Christopher Carlozzi, State Director, National Federation of Independent Business
In Opposition to House Bill Nos. 2172, 3134 and Senate Bill No. 1048 An Act Establishing a Family and Medical Leave Insurance Program and An Act to Establish Paid Family Leave,
Before the Joint Committees on Labor and Workforce Development
June 13, 2017
Chairman Lewis and Chairman Brodeur and Members of the Joint Committee on Labor and Workforce Development:
My name is Christopher Carlozzi. I am the Massachusetts Director of the National Federation of Independent Business (NFIB). A non-profit, non-partisan organization, NFIB is the nation’s and our state’s largest small business advocacy group. In Massachusetts, NFIB represents thousands of small and independent business owners involved in all types of industry, including manufacturing, retail, wholesale, service, and agriculture. The average NFIB member has five employees and annual gross revenues of about $450,000. In short, NFIB represents the small Main Street business owners from across our state. On behalf of those small and independent business employers in the Commonwealth, I urge you to oppose House Bill Nos. 2172, 3134 and Senate Bill No. 1048, proposals that would mandate that Massachusetts employers fund paid leave for workers absent from work due to situations with family members and for workers’ temporary disabilities.
Massachusetts is already a high-cost state for employers with energy costs, development costs, taxes, unemployment insurance costs, health insurance premiums, mandated sick leave benefits, employee salary and benefit costs at or near the highest in the nation and now the potential for a new health care tax assessment. These costs and mandates, although not an exhaustive list, are reflected in the small business sector’s economic struggles over the past several years – a sector that has historically served as the state’s job incubator. Small business owners are not a bottomless pit. Now is not the time to impose a new mandate on employers for paid family leave for workers—a mandate that will make the state less economically competitive.
These employer-paid proposals would once again add another benefit to the growing list of “Massachusetts-only” expenses, leaving Bay State businesses at a competitive disadvantage with neighboring states. Rhode Island has had an employee paid (through a 1.2% payroll deduction tax) temporary disability program in place for workers for nearly seventy years. The program was recently expanded to include family leave along with employee disability, but once again, employee funded.
In addition, while the state policymakers may think they know how employees should want to be paid, this proposal takes away flexibility of employers and employees to design appropriate compensation. They know that the mandated employer paid benefits will result in smaller paychecks or less robust health insurance or retirement benefits. The cost of this mandate will be reflected in the workers’ compensation. A new state mandate that prescribes specific employee benefits, like paid family leave, would restrict the flexibility of employers to provide the wages and benefits that their employees want, and that the employer can afford. If employers are required to take money out of the weekly pay check for family leave, there are fewer resources available for other optional benefits such as health insurance, retirement programs, or wage increases—benefits that have a more fundamental relationship to the workplace and that impact workers of all ages. Particularly in small businesses, employees appreciate an employer that can tailor their benefits to their particular needs and desires.
Experts have reported modest wage growth for many workers in the Commonwealth and this may be attributed to the cost of additional state mandated benefits. Small businesses have a finite amount of resources to allocate to wages and benefits. State budget problems have dominated the news headlines these past few months as Massachusetts reports lower than anticipated tax revenues. It is important to note that the more employers are forced to pay for non-taxable benefits like leave policies, the less money they can allocate for wages (subject to the state income tax). As the Legislature adds more employer-paid mandates they may be inadvertently widening the state budget gap with less income tax revenue. Additionally, many workers would prefer a larger paycheck to additional benefits.
Unlike unemployment insurance or workers’ compensation, which cover losing a job through no fault of the employee or incurring an accidental injury on the job, having a family and paid family leave benefit is unrelated to the employment relationship. And in a small business, mandated family leave programs significantly impact productivity and operations. One employee on family leave would require the average-sized NFIB member business (with five employees) to operate without 20 percent of their total workforce for half of the year. The alternative would be to hire a temporary replacement worker—a difficult, costly, and in many cases likely ineffective remedy.
In summary, time-off for family issues are currently worked out in tens of thousands of small businesses in the Commonwealth every day without government intervention. Several current laws, such as the sick leave law, the small necessities act, and others cover many personal issues for workers as well. The government mandate is an economically dangerous imposition of additional costs on many Massachusetts employers.