Parental Leave Mandate Hurts Small Firms
One of the things keeping state legislators busy in Sacramento right now is a shortsighted attempt to impose on California small businesses a new, one-size-fits-all mandated leave program that threatens their ability to stay in business.
SB 63 would impose a new unmanageable mandate on small business. The bill would dictate another leave program over and above the existing pregnancy disability leave for new parents.
Small business owners want to be sensitive to the needs of new parents. But with limited resources and limited flexibility in managing their workforce, the best way for employers to meet the needs of new parents beyond what is already required in statute for pregnancy disability leave is to work out a mutually agreeable solution. This proposal is unworkable because there is no flexibility.
The cookie-cutter approach required under SB 63 would not adequately take into account the fact that in order to be profitable, a business must be responsive to its clients. The situation SB 63 would create could make this impossible.
Very troubling is the fact that the proposal would allow employees to sue their boss if the employer could not grant leave on the employee’s terms. SB 63 would put the employer in an untenable position of choosing between the threat of litigation by trial lawyers or meeting its customers’ needs.
Veto of Similar Bill
Last year, Governor Edmund G. Brown Jr. vetoed a measure that was nearly identical to SB 63, saying, “I am concerned, however, about the impact of this leave particularly on small businesses and the potential liability that could result.”
Yet the bill was reintroduced again this year without any sensitivity to either the governor’s or small businesses’ concerns. The threat of litigation under this proposal is significant. Any claim that the employer denied, interfered with, discouraged, retaliated or attempted to do any of these actions with regard to the employee’s 12-week leave could expose the employer to compensatory damages, injunctive relief, declaratory relief, punitive damages and attorney’s fees.
A 2015 study by insurance provider Hiscox regarding the cost of comparative employee lawsuits estimated that the cost for a small employer to defend and settle a single plaintiff claim was approximately $125,000. This amount is without regard to the merit of the claim and could easily put a small employer completely out of business.
The size of the employer to whom SB 63’s mandate would apply also contributes to the bill’s overreach. The practical reality of how the policy would need to be implemented makes the measure particularly onerous. While the bill purports to apply only to businesses with 20-50 employees within a 75-mile radius, it does not take into account the impact on individual locations.
Consider a scenario where a business’s individual location employs five people and three are out on mandated protected leave programs. The inflexibility of the bill means there is no opportunity to work out a mutually agreeable arrangement for the leave to make sure both the needs of the employee and employer are met.
Currently, small employers have the ability to balance the parental needs of their employees and customers, without the interference of state law. Employers can work with their employees to determine the amount of leave needed in consideration with other employees who may be out on leave as well, and how that leave can be provided while still making sure the business’s needs are addressed.
After determining an appropriate leave schedule, employees also can access and obtain wage replacement while on leave through California’s Paid Family Leave program. SB 63 eliminates this flexibility as it mandates the leave instead of allowing the employer and employee to determine a mutually agreeable arrangement.
Most small businesses do not have a dedicated human resource officer who can monitor and juggle all the various leave programs available to employees nor can small businesses absorb workload with numerous employees in one location out on simultaneous leaves. This proposal ignores the limited resources of a small business.
Proponents often emphasize the idea that SB 63 wouldn’t “cost” employers anything because it deals with “unpaid leave.” What they forget to mention is that small businesses or companies who deal with very specialized products or services cannot simply hire a temp to do the job necessary to stay profitable.
Also, under the proposal, employers are required to continue to maintain and pay for the absent employee’s health coverage during his or her leave. Additionally, the employer must either pay other employees overtime to cover the duties of the individual on leave or hire a temp, if possible, at a premium price to cover during the absence.
California is already recognized by the National Conference of State Legislatures as one of the most family-friendly states given its list of programs and protected leaves of absence, including paid sick days, school activities leave, kin care, paid family leave program and pregnancy disability leave—all of which apply to small business. This list is in addition to the leaves of absence required at the federal level.
Leave policies like the one proposed in SB 63 can overtake and strain small business employers who, ironically, are needed by families to provide the jobs, paychecks and benefits that will allow them to support their families in the future.