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Report: D.C.’s Paid Family Leave Alternatives ‘Bad for Workers’

Michelle D. Anderson

“Companies will have financial interest to limit claims and to discriminate in hiring, especially against women of child-bearing age,” said Ed Lazere, executive director of the DC Fiscal Policy Institute.

Paid leave policies backed by the local business lobby that could replace the District of Columbia’s newly passed Universal Paid Leave Act (UPLA) could create more red tape and financial hardship for workers and small businesses.

An analysis provided to Rewire by the DC Fiscal Policy Institute (DCFPI) contends that the prospective “hybrid” and worker mandate models pushed by businesses and D.C. Council members Mary Cheh (D-Ward 3) and Jack Evans (D-Ward 2) could undermine UPLA’s generous benefits.

The policy institute, which focuses on the District’s low- and moderate-income residents through its research on budget and tax issues, said there’s no evidence to support claims that the alternative family leave models would reduce costs and prevent excess bureaucracy.

DC Fiscal Policy Institute Executive Director Ed Lazere told Rewire in an email that some city workers will be reluctant to request paid leave if they have to ask their employer, who would foot the bill for paid time off under the alternative family leave models.

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“Companies will have financial interest to limit claims and to discriminate in hiring, especially against women of child-bearing age,” Lazere said.

The policy institute noted that low-wage workers with hourly pay and shift work duties are already “vulnerable to intimidation and pressure to not … take leave” and often face reduced hours.

A recent Pew Research Center survey indicates mothers were more likely to say they faced career interruptions to care for their family, and that these interruptions could be linked to less long-term earnings.

Paid leave supporters, including Jews United for Justice officials and 32BJ Service Employees International Union Vice President Jaime Contreras, have said backdoor deals and aggressive business lobbying gave way to the new hybrid proposal that could be worse for city workers.

Under the mandate and hybrid models, workers would receive the same number of weeks of leave as the UPLA, along with same wage replacement, which ranges from 50-90 percent of their weekly paycheck.

The hybrid program would split employers into two groups, requiring each division to fund paid leave benefits differently: Companies with 5 to 50 employees would pay a 0.4 percent payroll tax to fund a government-run paid leave program. Companies with more than 50 employees would fund the full cost of paid leave and administer their own program, including the claims process. They would also pay a 0.2 percent payroll tax to help boost the government-ran fund for small businesses.

“Those costs could fluctuate a lot, and medium sized businesses will be most vulnerable,” Lazere said. “No one knows if paying benefits [plus] 0.2 percent tax will be more or less than 0.62 percent, meaning businesses could end up paying more.”

If workers with a $500 weekly paycheck took six weeks of paid leave, an employer under the mandate model would pay $2,700, according to the DCFPI analysis. By contrast, under the UPLA, they’d pay $161.

Lazere added that the mandate approach “greatly increases need for monitoring and enforcement” and adds to costs “while still knowing workers will fall through the cracks.” The institute said an employer mandate could be “bad for workers, bad for many businesses, and have much higher administrative costs.”

The employer mandate model would undermine the advantages of UPLA such as “easy access to benefits for workers, predictable costs for businesses,” low administrative costs, and “a neutral third-party arbiter” that would make decisions on paid leave claims, the DCFPI analysis shows.

Michelle Sternthal, policy director at the Main Street Alliance, told Rewire that, unlike the city’s UPLA program, the so-called hybrid model would exclude commuters from the city’s suburbs, self-employed workers, and businesses with fewer than five employees.

The policy institute analysis indicated a program dependent on employer-provided benefits would exclude unemployed workers and those between jobs because they would be unable to gain access to benefits even when employers make contributions on their behalf.

Sternthal said many small business owners, unlike their larger counterparts, operate “on shoestring budgets” and that’s what made social insurance programs like the UPLA workable.

“It allows small business owners to budget out a certain amount monthly,” she said. “Providing paid leave all of sudden could hurt solvency.”

Other alternatives to the UPLA, she said, leaves workers and small businesses “out in the dust,” Sternthal said.

Authored by At-Large DC Council members David Grosso (I) and Elissa Silverman (I) and introduced in October 2015, the UPLA underwent several revisions and much scrutiny before the council in December 2016 passed the measure in a 9-4 vote.

Using a social insurance model akin to state unemployment programs, the UPLA relies on a 0.62 percent payroll tax to provide workers eight weeks of paid leave after welcoming a new child, six weeks to care for sick relatives, and two weeks of personal medical leave.

The $250 million program is expected to help more than a half million private part-time and full-time workers in the District beginning in 2020. A fiscal policy impact study conduced by the Office of the Budget Director found the law would have virtually no negative effect on the “upward trajectory of the District’s economy.”

Despite these advancements and supportive evidence, D.C. Council president Phil Mendelson last month said he would consider alternatives to the UPLA. Like Mendelson, Grosso has changed his mind, saying he supports a private-sector third-party administrator rather than a government administration of the family leave program, the Washington Business Journal reported.

Soon after, Cheh and Evans introduced an alternative “hybrid” paid leave program. Cheh had supported another version of the paid leave program pushed by D.C. Chamber of Commerce and a consortium of local colleges and universities called the employer mandate model before she voted for the UPLA.

A 2017 Main Street Alliance report shows that the lack of a national paid family leave program puts small business owners and their families at a disadvantage.

The United States is the only member country of the Convention on the Organisation for Economic Co-operation and Development (OCED) that doesn’t mandate national paid maternity leave, which like similar family friendly-programs, can reduce absenteeism and worker turnover rates.

Both the DCFPI and Sternthal noted that the hybrid model disincentives business growth because some companies would be discouraged from switching to a self-insurance model after exceeding 50 employees.

DCFPI officials urged D.C. policymakers to allocate the $20 million needed in the District’s fiscal year 2018 budget to begin implementing the UPLA program. Costs for the program include infrastructure, IT costs, and educating District workers about UPLA benefits.

Sternthal agreed with the policy institute conclusion that UPLA made the most sense “for vulnerable workers, small business, and the broader DC economy.”

“That is the program that should be provided and we have evidence of it working,” Sternthal said.

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