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Sick-Leave Laws Cause HR Headaches

When it comes to paid sick leave, there are no easy answers for multistate employers, which must contend with a growing number of inconsistent state and local mandates.

Tuesday, August 23, 2016
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Local and state laws mandating paid sick leave are popping up around the country like mushrooms after a rainstorm. And they're driving multistate employers crazy.

States and cities from coast to coast are drafting their own rules, and few of them are alike. The mandates give different minimum leaves to different kinds of employees for different kinds of health needs. They have different accrual, tracking, reporting and notification requirements.

And beginning next year, all employers with federal contracts will be required to meet yet another standard by providing at least seven days of paid sick leave.

In short, it's a mess, says Debbie Harrison, assistant director of the National Business Group on Health, a coalition of large employers. Many of her members have long provided paid sick leave -- but they worry about the cost of administering a benefit that must be tailored to so many different locations.

"It definitely does raise a lot of concerns," Harrison says. The trend dramatically accelerated over the last two years, raising the risk that companies could miss a provision in one jurisdiction and be fined, she says. Employers "want to do right by their employees -- but it's difficult."

One key challenge is updating HR systems to juggle all the different mandates, experts say.

"The issues most employers are really struggling with is that systems are not easily adjusted for all of the different localities," says Jackie Reinberg, a national practice leader for consultant Willis Towers Watson in Philadelphia. "A number of them are keeping spreadsheets because they just do not have the bandwidth right now to update all of the systems."

Another major problem is that many state or local laws include part-time employees. This requires companies to create new systems for those workers, Reinberg says.

Just describing the legal landscape is headache-inducing. Five states have laws that compel -- or soon will -- companies to provide some form of paid sick leave to workers: Connecticut, California, Massachusetts, Oregon and Vermont. More than 20 cities -- from Santa Monica, Calif. to New York City -- do the same. In California, both the state law and local laws in six cities apply, creating an especially complex brew.

Other sick-time laws are in the pipeline across the country, despite a ban on local mandates in some states. After years of gridlock in Congress, state and local governments increasingly feel compelled to take matters into their own hands on employment standards. That affects not only sick time, but parental leave, the minimum wage and more.

How do companies cope with the sick-time challenge? That depends primarily on the employer's philosophy about sick leave, says Liseanne Kelly, an employment attorney with Littler Mendelson in San Diego. They should ask: Is the main goal to minimize the amount of leave allowed, or to minimize the administrative costs?

"That's the primary question," she says. "Then, once they answer that, we know what we're building."

Experts say a company with employees who are mostly professionals or managers might prefer a policy based on the most generous relevant local standard -- a kind of highest common denominator. Even that will not eliminate individual reporting and calculation requirements of some jurisdictions, however.

By contrast, an employer with a large proportion of hourly workers, or one in a highly seasonal industry where absences at peak times could hurt business, might favor tailoring its policy closely to each local law to minimize sick-time allowances.

Companies can pick a hybrid model if most workers are in a single location, Harrison says. These employers could set a policy based on laws that apply to the headquarters and make ad-hoc adjustments for other locations.

Setting a different benefit level for different offices can have unpleasant consequences, notes Manuel Martinez-Herrera, vice president for legal and compliance at the payroll and benefits technology firm Namely in New York.

"Employees working in states/cities that have not passed these types of laws may not be particularly happy that their colleagues performing the exact same job a few miles away are getting these 'perks,' " he says.

Employers striving to keep things as simple as possible could consider adopting a paid-time-off policy that combines sick and vacation leave, allowing the employee to use the time as they see fit.

"If you're comfortable with someone using all four weeks as protected paid sick time, that may be the easiest way to go," Kelly says. But some laws require employers to maintain separate sick-leave tracking. And if local laws require sick time to be carried over each year, a PTO bank can add to liabilities on the balance sheet.

"PTO is not the silver bullet," says Reinberg. "You still have to get it on your pay stub, you have to track it, and it doesn't mitigate book liability."

Another option that may look good at first blush -- unlimited time off -- isn't a good choice, Kelly says. Popular with some tech companies, it isn't a practical answer now in many jurisdictions that require separate accrual and tracking of sick time.

Kelly says many employers are carefully monitoring the changing laws and are keeping their policies up to date. But others are assuming -- often incorrectly -- that because they offer paid sick time, their existing policies are compliant.

"The trap for the unwary is ... these laws have a lot of provisions about what kind of notice you have to give," among other fine points, she says. And some jurisdictions are hungry for the revenue that fines can bring for technical violations.

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Even if you provide the right kind of sick leave, Kelly says, "you could find yourself on the wrong end of an enforcement action because you didn't have the right policy, or put up the right poster."

It's worth noting that workers will take sick leave if it's offered, and companies must plan for that.

Depending on the industry, salaried workers on average take two to three days a year and hourly workers take five to six, Reinberg says. "But when you give people 12," for example, especially in an industry with high turnover, "those folks make sure they take every one."

Many advocacy groups, lawmakers and agency officials point out that paid sick leave has benefits for employers as well as employees. By letting workers take care of their health -- or care for a sick family member -- without sacrificing income, employers see higher morale, productivity and retention, they say.

And workers -- particularly millennials -- increasingly expect paid sick and family leave, says Martinez-Herrera.

"It is undeniable that more and more companies are offering paid maternity, paternity and sick leave," he says. More generous policies are driven not only by laws, but "are also the result of a cultural shift which, of course, also drove the laws to be passed in the first place."

That cultural shift is part of the political dynamic in Washington. U.S. Labor Secretary Tom Perez, in a June 30 blog post, criticized the Republican-led Congress for not passing a national sick-leave mandate. He supports the Healthy Families Act, a long-stalled bill that would set a minimum of seven days -- the same threshold that applies to federal contractors on Jan. 1 under an executive order signed last year by President Obama.

"People shouldn't be forced into impossible choices between the job they need and the family they love," he wrote. 

Many business groups oppose the law. But some also recognize that a national standard is necessary to tame the chaos of local and state mandates, says Harrison.

"Certainly from the employer perspective, at some point it gets so complicated to administer, you would be much happier if there was a flat national standard" that would override state and local rules, she says.

But no one who follows this is optimistic, says Reinberg. Given the prospect of continued stalemates in Congress, she says, "I think it is wishful thinking at the moment."

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