Paid Sick Leave Becomes Law in New York Despite Small-Business Concerns

February 26, 2014 Updated: February 28, 2014

NEW YORK—City Council passed one of the most expansive paid sick leave laws in the nation Wednesday, granting 500,000 New Yorkers in businesses with five or more employees the right to five paid sick leave days per year.

The 46–5 vote was a major victory for Mayor Bill de Blasio and Council Speaker Melissa Mark-Viverito, but small-business groups and some council members fear that it may burden and blindside thousands of small-business owners, whom the fledgling progressive administration has vowed to uplift.

The new bill significantly expands a version of the paid sick leave law passed last year, applying it to an additional 355,000 working New Yorkers, 200,000 of whom do not currently have paid sick leave days. It also strengthens what the mayor calls “family economies” by adding grandparents, grandchildren, and siblings to the relations a worker could take sick time off to care for.

But when the law goes into effect on April 1, it will also impact 175,000 of New York’s small businesses, nearly half of which are owned by immigrants, burdening them with additional payroll expenses, extensive booking requirements, potential fines, and little time to prepare for all of it.

At the council session Wednesday, several lawmakers took time before their votes to express concern about the impact of the bill on small businesses, but nonetheless voted for it in a display of allegiance with the mayor, the speaker, and the city’s progressive administration. Council member Ruben Wills said he was concerned by the speed at which the legislation was rushed, and intends to introduce amendments to it before the law takes effect.

Small-business groups and small-business owners voiced their concerns about the changes in the new law. A previous version of the bill was approved after extensive negotiations with small-business owners and other groups. Many testified against the expanded law last month, but to no avail as the bill was rushed through the legislative process, passing unanimously out of committee Tuesday and going to the full council Wednesday.

“They won’t even know that this affects them within the time frame and will not even be able to figure out the calculations, paperwork, and how to comply,” Zulay Mateo-Burgos, executive director of the Bodega Association, USA, said. “We need more time to educate them and get them prepared.”

Small businesses will be required to keep a record of hours worked and paid sick time earned by all employees for three years. Meanwhile, employees can also file a complaint three years after leaving a workplace. The law also enables the Department of Consumer Affairs to pursue investigations without receiving a complaint (although de Blasio may appoint a different department to oversee the law).

“This will add yet another layer of government on already overburdened small businesses, replete with gotcha fines,” said Robert Bookman, counsel for the NYC Hospitality Alliance.

Good Intent

Expanded paid sick leave laws are intended to improve the financial and physical well-being of the employees and their families. They aim to protect workers who are either ill or have ill relatives from the financial burden of losing wages, or their jobs, when taking time off.

“When people suffering from communicable diseases such as flu are forced to go to work when they’re sick—or who are forced to send their sick children to school because they can’t stay at home to care for them—they contribute to the spread of illness among their co-workers and classmates,” Alicia Glen, the deputy mayor for housing and economic development, said at a council hearing on Feb. 14.

Paid sick leave could also boost productivity: a study of national data by the San Francisco Department of Health showed that employees who have paid sick leave days take 1.5 less days off on average than those without. And perhaps reassuring to those who fear the bill’s impact is that similar laws have so far worked in Washington, D.C., San Francisco, Seattle, and the state of Connecticut, where there was no economic depression created or exodus of businesses.

“The legislation is unlikely to create any significant negative economic impact, and, in fact, could create positive economic gains for businesses and provide significant benefits to workers,” Richard McGahey, a labor economist at the New School, said.

The bill is a priority for de Blasio, who promised to expand paid sick leave during his campaign and moved to introduce it swiftly after taking office. It is also the first major victory scored by New York’s fledgling progressive administration. Progressives believe paid sick leave is one of the tools that can rectify what they refer to as the city’s burgeoning income inequality crisis. Nearly 48 percent, or 1.75 million working New Yorkers, can’t take time off work when sick without economic consequences, according to a study from the Community Service Society.

“Under this law, thousands of hardworking New Yorkers will no longer have to choose between taking a sick day or earning a paycheck—and thousands of parents will no longer be forced to pick between caring for a sick child and earning enough to provide for them,” de Blasio said in a statement Wednesday.

Poor Execution

Despite the good intent of the de Blasio administration, the rush to pass the expanded paid sick leave can hurt the very people it set out to protect and uplift. Small businesses in the city are already dealing with the costs of the federal Affordable Care Act and the impending increase in the state minimum wage. The additional financial strain associated with paid sick leave could tip some small businesses over the edge.

“Our position on paid sick leave from day one was that while expanding the social safety net to include mandatory paid time off is a worthy goal, we feel a cost sharing mechanism should be considered,” Nancy Ploeger, president of the Manhattan Chamber of Commerce, said. “Putting the entire cost of paid sick leave solely on the backs of the small-business community adds additional financial burden to their already over-taxed and over-fined small businesses.”

The bill will also disproportionately affect business with highly paid employees. Dorren Zayer, the owner of Relax on Cloud 9 Spa, testified on Feb. 14 against the law. Her employees are professional therapists who are paid highly for their work. Since clients prefer their specific therapists, when an employee takes time off, Zayer loses business. Under the paid sick law, her losses would be even worse.

“I don’t believe the council is hearing the challenges every business owner faces every day in starting, maintaining, and growing a business,” Zayer, said. “As I struggle to increase employees’ wages every year, which is what they want, I am thrown a council curveball in the form of a legal mandate making it difficult for me to not only hire new people, but to increase wages of current employees.”

Before voting the law in, council members also expressed concern about the outreach necessary to educate both employees and business owners about the law. De Blasio set apart $4.8 million in the preliminary budget to implement the law, some of which will be used for this purpose.

“The unintended consequences from this laudable bill I believe would have a chilling effect on small businesses,” Council member Vincent Ignizio, one of the five people who voted against the bill, said. “I believe it will foster the underground economy. You will see business owners that sadly will either not hire, lay off folks, or will start putting people off the books.”

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