The Lens: Employers Prep for Paid Leave

The Lens: Employers Prep for Paid Leave https://wahospitality.org/wp-content/uploads/2018/02/Raw-TFT.jpg

The following article was published by The Lens on Dec. 21, 2018. View the article here.

With the phase-in period for paid family and medical leave just around the corner, two members of the Paid Family and Medical Leave Advisory Committee say they are content with how the law turned out and have encouraged businesses across the state to prepare themselves and their employees for the changes to avoid missing out on benefits.

They say business and labor representatives were able to negotiate to a point where employers will have a much lower cost burden than originally planned while still offering employees the paid leave they deserve.

On July 5, 2017, Governor Jay Inslee signed SB 5975 into law, making Washington the fifth state to mandate paid family and medical leave. The legislation specified that employees would pay into a fund for their own paid family leave, and both employees and employers would split the cost for offering paid medical leave.

Employers may begin deducting premiums from employee paychecks beginning on Jan. 1, 2019, and reporting begins Apr. 1. On Jan. 1, 2020, the benefits become available for employees who have worked 820 hours or more in the state.

Negotiations on the bill began April 2017 and involved coalitions of business interests and labor members. Julia Gorton, Director of State Government Affairs for Washington Hospitality Association (WHA), told Lens that both sides made sure that any controversial issues that came up while developing the bill were addressed early to prevent arguments at the rulemaking stage.

“This might be the smoothest process for a policy this large,” she said. “I really think this is representative of the time we sat in a room together working out the core details of the program.”

Gorton added that the biggest challenge for the business community was figuring out how this new model of state benefits based off a portable benefits model would work.

The biggest priorities for employers included making sure the program would align with the federal Family and Medical Leave Act (FMLA) requirements. Also important was considering how it might affect smaller companies.

“There is an exemption for small businesses for paying employer share premiums and there are also incentives for small business to opt in, which I think is the most valuable piece of the program,” she said.

An employer with an employee taking the paid benefits can apply for credit to deal with costs associated with the hiring and training of a temporary worker. Employers who do not need to hire an employee can recoup some of the additional costs associated with payroll, overtime and training requirements up to $1,000.

Employers with fewer than 150 employees can partake in these incentives. Employers with fewer than 50 workers can opt in voluntarily and contribute to the benefits program.

“I think those incentives really help ensure we can continue operating in the industry…we can’t have hospitality without people,” said Gorton.

One major concern for the business community was how the new law and the hiring of temporary workers would affect employers’ unemployment insurance rates, which Gorton said could have a “potentially drastic impact” because laying off workers results in more expensive payments into that program.

The bill addressed this problem by specifying that any temporary employee hired as a result of a worker on paid family leave would not affect an employers’ experience rating. Gorton said this provision encourages employers to make a hire while they have an employee recovering.

“This program is designed to help employees…from blessings to tragedies,” said Gorton. “These employees wouldn’t be able to work anyways, so we are able to provide a broad insurance program for individuals when they have major life events.”

She continued that the business community wants to make sure its employees can care for themselves and return to work when they are better.

“I think we mitigated the costs on employers the best that we could,” said Gorton. “Employers that have 50 or more employees are paying into the program has really set this up for a very broad and low-cost model, which we will be watching carefully as it takes effect in 2020.”

Bob Battles, Government Affairs Director for Association of Washington Business (AWB), told Lens, “While employers pay (into) this, the majority through the law is actually covered by employees.”

63 percent of the benefit program across both benefit types will be paid for by employees and collected out of their paychecks; the remaining 36 percent will come from employers.

Battles said it is important for employers to be ready for the premium collection on Jan. 1 because if they do not collect from January through March, they are unable to go back and would have to send in the remaining portion themselves.

In addition, AWB is encouraging employers to ensure their employees are aware of the changes.

“They need to be preparing for employees to see those lines on their checks,” he said. “If I was an employee and saw five dollars on a check, I would want to know what that extra charge is.”

Battles said the passage of the law allowed the business community to have more say in the program and have access to benefits such as small business grants.

“The reality is that ordinances and initiatives were being proposed and all of those would have been far greater a problem for business than what we have in this law,” said Battles. “They were thinking between 38 and 39 weeks of benefits and anywhere between 75 to 100 percent employer paid. There were also no protections for small businesses.”

He added that through negotiations, the bill specified that employees were able to get 16 weeks maximum out of a combination of 12 weeks allotted for both paid family leave and paid medical leave.

“This law does help protect employers and allows them to give a benefit to their employees at a reasonable rate the cost is not outrageous…it’s not free or cheap, but it’s not what it could or would have been.”