milder paid family and medical leave proposal that would allow up to 12 weeks of paid family and medical leave, phased in over three years.
The first year of the law’s implementation in 2020 would mandate eight weeks of paid family leave, followed by 10 weeks in 2021 and 12 weeks in 2022. Workers could use the leave for a child’s birth or adoption, to care for a family member, or to recover from their own health condition. They would be required to work 26 weeks (6 months) to become eligible for the paid leave.
The weekly benefit amount would also be phased in, starting at a maximum weekly benefit of 50 percent of the state average weekly wage in 2020, increasing to 55 percent in 2021, and topping out at 60 percent of the state average weekly wage in 2022. The average weekly wage in Washington in 2015 was $1,082. So the maximum weekly benefit amount would be significantly less than proposed in SB 5032.
Under SB 5149, the program would be funded entirely by employees through a payroll tax paid only by workers, as is done in the four other states (California, New Jersey, Rhode Island, and New York) with paid family and medical leave laws.
But even a program that is completely employee funded comes with a hefty price tag for employers. After all, employers are on the hook for the cost to hire and train a temporary replacement worker to cover for the employee using the paid leave or, alternatively, make other employees work harder to cover for the absent team member. That can be a heavy lift for the state’s smallest employers.
The biggest problem is not so much the idea of a paid family or medical leave mandate itself. The problem is such a mandate would be in addition to the piles of other mandates with which employers must comply.
Employers in Washington were just hit with a significantly higher minimum wage and a new paid sick leave mandate. Another costly labor mandate is the last thing needed right now.
As one business owner put it, one rule adding $100 to overhead may not be the straw that breaks the camel’s back, but 10 rules adding $1,000 to overhead – and tens of thousands of rules to monitor – make for a tall haystack.