Paid family leave has employers asking who pays

New unfunded law gives employees five paid weeks to care for newborn

Elizabeth Grant, president of Stewart Title, is concerned about how this new law will be funded and its fairness. If employers are stuck with the bill, it may result in some businesses cutting benefits or even salaries.

Heidi Schiller
   In May, Gov. Chris Gregoire signed into law a program that would provide five weeks of paid family leave for new parents, making Washington only the second state in the nation to do so.
   The bill establishes a state-run insurance program to pay employees $250 a week for up to five weeks in order to care for a newborn or newly adopted child. Employees working 35 or more hours a week for at least a year in a firm with more than 25 employees are eligible. Federal law, under the Family and Medical Leave Act, provides employees with up to 12 weeks unpaid family leave to care for a newborn or newly adopted child, but this law only applies to employers with more than 50 workers.
   The bill does not, however, establish a funding source for the program or give a proposed operating budget, and instead sets up a task force to study how it will be financed, implemented and administered. The task force must report its findings and recommendations by January 2008.
   The program, which is set to begin in fall 2009, has drawn fire from small-business advocates across the state who fear the costs to finance it will be passed on to employers.
   But supporters say it is a necessary and needed step toward helping working families care for newborns.
   Locally, the reactions are mixed. Most are concerned with where the funding will come from, and some question the program’s comprehensiveness and fairness.

Where will the funding come from?
   David Groves, communications director for the Washington State Labor Council, said his organization supported the bill because almost every nation on the planet makes sure its citizens can afford to take time away from work
   “Instead, we force our employees to use vacation and sick leave to spend time with their babies,” he said. “That’s bad not just for workers, but bad for our children.”
   Most in the business community don’t disagree with the importance of spending time with newborns, but many are concerned about how the program will be funded.
   An early version of the bill would have financed the program through payroll taxes, but the final version leaves the funding question up to the task force.
   Ken Oplinger, president and CEO of the Bellingham/Whatcom Chamber of Commerce & Industry, said he thinks it is important for families to have the time they need to bond with a newborn, but his feelings about the program depend on how it will be funded.
   “It makes sense to pay for it out of a general tax or the general fund, but not through Business and Occupation taxes or employers. That’s almost a double tax because you’re already taking an employee out of work for five weeks,” he said. “If society deems this is important, then everyone in society needs to pay for it.”
   Oplinger said 20 percent of chamber members employ more than 20 employees, and he estimates about 5 percent to 10 percent of Whatcom County employers have more than 25 employees.
   If the program ended up being funded through employers, Oplinger said they might begin to make hiring decisions based on whether or not they think an employee might take family leave, despite the obvious illegality of such a practice.
   The $250-a-week benefit itself is insubstantial, he said. But coupled with the cost of having the employee gone for five weeks and having to replace their workload, it adds up.
   Elizabeth Grant, president of Stewart Title of Bellingham Inc., which has 28 employees, agreed that funding for the program is a concern.
   “Somebody has got to pay for it,” she said.
   That somebody will likely be employers, Grant said. She predicts the funding will come from a tax on businesses, similar to the unemployment tax. “I don’t know how else they would expect to fund it. That seems the only logical way,” she said.
   If this occurs, Grant said, businesses will have to cut other benefits, or possibly salaries or jobs in order to make budgets work, she said.
   “The ‘someone’ that has to pay for it ends up being the employee, in that respect,” she said.
   Tom Dorr, director of Western Washington University’s Small Business Development Center said there are two schools of thought on the issue.
   “From the employee standpoint, it’s really positive, it improves quality of life and family relationships, but the challenge is how to fund it,” he said.
   He agreed with Grant, saying likely the burden will fall on employers as does the unemployment tax.
   “One of the challenges of running a small business is the burden of compliance with regulatory policies. It just makes costs and the price of doing business higher, and increases the challenge of running a small business,” he said.
   He also said the cost to employers would reduce their state-to-state competitiveness with most other states that do not mandate paid family leave.
   Groves said it was unfortunate that business-lobbying groups did not support the original bill that would have funded the program through payroll taxes. The Labor Council still thinks the payroll tax is a viable option, he said.
   For Jackie Van Zwol, in charge of human resources and sales at Wood Stone, the program’s potential impact on her company is not a huge concern.
   Of her company’s 65 employees, only two took time off last year to be with newborns, and she anticipates three more will do so this year. Because Wood Stone likes to attract family-focused employees, she said the company has always allowed workers to take as much paid and unpaid vacation time as needed to care for newborns, although not many have taken large amounts of unpaid vacation.
   If the program costs were passed on to employers, Van Zwol said it would create a slight hardship for Wood Stone.
   “It’s a slight monetary hardship only, for the amount of people that take time off to have babies is really small, so I’m not that concerned,” she said. “It’s not a bill we’re against, we’re just curious about the funding.”

How fair and comprehensive is the bill?
   Rep. Kelli Linville did not vote for the bill because she said other health-care issues need priority, and that the paid family leave bill was not comprehensive enough.
   “Not that I don’t support family leave, but when people don’t even have sick leave or health care, it seems like we have certain things we need to address,” she said. “I try to prioritize what I support.”
   Linville echoed others’ concerns about the program’s funding, but said her main concern was providing health care to Washingtonians.
   “We have a lot of needs. When we look at policies we need to pass the ones that affect the broadest number of people,” she said.
   Sen. Harriet Spanel voted for the bill, but was unavailable for comment.
   Grant said her main grievance about the bill is that it is unfair because $250 a week, for most full-time workers, is not enough to live on.
   “Who can live on $250 a week?” she said. “So, only the people who can afford to take a salary cut will be able to afford the luxury of staying home with a newborn. The people who need 100 percent of their salary are not going to be able to afford to take advantage of this opportunity.”
   But Groves said the program is only meant to be a stipend, not to replace income.
   “We fully acknowledge that people need to prepare to (take time off), and they do do that,” he said. “This is just a necessary step to help them do that.”



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