Paid Family Leave

Background

The 2007 legislature greatly expanded family leave benefits, and many Oregon businesses—large and small—are still grappling with the impacts of these significant changes. An employee may now take up to three months a year. However, if an employee uses up his or her 12 weeks for parental leave, he or she receives an additional 12 weeks in that year for a sick child leave. In one year, a female employee may take nine months of leave: 12 weeks of pregnancy leave, 12 weeks of parental leave and 12 weeks of sick child leave.

Oregon is one of only three states whose family leave laws apply to employers with fewer than 50 employees. It is also one of five states that more broadly defines “family member” than the federal law, and one of eight states with longer medical leave periods than federal requirements. Although unpaid, an employee can use any accrued paid sick leave during his or her family leave. Upon returning to work an employee is entitled to his or her position, or an equivalent position, whether or not it was filled in his or her absence.

In 2007 an attempt occurred to adopt a measure (HB 2575) that would have allowed employees a form of paid family leave. The legislation would have created the Family Leave Benefits Insurance program, taxing workers a penny for each hour worked. HB 2575 died on the Senate floor but is expected to resurface in the 2009 session.

Issue

Creating, administering, staffing and running a new insurance plan is a costly business venture. In 2007, Washington State passed a paid family leave law, but without a dedicated funding source. The Washington State Office of Fiscal Management estimated the administrative costs on the original two-cent per hour, per employee tax proposal (SB 5659) would have consumed 37% of the revenue raised. (2009-11: $71 million in cash receipts, $38.2 million in paid benefits, $26.7 million in administration costs, $65 million in total expenditures.)  Without the funding, which is being tagged at $40-45 million a year for wage replacement alone, the program cannot commence.

Furthermore, Oregon’s Bureau of Labor and Industries has no background in creating and managing an insurance program. Much of the penny-per-hour will be spent developing a highly specialized system to manage an insurance program –premium collection, denials, appeals etc. BOLI currently does not manage any insurance programs.

Restaurants earn roughly four cents in profit on every $1 in sales. These are tight margins. Mandatory paid benefits that increase small-business costs would have to be recouped elsewhere, perhaps through reduced wages or fewer paid benefits in other areas. In cases where employees take leave with little or no notice, employers may even face double payments—pay for both the person taking sick leave and for the person called in to cover the shift.

Restaurants typically offer flexible work schedules and hours that best meet the needs of their workplace and their employees. Many also offer sick leave through a paid-time-off benefit structure. A one-size-fits-all paid sick-leave mandate threatens these employee benefits.

ORA Position

The Oregon Restaurant Association is opposed to paid-leave mandates, particularly their impact on small employers. Mandated paid leave would significantly raise costs and deprive employers of flexibility. Voluntary paid-leave programs that are part of employees’ total compensation packages work precisely because they are voluntary. These packages offer flexibility to both employees and employers. Even if the pennies are being taken out of the employees paycheck, eventually this may run out leaving the employers to pay for family leave benefits.