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Paid Sick Leave: New Duties for Employers

In a current wave of legislation, states and cities across the country are passing laws and ordinances granting workers paid sick leave. Massachusetts, Connecticut, California and Washington have passed state wide laws permitting leave. Cities such as Philadelphia, Baltimore and nine New Jersey municipalities have enacted paid sick leave laws. Even many private companies, such as Chipotle have begun to enact paid sick leave policies for all types of workers. While some view these laws as a large step forward for American employees, others feel as though government is overstepping its bounds by dictating how employers treat employees. In response to many city ordinances granting this leave, some states have adopted preemption laws which prohibit localities from passing such laws.

Eleven states have passed measures that ban municipalities from passing paid sick leave laws, including, Georgia, Louisiana, Tennessee, Mississippi, Kansas, Indiana, Arizona, Oklahoma, and Alabama. A similar preemption bill is awaiting vote in the Pennsylvania House of Representatives, although Governor Tom Corbett has stated his intention to veto the bill, should it require his signature. Currently there is no national law requiring paid sick leave, although it is an issue supported by current president, Barack Obama. It is expected to be addressed by the presidential candidates during their upcoming campaigns.

Paid sick leave laws raise two kinds of debate, the philosophical: how much should government be involved in business, and the economic: the whether the economic impact of the law is bad for business and the economy overall. While the philosophical debate cannot be quantified with data, Bloomberg News has compiled research from employers in cities and states with paid sick leave laws Connecticut, Seattle and San Francisco to determine the effects of this kind of law.

First of all, paid sick leave does take a toll on business profits due to increased costs. The companies reporting the largest losses were smaller business, defined as those with under 24 employees. However, these increased costs ranged from 0-5% and were not devastating or as significant as expected. Only 1 in 7 San Franciscan businesses, and 1 in 5 Connecticut businesses stated they suffered increased costs of 2% or more. Other concerns about paid sick leave include reduction in workers' wages and benefits, as well as higher prices for consumers. Bloomberg's research revealed that there was a reduction in workers' benefits ranging in 1%-8% percent in these three jurisdictions, and no significant rise in consumer pricing. What happened in these three jurisdiction won't necessarily predict what will happen in other areas; employers need to acknowledge the importance of complying with these new laws.

While employers may experience rising costs associated with these new laws, those costs are insignificant compared to the legal fees and penalties of non-compliance. Employers must act to ensure full compliance in cities and states that already have laws requiring paid sick leave. It would be wise to consult with counsel and revisit the terms of employment contracts. Employers should also consult with the staffing companies they utilize to determine who bears the responsibility for tracking hours and leave proper information for independent contractors.

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