A key General Assembly committee this week approved sweeping paid family and medical leave legislation, despite broad concerns about the mandate's economic impact, particularly on small businesses.
Both bills establish up to 12 weeks of annual leave for private sector and some state government employees at 100% of salary, capped at $1,000 per week, for their own or extended family members' illnesses.
The state-run program will be funded through an automatic 0.5% payroll tax, withheld from employees' after-tax earnings. Employees cannot opt out of the program.
Employers will be forced to shoulder many administrative burdens involved with juggling their workforce to accommodate employees on leave while also continuing to provide them with non-wage benefits.
More than 40 business organizations throughout the state submitted a letter to lawmakers opposing the leave mandate.
Gov. Ned Lamont also released his own paid FMLA proposal Feb. 20, outlined in SB 881. That measure varies slightly from the two committee-approved bills and will require a public hearing.
'Small Businesses Terrified'
CBIA's Eric Gjede told committee members at an earlier public hearing that "small businesses are terrified of this proposal."
"What you're asking us to take on in these two bills in terms of cost and burdens simply cannot be done by a significant number of Connecticut’s small businesses," Gjede said.
Unlike larger businesses that may be able to function with one or two employees out for extended periods of time, small businesses in particular face considerable difficulties adjusting to this mandate.
Gjede also said the program, as proposed, is not sustainable.
He noted that a worker making $52,000 per year would contribute only $260 annually to the fund, while eligible to receive up to $12,000 in benefits.
What you're asking us to take on in terms of cost and burdens simply cannot be done by a significant number of small businesses.
Massachusetts and New York, two of the most recent states to adopt paid leave, already are looking to increase the payroll taxes that fund their programs.
New York's payroll tax was 0.126% in 2018. The maximum employee contribution was $85 for a program that provided 50% of pay for a maximum of eight weeks.
In 2019, New York increased the payroll tax to 0.153%—still far below Connecticut's proposed tax—with a maximum employee contribution of $108 while the benefit increased to 55% for a maximum of eight weeks.
Public Sector Exemptions, Concerns
Gjede noted that while SB 1 and HB 5003 originally exempted public sector workers, both were amended this week to include state and municipal employees not covered by collective bargaining agreements.
The initial exemption of all public sector workers was a tacit acknowledgement of the huge cost and administrative burdens of paid FMLA, with the legislation shielding state and local governments.
Nonetheless, the majority of public sector employees remain exempt from the mandate under the revised bills.
The legislature's nonpartisan Office of Fiscal Analysis will report on the cost of adding that segment of public workers.
While the Labor Committee approved SB 1 and HB 5003 on party lines, at least one Democratic legislator expressed reservations about the mandate.
Sen. Cathy Osten (D-Sprague), who also co-chairs the Appropriations Committee, said the paid leave program appears unsustainable as written, saying she would like to see at least 20 changes to the legislation.
Osten, who is Sprague's first selectman, said she was also concerned with the mandate's impact on municipal budgets as well as how the state will pay for such a massive program.
CBIA and other business groups have also called for changes to lessen the mandate's impact, including not allowing 100% wage replacement, adding more protections against fraud, and excluding sole proprietors, independent contractors, and unemployed workers.