Colorado voters passed the Paid Medical and Family Leave Initiative on the 2020 ballot, but business owners still have mixed feelings. While some have concerns around solvency and added expenses on already struggling businesses during the COVID-19 pandemic, proponents argue that there could not be a better time to introduce paid leave.
Suzie Brundage, a hospice social worker who works with families in Boulder County, had anxiety surrounding the election on Nov. 3. Even though the president-elect wasn’t announced until later that week, she felt less anxiety when she found out that Proposition 118, the Paid Medical and Family Leave Initiative had passed.
After being killed at the state Legislature every year since 2014, Colorado voters approved the creation of a statewide paid family and medical leave program. In Boulder County, 72.13% of voters were in favor.
The initiative builds on the federal Family and Medical Leave Act, which provides unpaid time off. Under Proposition 118, covered employees can receive up to 12 weeks of paid family or medical leave with an additional four weeks of leave allowed for pregnancy or childbirth complications.
Brundage said that she sees clients make hard decisions between continuing to work or take unpaid time off to take care of their elderly relatives.
“It’s a question of their own livelihoods and survival, versus caring for their loved ones at the end of their lives,” she said.
Brundage also has had to take medical leave herself. She was on bedrest for the last two months of her pregnancy. After exhausting short-term disability and other funds after the birth of her now 6-year-old daughter, she returned to work earlier than she wanted. Brundage said that she had 10 weeks away from work — a period of time that she said is longer than what many mothers receive — but she vividly remembers experiencing heat flashes while sitting at her desk.
The $1.3 billion program will be funded through a payroll tax — 0.9% of employee salaries — paid for by employers and employees in a 50-50 split. The funds pooled will be managed by the Colorado Department of Labor.
Employees and employers will begin paying into the program in January 2023, and individuals can apply for benefits the following year.
Brundage said that she’s happy to pay into the fund if it covers Coloradans who don’t have paid time off if they have to take a leave.
“I’m happy to pay into a fund though if that means that other people will get the time that they need to be with their families or recover themselves,” she said.
Business owners split on timing
While some business owners and professionals believe that Colorado dragged its feet on creating a paid family and medical leave, others think that it’s being implemented too early.
Edwin Zoe, owner of Boulder’s Chimera Ramen and the Zoe Ma Ma restaurants in Boulder and Denver, has been a long-time supporter of a paid Family and Medical Leave Program and was ecstatic to see it pass at the ballot. He was appointed to the Family and Medical Leave Task Force, a group of 13 members appointed by leaders of the Colorado Legislature and by Gov. Jared Polis in 2019. The task force’s purpose was to examine different premium requirements originally for Senate Bill 188, one of the attempts to pass the measure at the state Legislature. Their findings later informed Proposition 118.
Zoe understands the financial hardship that the pandemic has placed on small businesses, especially those in the restaurant and hospitality industries. Between his three restaurants, about half of the staff has been laid off. He declined to share how the restaurant’s revenue has been affected, but said that his situation was comparable to how many other restaurants are faring.
Even though the pandemic has been difficult for him as a restaurateur — Boulder entered the “Red Level” restrictions on Nov. 20, again banning indoor dining — he said that right now is when employees need benefits like this.
Zoe said that offering emergency paid time off will dissuade employees, especially those who live paycheck to paycheck, from coming into work if they fall ill.
“If this is not the right time to be able to have people just stay home and not worry about whether they’ll be able to make rent, I cannot imagine a better time to have a family and medical leave,” he said.
He said that this adds protection for lower-wage workers and employees in positions that don’t offer paid time off, because lower-wage workers can receive 90% of their average weekly wage with a cap at $1,100 per week for the first year. Higher-paid workers will receive a smaller percentage.
Though premiums won’t be levied until 2023, the coronavirus pandemic has been at the forefront of arguments.
Lauren Grosh, chief marketing officer and owner of Sky Blue Builders LLC, was less thrilled about Proposition 118 passing. She is apprehensive about how it will impact the company’s financial wellbeing. The general contractor works on municipal and federal contracts and has offices in Aurora and Albuquerque, New Mexico.
Finding carpenters and laborer talent is competitive, she said, and she worries that paid leave will make it harder for small businesses like hers to stand out.
Grosh said that Sky Blue Builders already offers a competitive benefit package so if she doesn’t opt out, it will add on to the business’ expenses.
Businesses with fewer than 10 employees are exempt from paying the employer share of the premium, but employees regardless of company size will pay their share. Companies and local governments with their own programs, and sole proprietors, can opt out of the program.
Grosh said that she’s not opposed to creating a paid leave program but is concerned with the logistics of Proposition 118. If the company were to buy into the program, it would cost $170,000 a year, or the equivalent of four workers’ salaries, she said. Grosh would rather focus on job creation during a time when many workers don’t have job security.
“Especially in COVID right now when so many other industries are hurting, we’re really focused on just creating jobs,” Grosh said. “We would rather put that $170,000 toward hiring four new folks than having our employees as well as ourselves pay into a program that only 6% will be utilizing.”
Scott Cook, CEO of the Longmont Area Chamber of Commerce, said that the chamber’s public policy committee echoed Grosh’s concerns. The chamber opposed proposition 118 for that reason.
In every legislative session where the program was presented, the committee either took a neutral or opposing position depending on the year. Cook said that though the premiums might seem small, business owners are already making tough decisions when it comes to expenses.
Arguments for and against potential solvency
The financial longevity of the program was a common argument among opponents in the run up to the election.
Dave Davia, CEO of the Rocky Mountain Mechanical Contractors Association and co-chair of the No on 118 campaign, was a leading voice against passage of Proposition 118. He said proponents of the recently passed paid leave measure used rhetoric that villainized employers.
“There hasn’t been this widespread, ‘employers are bad people,’” he said. “I think employers, by far and away, do what’s right for their employees, and I think we’re solving for the minority but taxing the majority.”
Davia said that the program isn’t fiscally sustainable. After 2024, the state Department of Labor reserves the right to adjust premium rates up to 1.2% of employee wages based on program demand. The premiums would still be split evenly between workers and employers even if increased. Davia doesn’t doubt that the premium increase will be needed and believes that the fund could quickly become insolvent.
No on 118 has referenced a study throughout the election season from the Common Sense Institute that said, “If the program starts at a claims rate of 6.2% and an average length of leave of 9.5 weeks, the 2023 premium collections will not be sufficient to cover benefits and administrative costs in the first year of the program in 2024.”
The opposing campaign also argued that the program could discourage small businesses from growing beyond 10 employees in order to avoid paying premiums. No on 118 argued that employers would have to hire temporary help to cover for employees on leave.
Joe Kabourek, campaign manager for Colorado Families First: Yes on 118, believes that employers want to provide benefits such as paid leave to their workers but don’t have the tools to do so. Colorado Families First argues that Proposition 118 makes paid leave accessible and boasts of receiving nearly 200 small business endorsements.
The 13-member bipartisan task force decided on the 0.9% premium based on a study from the University of Denver, the Massachusetts Institute of Technology and an actuarial study at the state level by AMI Risk Consultants Inc. The actuary study suggested that the utilization rate will be at 3.53%.
Now that the program has passed, Davia will continue to work on rulemaking as the program’s details are ironed out before it is implemented.
“I think the way the government implements it is going to be really important, so that it doesn’t have too much red tape associated with it, otherwise businesses are going to start resenting it,” said Kendra Prospero, CEO and founder of Boulder-based human resources consulting firm Turning the Corner LLC.
She was excited that Colorado approved the initiative but said that it needs to stay true to its promise: providing affordable paid leave for businesses and employees.
Turning the Corner works with companies with 10 to 200 employees, meaning Prospero’s clients will need to pay into the program unless they meet exemption rules. As a business owner herself, she’s glad that there will be an infrastructure for paid sick or family leave, but says ideally businesses wouldn’t need encouragement from the government.
“I want companies to just make the right choices for their employees, and that’s a little bit lofty of a goal,” Prospero said. “This benefit is needed by employees. And in an ideal world, businesses would just offer it because it’s the right, moral thing to do.”
David Secunda, founder and CEO of human resources technology maker All4Staff Inc., which does business as WorkBright, and founder of summer camp provider Avid4 Adventure Inc., said he supported Proposition 118 from the first time he heard of it.
He’s relieved that he has a path to provide family and medical leave benefits to his employees that don’t qualify for benefits.
Both of Secunda’s businesses have more than 10 employees qualifying for the employer side of the premium cost.
The COVID-19 pandemic significantly impacted Avid4 Adventure. Most programs went online, Secunda said, and only met 25% of its expected business this summer. But Secunda said he’s happy to pay the 0.45% of his employees salaries when the state starts collecting premiums.
Secunda said that both businesses offer benefit packages and paternity and maternity leave to its full time employees.The Paid Family and Medical Leave Initiative builds a foundation for the seasonal workers to take emergency time off, he said.
Secunda said that he was elated when Proposition 118 passed. It’s a win for the contingent or contractor, essential and low-income workforce, he said.
“When I think about something like this, it has the most benefit for those lower wage workers and those contingent workers,” Secunda said, “and that is well worth all of the other minor pain that’s incurred by the economic hit on it.”
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