Rhode Island Society for Human Resource Management State Chapter Statement of Cindy Butler, SPHR, SHRM-CP On behalf of the Rhode Island Society for Human Resource Management State Chapter Submitted to the Rhode Island House Labor Committee H 5413: Healthy and Safe Families and Workplaces Act (HFWA) March 30, 2017 Chairperson Craven, First-Vice Chairperson Messier, Second-Vice Chairperson Casey and Members of the Committee: My name is Cindy Butler and I currently serve in the volunteer position of Government Affairs Director for the Rhode Island Society for Human Resource Management (RI SHRM) i, an affiliate of the Society for Human Resource Management SHRM. ii the world s largest HR membership organization devoted to human resource management, representing more than 290,000 members in over 165 countries. I am grateful for the opportunity to provide testimony to the House Labor Committee on H 5413 Healthy and Safe Families and Workplaces Act, which is currently pending before the General Assembly. I testify today on behalf of the Rhode Island Chapter of SHRM, a 100% volunteer organization. Representing more than 750 individual members in our State, the Chapter s mission is to serve the needs of human resource professionals throughout Rhode Island, many of whom are charged by their employers to administer complex employee benefits and paid time-off programs. Our member organizations include employers in the manufacturing, education, healthcare, hospitality, services, non-profit, government, technology, and small business sectors of the Rhode Island economy. Our members are constantly looking for ways to adapt and design workplace policies that improve employee morale and retention two essential elements in developing and maintaining a productive workforce. I come to you today with more than 30 years of human resources experience, servicing clients in the business and non-profit sectors, primarily in Rhode Island and Massachusetts. Given the practical experience that RI SHRM and its members possess, we believe that we are uniquely positioned to provide advice to the General Assembly on this legislation that is fair to both employees and employers. RI SHRM respectfully opposes H 5413 for a variety of reasons.
Page 2 of 9 Effect upon Workplace Flexibility Models and Practices and Impact to Business As Human Resources professionals, we work directly with employees and managers and are responsible for designing, developing and administering compensation, benefits, and time off programs, which are part of our employers total reward strategy. We encourage, support, and expect employers to offer paid time off to their employees. The diversity and complexity of the American workforce combined with workplace transformations driven by advances in technology and global competition in a 24/7 economy continue to drive the need for more workplace flexibility. As a result, HR professionals, business owners, and managers are deploying flexible workplace programs and policies to recruit and retain top talent, enhance employee engagement, reduce turnover costs, and increase productivity. The workplace is continually changing, and we believe Rhode Island must have 21st century human resources policies and practices that meet the needs of Employers and Employees alike ones that are Innovative, Fair, and Competitive. RI SHRM s membership knows that compensation and benefits packages and workplace flexibility policies must be tailored to the unique needs of the organization and its employees, not dictated by government through a one-size-fits-all employer mandate. Paid time off programs should accommodate varying work environments, industries, and organizational sizes, while fostering innovation and a competitive economy. One size does not fit all and this legislation would pertain to all employers regardless of size and industry. This would create a hardship on many organizations, and would impact, in a negative way, the current compensation, benefits and paid time off/workplace flexibility programs of some employers. Employers implement paid time off and workplace flexibility programs because it is good business, increases employee retention, reduces unplanned absenteeism, and improves morale all of which, can, ultimately, improve the employer s bottom line. It is a critical recruiting tool. In fact, according to the 2014 National Study of Employers iii, 99% of U.S. employers already offer some type of paid leave to their employees. Keep in mind that many employees still may prefer higher wages, higher contributions towards their health or retirement plans, or other benefits over receiving more paid sick leave. Providing more leave as a one-size-fits-all approach will have unintended and adverse consequences. RI SHRM believes that our state government should encourage employers paid leave without imposing new and burdensome mandates on them and employees. Rather than the one-size-fits-all solution embodied in H 5413, policy proposals for incentivizing employers to offer paid sick leave should accommodate varying work environments, employee representation, industries, and organizational size.
Page 3 of 9 RI SHRM supports efforts to assist employees and prospective employees in meeting the dual demands of work, prospective work, and personal needs. Employers recognize these needs are not limited by legislation and regulations (medical, family caregivers, military service, jury duty, voting and more). Nor are they limited to only women or to employees who work a minimum number of hours. We applaud companies like Yahoo who offer unlimited sick days, and it would be wonderful if all companies were in a position to do that. However, that is not realistic. At Yahoo, it is not unusual for an employee to work remotely from home, work a fifteen hour shift to complete a project, and then take two days off. Many of our member organizations in Rhode Island are small businesses and non-profits, many of whom simply cannot not afford these types of generous benefit programs. Legislative mandates serve to flatten the market and reduce competition-rather than encourage innovation and creative methods for each employer to attract and retain the types of employees suited for their type of organization and industry. It just makes sense that offering a solid benefits program makes it easier for organizations to achieve this, rather than penalizing a company with a fine up to $5000 for noncompliance, which this bill would do. Rhode Island Compared to other New England States Seven states have implemented paid sick time laws in the United States. Three of them are in New England: Connecticut, 2012; Massachusetts, Voter Referendum, implemented July, 2015; Vermont, 2017. New Hampshire and Maine do not have paid sick and safe leave mandates. In almost every category, the proposed Rhode Island legislation is more costly to employers and more challenging for employers to implement than the legislation of other New England states. Our Governor, Speaker, and Senate President continue to work hard to attract employers to the state to improve our economy. However, Rhode Island has some of the most onerous labor and employment laws for employers in the United States, and we have more healthcare mandates than most other states 69 in total. Although each one has merit individually, collectively these mandates contribute to the fact that Rhode Island is one of the most expensive states for employers to offer health insurance to employees. Additional employer mandates would only increase the costs of doing business in Rhode Island. Rhode Island currently falls near the bottom of the list on many surveys of business friendliness. Many employers have told me that they consider these factors when making decisions whether to move or open a new business in our state. RI SHRM believes that Rhode Island needs to strike a better balance between the interests of employers and employees, instead of continuing to impose more and more burdens onto employers.
Page 4 of 9 Here are just a few examples of the differences between H 5413 and the laws passed in the other New England states: Connecticut exempts small employers with less than 50 employees, many manufacturers, and non-profits from the regulations; Vermont excludes many seasonal businesses, many part-time employees, very small employers, and per diem employees. H 5413 requires almost all employers to comply. Rhode Island s definition of family members to allow time off to care for is significantly broader than the other states. Connecticut requires employees to earn paid time at 1 hour for every 40 hours worked and Vermont at 1 hour for every 52 hours worked. H 5413 would require 1 hour earned for every 30 hours worked. Connecticut, Massachusetts, and Vermont allow workers up to 40 hours per year sick and safe leave. Rhode Island is proposing 56 hours. Massachusetts held listening sessions with employers and incorporated their feedback/revised the rules when drafting the regulations. They also provided safe harbor rules for employers upon implementation and alternatives to accrue time off. Potential Negative Impacts for Employees and Burdens As you know, H 5413 would require covered employers to provide up to 56 hours of paid sick and safe leave annually to most all Rhode Island employees, which would be the most generous of all the seven states that have mandated paid sick leave. California s law requires employees to accrue up to 48 hours, however they may limit the number of days at 3 (24 hours), and Vermont currently mandates 3 paid sick days. It would also make Rhode Island one of only two states in the nation to offer paid family leave (TCI) and paid sick leave. The only other state to require employers to provide both paid family leave and paid sick leave is California, a state with a significantly larger and more robust economy. But let us look at the bill s accelerated accrual rate. It requires accrual of at least one hour of paid sick leave for every 30 hours worked. That alone presents a very real, practical, and overwhelming challenge for employers to administer. Most employers provide paid leave or PTO (paid time off) to full time employees at a flat rate, regardless of the number of hours worked. This bill would create a significant administrative burden because employers would be required to track the actual hours worked of each and every employee and provide leave as required under this bill. See the chart below and how it would impact an employer that currently meets the requirement of the bill providing 56 hours of paid leave per year for a full-time employee who currently accrues a standard amount on a weekly basis.
Page 5 of 9 Hours Worked Current Weekly Accrual HFWA Weekly Accrual Week 1 37 1.077 1.23 Week 2 42 1.077 1.40 Week 3 40 1.077 1.33 Not only would the above employer have to change its entire tracking and accrual system (and incur extra costs to do so), but it would be faced with a challenge. This employee will accrue 56 hours of paid leave sooner under the HFWA than he or she currently does today. This will require yet another administrative adjustment to stop the accrual when the 56 th hour of paid sick time is accrued. This could be less than well received by the employee at that time. Some payroll companies are able to track and implement these types of complex accrual systems. However, many employers do not have payroll systems or payroll companies that are equipped to track these accruals. This situation is further complicated in the case of employers who operate in multiple states. The HFWA s inflexible approach could cause employers to reduce prospective wages or current benefits to pay for the leave mandate and associated compliance costs, thereby limiting the benefit and compensation options available to employees. Most employers have a finite pool of resources for total employee compensation. If total compensation for my staff includes 25-30% of an employee s wages for benefits, including paid leave, and the mandate for paid leave is increased, then I need to reduce or eliminate another benefit such as health or retirement benefits, educational assistance, or forgo wage increases to keep total compensation at the same total percentage. Additionally many employers already offer Paid Time Off (PTO), which often includes time off for sick time, vacation time, personal time, and even holidays. Mandating that employers track and accrue at a certain level could impact current generous PTO plans. The HWFA specifically states that the Act does not supersede any state or local law that provides greater paid sick time or leave rights, thus forcing employers to comply with a patchwork of varying federal, state and local leave laws as well as their own leave policies. Rhode Island employers must already offer, administer, and navigate a complex maze of at least 13 paid and unpaid leave mandates under federal and Rhode Island state law: Federal: 1. Military Leave (USERRA) 2. Family and Medical Leave (federal FMLA)-12 weeks on a 12 month period 3. Fair Labor Standards Act (FLSA limits recovery of employees negative paid leave balances at termination) 4. Breaks for Nursing Mothers (FLSA)
Page 6 of 9 5. American with Disabilities Act Amendments Act (ADAAA)- requires leave as an accommodation in certain circumstances 6. Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors Rhode Island: 7. RI Parental and Family Medical Leave-13 weeks in a 2 year period 8. RI Military Family Relief Leave 9. School Involvement Leave 10. Temporary Disability Insurance-provides up to 30 weeks paid leave per benefit year 11. Temporary Caregiver Insurance-provides up to 4 weeks of leave per benefit year 12. Jury Duty 13. Reasonable Accommodation for Disabilities Related to Pregnancy includes providing leave Consequences What are the financial impacts to businesses if there is a state mandate that requires paid leave for almost all employees, whether they work full-time, part-time, seasonal, and temporary, or on call for small and large businesses and non-profits in the state? Has anyone measured the overall impact to our economy? In December 2014, SHRM published the results from its survey, Total Financial Impact of Employee Absences Across the United States, China, Australia, Europe, India and Mexico. iv It found that when considering both the direct and indirect costs of paid time off, the total cost as a percentage of payroll was between 20.9% and 22.1%. Please allow me to share some of the concerns voiced by our members and their observations of the unintended consequences if this Act becomes law: 1. Employees can use the sick and safe leave in increments as small as the employer s time clock allows; let s say that is 12 minutes. Therefore, employees who oversleep, get out of the house late, etc. would be able to be frequently late to work, without penalty by texting their employer, claiming it is sick and safe leave. This could lead to widespread abuse, as employers do not have any recourse under this mandate and, in fact, cannot require documentation unless the employee is out of work for more than 3 days. And, if an employee incurs a cost to get the documentation from their health care provider, the employer is required to pay for it. Additionally, these frequent absences may cause disruption of production or customer service for the employer, overtime costs if other employees have to cover shifts, and significant employee morale issues for others who have to pick up the slack for the tardy employee. 2. A hospital regularly employs per diem staff, including nurses and security personnel. These workers may be regularly scheduled to work at least eight hours per week some
Page 7 of 9 weeks and/or for a limited duration but not on a regular basis. A private school employs on-call teachers when regular staff is on leave or vacation. Will employers retain these workers, who work limited part time shifts, if they now have to pay them for sick and safe time? 3. Organizations that employ seasonal workers, from 90 days to 6 months in a year, from year-to-year, who do not serve food, would have to track sick and safe time during the season; when the employee is rehired the following year, they would be reinstated with the previous accrued sick and safe leave balance in their bank and able to use it during the organization s busy season, impacting business. Or, perhaps the employer would hire someone different altogether, rather than reinstate a past worker, in order to avoid the liability of the accrued time off. This bill will adversely impact Rhode Island employers, and may negatively impact our efforts to attract new businesses from out of state and start or grow businesses in state. In anticipation of tonight s hearing, RI SHRM conducted an e-survey. The target audience was approximately 700 HR professionals and their respective employers in Rhode Island. It was released on March 28. As of this writing we have received 101 responses. The following is a summary of some of the highlights of our survey: Over 70% of reporting employers offered at least 40 hours of paid sick time or PTO. The majority of employers who offered traditional paid sick time did not offer 7 days, which this legislation calls for and would be the most expansive mandate of any state. Over 50 % offered paid sick leave to part time employees who regularly worked a minimum amount of hours, typically between 20-30 hours per week. The most common benefit was prorated based on hours worked, using the FT as the standard. Over 80% of employers did not offer paid time off to seasonal employees. Guidance from attorneys regarding ACA eligibility, typically recommend a 6 month working period before employees become benefit eligible for benefit tracking under the regulations. This, along with the carry over mandate would cause a hardship on manufacturing, retail, and hospitality industries. Documentation for absence: Some employees may take off time (and abuse the program) before and after holidays, weekends, just being late. Allowing employers to ask for documentation only after 3 days does not allow employers to manage their workforce time and attendance programs. Increments of time: Most employers use a minimum of one hour to track paid time off. Tracking at the rate of one hour paid time off for every 30 hours worked is an outlier. Most states that have this mandate require one hour earned for every forty hours worked.
Page 8 of 9 Carry-over: Employers maintain a variety of carry-over (sick time or PTO); regulating this element is confusing. Safe-harbor: All employers who offer benefits that comply with the essence of the mandate should be afforded a safe harbor and be protected from liability. There are concerns with the posting requirement who will develop the posting and how do we track the languages (5% of population) used in our workplaces? Will employers be allowed to run the leave mandates currently, such as FMLA and Paid Sick Time? Comments from employers: The current size of an employer who has to comply with FMLA and RIPFMLA Act is 50; TCI became a leave mandate for small employers--not to mention compliance with Workers Compensation and ADA leave mandates. This legislation creates new definitions and continues the patchwork of definitions for employers. This is a state with TDI and TCI, unlike other states. Many employers have PTO which rewards the employees who do not abuse sick time. If 56 hours is mandated, unfortunately employees will abuse it. Care for a sick relative is not needed with the TCI benefit. This legislation would be burdensome in a state that already has trouble verifying the validity of absences with no communication with the employer regarding TDI or TCI. The family definition under all 3 statutes is different. This would create a fourth definition. Anyone related or in the household by affinity is of major concern. This would complicate an already complicated mix of paid and unpaid leave mandates. How much more burden do the states and federal government think employers can handle? If they have to meet every mandate, some will just go out of business and we are back to high unemployment again. I feel every employee should have access to some paid sick/safe time. Employers should not be LEGISLATED to provide this leave at all. If something were to pass (this is RI after all) there should be some consistency from state to state, especially in New England where people move frequently from one jurisdiction to another. There are enough requirements imposed on employers, whether state or federal, that put a lot of pressure on employers, in particular those with a small workforce, where resources are scarce but the administration of employee benefits for that workforce is overwhelming. There seem to be an awful lot of requirements that employers must comply with, but there isn't any relief to employers to deal with those employees who find a loophole in the system and take advantage of it. People get sick, people get injury, people have to take care of loves ones. While we are employing people we must offer time for them to take care of them. Our company has 48 hours Personal Time" that can be used at the employee's discretion for whatever purpose. Where I disagree is the fine to businesses for non-compliance.
Page 9 of 9 Conclusion RI SHRM believes that all employers should offer paid time off programs to their employees to remain competitive. However, there are currently so many laws and regulations that limit what, when, and how we can engage our employees and to require yet another mandate, one which will be costly to some employers and another administrative burden to others is not the solution. There has to be a balance between state mandated benefit programs and employer choice in managing one s own benefit programs. The model of one-size-fits-all is not competitive for a 21 st century. RI SHRM believes that this is yet another rigid state mandate one that most other states we compete with are not currently required to comply with and combined with many other mandates, does nothing to help the state s efforts to attract new businesses and qualified, skilled workers to Rhode Island. In lieu of a legislative mandate, RI SHRM remains available to work with the General Assembly to shape public policy that entices, encourages, and supports employers who offer paid leave, such as through a tax incentive or safe harbor for those employers who already offer paid leave. We remain ready, willing, able and available to work with the General Assembly to continue this dialogue and advance our mutual goals to serve and support our employees, employers and RI s economic climate. In summary, one-size does not fit all. We would like Rhode Island to continue to focus on jobs and the economy. More competitions will create the need for employers to offer better benefit programs and higher wages. We respectfully request that the committee does not pass H 5413. Thank you for your time, interest, and attention to this important matter. Respectfully Submitted, Cynthia J. Butler, Director of Government Affairs Rhode Island Society for Human Resource Management State Chapter (RI SHRM) President, Butler & Associates Human Resources Consulting 14 Mast Street Jamestown, RI 02835 Cbutler579@aol.com 401-423-0046 i http://ri.shrm.org ii www.shrm.org iii www.whenworkworks.org iv http://www.shrm.org/research/surveyfindings/documents/total%20financial%20impact%20of%20employee%20a bsences%20report.pdf