New York’s Paid Family Leave Creates More Costs for Employers, Employees

New York has a habit of enacting policies that, rather than finding a balance, create burdensome regulations that are costly, overreaching, and often untested. Nowhere is this more evident than with the paid family leave program due to go into effect on Jan. 1, 2018. The concept of paid family leave is something most New Yorkers (including myself) agree with — that is, providing employees with the ability to take paid time off from work to care for a sick family member or to provide care for a newborn child. But as too often is the case in New York, our paid family leave policy fails to balance the needs of the employee with the employer and pays scant attention to costs. In typical New York fashion, our paid family leave benefit comes in the form of a Cadillac Escalade with leather seats rather than a standard four-door sedan.

Since 1993, under federal law, employees who have worked for their employer for at least 12 months are able to take up to 12 weeks of unpaid leave for purposes such as child birth, the need to care for a family member who has a serious health problem, or an exigency arising from a family member who is on active duty. The federal law recognizes that having an employee out of work for up to 12 weeks is much more burdensome on small businesses than those with a larger number of employees. The reason is simple. Small businesses have fewer people who can pick up the slack caused by a worker who is out on leave. Therefore, as a compromise, the federal law applies only to businesses with 50 or more workers. New York’s new paid family leave law provides no such protection to small businesses, and rather under New York’s law, all private-sector employers (regardless of size) are required to provide paid family leave to their employees. Therefore, if you are a coffee shop that employees two people and one of your employee takes leave, you will most likely have to either hire a temporary worker to cover for the absent employee, or you and your other employee will have to take up the slack. 

It should be noted that New York’s program is for paid family leave unlike the federal program which is unpaid. Indeed, New York joins only three other states (California, Rhode Island, and New Jersey) that offer paid family leave. Interesting, but not surprising, the other states cap their paid family leave at four or six weeks. New York’s program, when fully phased in, will provide for 12 weeks of paid family leave. Even California, not a state known to be all that friendly to business, recognizes that lengthy employee absences can create hardship on employers and therefore tries to find a reasonable balance by requiring only 6 weeks of paid leave. In New York, these concerns are disregarded, and we will provide more than double the amount of leave (12 weeks) that is provided anywhere else in the country. 

Lastly, New York’s paid family leave program, to some extent, leaves open the big question of how it will be funded. In the first year of the program’s existence (2018), an employee who takes paid family leave will be eligible to receive 50 percent of his or her average weekly wage. In the second year, 55 percent of his or her average weekly wage. In the third year, 60 percent and in the fourth year and thereafter 67 percent. To pay for the wages during leave, an employer is required to purchase an insurance policy for the family leave benefit or self-insure. The cost of purchasing that policy or self-insuring, in theory, is to be borne by the employee through a payroll deduction on all of the employer’s workers. The issue, of course, is whether the payroll deduction will be sufficient to cover the costs. Since the legislation caps how much can be deducted from an employee’s pay (for example $1.64 per week in 2018) there is a real fear that the amount deducted will not be sufficient to cover the costs and the employer will then be on the hook to pay whatever the shortfall may be. Since this is a new program, it is difficult to determine how many will take advantage of paid leave and therefore its costs are unknown. It my mind, it would not have been unreasonable for the state, since it was mandating the program, to either allow for greater payroll deductions in case the costs are greater than the amounts raised or, in the alternative, have the state subsidize any additional costs. Unfortunately, that is not what the state enacted. 

In a way, the paid family leave program that is going into effect in January is a regressive tax on employees. Because all employees are required to contribute, employees, particularly those who live paycheck to paycheck, will soon notice their weekly earnings further diminished by the payroll deduction even if they never chose to take paid family leave. They, in essence, will be subsidizing those who chose to use the benefit.

There is merit to enacting a paid family leave law in New York. It will allow workers to utilize leave time without having to worry about the financial strain that may be put on a worker who is on leave for what almost everyone would consider legitimate purposes. However, since it is an untested program, New York should have taken its time putting it in place. 

We could have followed the federal law by limiting the mandate to larger employers and kept the length of the leave at least in the vicinity of the time allowed elsewhere. But as often is the case, New York instead is providing a very generous program. Let’s hope that this mandate does not add to the already challenging economic picture that we face in upstate New York.                                      

William (Will) A. Barclay is the Republican representative of the 120th New York Assembly District, which encompasses most of Oswego County, including the cities of Oswego and Fulton, as well as the town of Lysander in Onondaga County and town of Ellisburg in Jefferson County. Contact him at barclaw@assembly.state.ny.us, or (315) 598-5185.