Published by the Baltimore Business Journal
The Devil Is in the Details of Mandated Paid Leave
By Mike O’Halloran
Well, that escalated quickly. Mandatory paid leave legislation has ballooned into one of, if not the most, hotly contested issues of this legislative session. It is certainly an issue that polls well for legislators however it is hardly the innocuous proposal that many are claiming. The problem is that proponents of the concept are failing to consider the long-term consequences of their feel-good legislation. The proposal is barreling its way through both the House and Senate Committees, with many lawmakers failing to pause for a moment to understand the costs of implementing what could ultimately become one of the strictest paid leave laws in the Nation. The time has come for everyone to take the time to conceptualize what the future may hold if they proceed because according to a new study, the strength of our employment market depends on it.
A report conducted by NFIB’s Research Foundation analyzed the potential economic impact that House Bill 1 and Senate Bill 230 could have on the small business sector if implemented. The BSIM model report considers the economic impact that complying with mandatory paid leave will have on employers. It found that not only will mandatory paid leave cost Maryland billions of dollars in economic output, but over 13,000 jobs will be lost by 2027 if this proposal becomes law.
What supporters fail to explain to the public is that a worker taking time off from a small business leaves a gap that must be filled. Be it via other staff working overtime or through the hiring of temporary employees; there is a direct fiscal impact to businesses, especially small ones. Mandating that employers provide paid time off is a regulation that many simply cannot afford and will directly impact their ability to hire people.
The bills before the legislature are wholly unworkable for the small business community. Whether it be employees working an average of 8 hours per week now qualifying for up to 7 paid days off, the painstaking recordkeeping requirements, or the heavy-handed sanctions, this legislation stacks the deck against our employers. Many of the bill’s provisions seem to arbitrarily create a hodgepodge of thresholds and limits a small employer will be forced to remember, lest they want to be hauled into court by the Attorney General.
As a matter of fact, according to NFIB’s Research Foundation report, 57% of the noted job losses would occur within the small business community. Additionally, the burden of complying with the mandate will fall disproportionately on small businesses who most likely do not have a human resources department to aid them in properly tracking their compliance with the new regulation. Unfortunately, lawmakers continue to be focused on burdening our small business owners with over-regulation instead of allowing employers and employees to come up with mutually beneficial arrangements. They simply refuse to accept that legislating one size, fits all solutions is not the answer.
A recent study from GoBankingRates.com found that businesses in the state of Maryland are having a hard time surviving. The study took into consideration various factors including startup rates, workforce strength, and business tax climate. The survival of small business is always precarious, especially in the heavily regulated environments many are forced to exist in currently, but here we are again, considering an increase to regulations in Maryland. Mandatory paid leave is not the direction in which we should be headed if we want to empower our small employers and improve our economy.
Another recent study by the Tax Foundation found that Maryland ranks in the bottom ten states nationally in terms of business tax climate. Year after year we see legislation floated around from both sides of the aisle that would address many of the concerns cited in the study that goes nowhere. Instead, lawmakers are continuing to legislate as if employees require rescuing from employers. Senate and House members sponsor bills, including paid leave, that are based on the premise that workers are being mistreated and require advocacy. Instead of allowing due process of the law to work in the rare case that there is a transgression on an employer’s part, lawmakers feel it necessary to paint all businesses with a broad brush. Increasing bureaucratic red tape year after year simply punishes everyone and keeps many well-intentioned employers from creating additional jobs. The costs, record keeping and other requirements lay more at the feet of a small business owner at a time when they are already struggling to stay ahead of other state and federal regulations.
We often hear in the halls of Annapolis that small business is the backbone of our state’s economy. Unfortunately, so many of the bills that garner attention tell a different story. Lawmakers must realistically address the concerns of the small business community when it comes to mandating paid leave. They should be focused on reducing regulations and improving our tax climate in Maryland so that employers will be free to hire additional people. It is incumbent upon elected officials to set aside the rhetoric and show through their actions that the contribution of the small employer to our economy is in fact valued. Mandatory paid leave will cost our state thousands of jobs and solidify our position as a hostile climate for businesses if lawmakers do not address the concerns of the small business community.
Mike is the Maryland State Director of the National Federation of Independent Business (NFIB)