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For Business Support of Paid Leave, the Devil is in the Details

June 2, 2021, 9:31 AM

If members of Congress hope to take their lead on paid leave proposals from businesses, they’ll have to wade through a sea of mixed messages.

Efforts to pass a federal paid leave law got a big boost this year when President Joe Biden included a paid leave proposal in his American Families Plan. But getting legislation through the closely divided Senate will require Democrats to win over the support of at least 10 Republicans or else use the Senate’s budget-reconciliation process, which might limit the features or employer mandates that could be included.

And, while worker advocates are largely unified on the type of paid family and medical leave policy they’d like to see Congress enact, the employer community is divided on a range of details such as how broad the coverage should be and how to pay for it—or whether to create a federally run program at all.

“I certainly think the time is now for Congress to step in and provide a solution,” said Ilyse Schuman, senior vice president of health policy at the American Benefits Council, which represents large employers on issues related to employee benefits.

But she acknowledged the details of that solution are yet to be ironed out. The council is open to a federal program but prefers that it fill gaps as a backstop to private employers’ benefit offerings, Schuman said, and the council opposes a new payroll tax to pay for it.

A high priority for large employers is that they be exempted from following potentially conflicting state and local paid leave laws if they satisfy a federal standard instead, she added.

“There’s more work to be done to get to that point of truly leveraging private sector solutions,” Schuman said.

On the other hand, the small-business-centric Main Street Alliance is calling for comprehensive, universal paid family and medical leave provided funded by a payroll tax split between employers and employees.

More than 250 businesses have signed onto a similar message sent to Congress in March, calling for nationwide paid family and medical leave with broad coverage. These include the outdoor apparel company Patagonia Inc., the social-networking site operator Pinterest Inc., and Sun Life Financial Inc.

What’s in the Package

The business community has grown more receptive to a national program over the past year, but with caveats about its design.

Biden’s proposal calls for a program that offers up to 12 weeks of paid leave for the birth or adoption of a child, the serious illness of a worker or their family member, and for other covered reasons related to military service or domestic violence.

Draft legislation from Rep. Richard Neal (D-Mass.), who chairs the House Ways and Means Committee, calls for creating a national paid leave program in line with the president’s proposal while also expanding child-care access.

Republicans on the committee released a counterproposal May 27—the same day as a subcommittee hearing on paid leave—that would aim to give businesses incentives such as expanded tax credits and benefits-pooling options for voluntarily providing paid leave to employees.

Another small business advocacy group, the National Federation of Independent Business, opposes a federal mandate on paid leave, Beth Milito, the group’s senior executive counsel, said at separate congressional hearings last month.

“Some small businesses simply cannot afford to give this benefit,” Milito said at a May 27 hearing, adding that the ideas in the GOP proposal would better support businesses in choosing which benefits to offer voluntarily. “Leave, paid or unpaid, is not a free benefit for employees.”

Scope of Coverage

The scope and generosity of any federal program are key points of disagreement among business groups.

By some estimates, more than 40% of the U.S. workforce is left out of the existing Family and Medical Leave Act’s guarantee of unpaid leave. It exempts employers with fewer than 50 employees and also requires that workers have been with their employer for 12 months and worked at least than 1,250 hours in the past year.

Those calling for broad universal coverage hope to see these exemptions omitted from a new national paid leave program.

But the American Benefits Council and the U.S. Chamber of Commerce are calling for the new program to mirror the FMLA criteria.

“To simplify the administration of paid family and medical leave benefits, the federal Family and Medical Leave Act definitions and standards should apply,” the council said in its policy principles document.

Defining Terms

Matching the FMLA also would mean using its limited definition of family members. The law guarantees workers unpaid leave with job protection for the care of a spouse, son, daughter, or parent with a serious health condition.

The Main Street Alliance, like worker advocates, is calling for a much broader definition of family.

“I am a firm believer in the broad stroke,” said Sarah Piepenburg, owner of Vinaigrette, a retailer of vinegars and oils in Minneapolis with three employees. She’s involved with the Main Street Alliance and other small business groups’ paid leave coalition and has previously testified in congressional hearings on the subject.

For Piepenburg, that means a universal federal paid leave program with broad definitions of family members, paternity leave that matches maternity leave, and a full 12 weeks of benefits annually. A federal policy also should ensure coverage for same-sex couples, she added, noting this is important to her as someone with a gay brother.

Piepenburg has experienced the financial challenges of a small business owner trying to pay workers out of pocket during an extended medical leave, including for one long-time employee who recently died, she said. She has researched options for buying insurance such as short-term disability, but found them too expensive and limited in coverage—requiring the business to pay extra for paternity leave or cancer coverage, she added.

Providing universal coverage is also a means of addressing racial and gender equity in the economy, said still another coalition, Small Business for Paid Family & Medical Leave, in an April letter to Congress.

“The racial wealth gap means employees and business owners of color have less of a financial cushion for taking time off, but they also have more limited access to paid leave,” the group wrote. “And, with most caregiving still falling to women, paid leave is an important gender equity measure for business owners and employees alike. These facts have been further heightened during the pandemic.”

Implications for State Patchwork

Nine states and the District of Columbia have thus far enacted paid family and medical leave programs.

An overarching federal bill could impact both the scope of paid leave coverage, and its cost, but also address the ability of multistate employers to follow one national standard and be exempt from a patchwork of state and local paid leave rules.

Universal-coverage advocates may be reluctant to accept this condition, since it could mean letting a less-generous federal standard override the coverage guarantees in states with their own paid leave programs.

“Chairman Neal’s bill, which seems to be the dominant bill now since he’s chair of the relevant committee, doesn’t address that problem,” said Marc Freedman, vice president of workplace policy at the Chamber. “It basically codifies the status of the legacy states, as he describes them.”

“Our goal is to get a bill that we can go out and promote,” Freedman added.

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editor responsible for this story: Andrew Harris at aharris@bloomberglaw.com