BUSINESSWEEK ONLINE: FRONTIER - the resource for entrepreneurs  
By Pamela Mendels
FEBRUARY 28, 2000

Why Is Small Biz Allergic to Paid Parental Leave?

The fear is that mandated benefits will be too costly — but that might not be so


E-Mail Story

Dept. of Labor summary for small business of Family and Medical Leave Act

Dept. of Labor's proposed rule on Birth and Adoption Unemployment Compensation

National Partnership site with links to discussion of Labor Dept. Proposal

UWC site with links to discussion of Labor Dept. proposal

Business group urging changes to the Family and Medical Leave Act

Work & Family Archive

After I gave birth to my first child nine years ago, fortune smiled on me in two ways. First, long before federal law required employers to offer unpaid parental leave, I was lucky enough to work for a company that did so. Second, I could afford to take it. I stretched four months to six with sick leave and vacation. Somehow, my husband and I squeaked by.

Still, those months took a big financial toll. Down one income, we faced such startling new expenses as rice cereal, car seats, and scented diaper-pail liners. I remember wondering about parents whose employers didn't give leave or couldn't afford to take it. Didn't they need the baby-nuzzling, too?

One reason I was so privileged: I worked for a big company. An employee at a small company would likely be less lucky. That's because the current federal leave law exempts those with fewer than 50 workers. The National Federation of Independent Business says most exempt companies grant leave anyway -- but their employees depend on the boss's generosity.

These thoughts came to mind when I caught President Clinton's Saturday radio address on Feb. 12. He announced that the Administration backs several proposals to expand or enhance family leave. Under at least one, many more small companies would be affected.

The seven-year-old Family & Medical Leave Act requires businesses with 50 or more workers to grant up to 12 weeks unpaid leave to eligible employees after the birth or adoption of a child or family illness. One bill in Congress would extend the law, which now covers about 57% of the private-sector workforce, to companies with 25 employees or more, broadening coverage to 71%. The proposed Time for Schools Act, would let parents at companies covered by the FMLA take up to 24 hours a year of unpaid leave to attend parent-teacher conferences and such.

BRONX CHEER FROM BUSINESS. Other proposals are pending. The one that has kicked up the most dust emanates from the Labor Dept., which oversees state unemployment-insurance programs. Labor officials are considering a regulation that, for the first time, would let states tap jobless funds to pay parents on leave to care for a newborn or newly adopted child. Legislators and family advocates from about six states have shown interest, says Sally Paxton, a deputy solicitor at the Labor Dept. The states will resolve most details, such as how much employees can collect and for how long, and whether new parents who quit work qualify.

The proposal wins "amens" from working-parents' advocates -- and Bronx cheers from business, small and large. Supporters say it's a creative accommodation for the growing numbers of working mothers. And a broad-based system for paid leave is a matter of fairness. Should only rich people or those who work for big companies get to stay home with their new arrivals? As one study shows, the main reason eligible employees don't take parental leave is that they can't afford it. "We think the proposal is a significant step forward to help families afford time off when they are really needed at home," says Lauren Asher, a spokeswoman for the National Partnership for Women & Families, a Washington (D.C.) advocacy group.

Not so fast, business advocates respond. Unemployment insurance is for people who are jobless through no fault of their own and actively seeking work. Allowing leave-takers to go on the dole distorts the system and raises costs for employers -- who end up footing the bill. This idea will seem a lot less brilliant when the miraculous U.S. job-creation machine runs out of gas, they say. "People who are on parental leave are not unemployed. They are not available for work. They are not looking for work. This is not unemployment compensation. It is paid parental leave," says Eric Oxfeld, president of UWC Strategic Services on Unemployment and Workers' Compensation, a Washington (D.C.) group representing employers.

GLARING INEQUITY. Businesses raise other compelling points. Some say the FMLA needs fine-tuning before new mandates are added. For example, the definition of illness is so murky that some befuddled employers grant leave for minor ailments. They also fear that the unemployment-insurance scheme lets the camel's nose into the tent. What will stop bureaucrats from extending coverage to those caring for aging parents?

Yes, but.... Do these arguments counter the glaring inequity of our current system? What's wrong with letting states experiment? After all, the Labor Dept. says it will carefully evaluate the impact on employers and employees.

Mary Leon, a lobbyist for the National Federation of Independent Business, says advocates particularly fear erosion of what they consider a bedrock principle of the FMLA: that it apply only to companies large enough to absorb the temporary loss of an employee. That's why they're allergic to the 25-and-above bill. The NFIB says the unemployment-insurance scheme would undermine the spirit of the act by creating a new type of federal-leave program. In states that adopted the plan, benefits would be available to employees of companies of any size.

EVERYBODY'S HAPPY. Small-business owners also believe any increase in payroll taxes hurts them more than big business. Leon says entrepreneurs -- not the government -- should decide what benefits they can afford and employees need. "If the federal government says you must offer this benefit, you may not be able to offer other benefits that your employees would prefer. That destroys flexibility," she says. True. But it's hard to imagine people swapping paid parental leave for dental benefits, say, or Employee Assistance Plans.

The need for parental leave is as basic as unemployment insurance and Social Security -- a notion that most developed countries recognize. And for small-business owners who would like to offer paid leave, the proposal could be a boon: They would pay a fraction of what it would cost to keep an absent employee on full salary into an insurance fund. The employee gets paid leave. Everyone is happy.

Advocates of the proposal invoke another justification. Parents who take leave have the time to find reliable child-care arrangements. That means when they return, they'll be working -- not negotiating with babysitters. And they'll be less likely to quit due to an unworkable child-care situation. That's no small consideration for employers in this tight labor market.

Pamela Mendels is freelance writer based in New York City. She wrote about small business and had a workplace advice column at Newsday, and has written about workplace matters for Business Week, WorkingWoman, and the Web site iGuide.


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