Paid leave expansion headed for Delaware debate
Democratic state lawmakers will soon introduce a bill requiring Delaware businesses to provide paid family and medical leave to their workers, a potentially tough sell in a state known for its business-friendly practices.
Sponsors of the paid leave bill, which hasn’t been finalized, want Delaware employees to have up to 12 weeks off per year for certain qualifying events. Those include welcoming a new child, addressing a serious medical condition, caring for a sick family member, and addressing the impacts of domestic violence or a family member’s military deployment.
Details of the legislation – including how much it will cost Delaware employers – are still being drafted. It would not immediately go into effect if passed, according to drafters.
State Sen. Sarah McBride (D-Wilmington), sponsor of the bill and one of the General Assembly’s progressive Democratic newcomers, said paid leave will level the playing field between small businesses, which make up the bulk of Delaware employers, and larger companies that offer competitive benefits – what she calls “an advantage in the competition for talent.”
“With more states adopting this, Delaware is at a disadvantage in recruiting and retaining talent in our state because so many workers are looking to live in places where they know they will retain this benefit,” McBride said.
About a quarter of private sector workers in the U.S. didn’t have access to paid sick leave in 2020, according to the U.S. Bureau of Labor Statistics. That number has been steadily declining over the last decade, down from 37% in 2010. Among those who could access paid sick leave, 68% had an average of just eight days per year.
A paid-leave policy would be a major change for Delaware employers and the state’s business landscape.
“We would be looking for a proposal that provides the greatest amount of flexibility for employers because we think they are in the best position to assess their employee needs in relation to the realities of the market and the financial health of the business they’re operating,” said Michael Quaranta, president of the Delaware State Chamber of Commerce.
The chamber hasn’t taken a position on the pending bill because it hasn’t been filed.
What the bill could include
Paid leave in Delaware would operate as a social insurance program with payroll contributions collected by the state Department of Labor, similar to how Social Security and unemployment programs work.
Currently, nine states and the District of Columbia require paid family and sick leave.
“We can look at other states, see what works well and craft the right solution for Delaware,” McBride said.
Sponsors of the Delaware bill haven’t yet decided how the paid leave program will be funded.
One option is to split the paid leave contributions between employees and employers, as they are in Washington state.
The paid leave premium there is 0.4% of an employee’s gross wages, and employers pay just over 36% of that. That means if a Washington employee makes $50,000, the employer pays $73 while the employee contributes about $127 per year.
Washington also has an exemption for small businesses, which Delaware lawmakers are considering should they require split contributions between employers and workers.
In states like California and New Jersey, the programs are financed 100% by worker payroll deductions. New Jersey workers this year will pay 0.28% on the first $138,200 (the state’s income cap for family leave) in covered wages, or an annual maximum of about $387. Those who take leave are paid 85% of their average weekly wage, capped at $881 per week.
Delaware workers’ earnings would also be partially funded up to a certain percentage, and there would be a weekly cap. For example, an executive making $400,000 a year is not likely to get the full payout.
A private company with its own leave policy may be able to opt out if theirs is equal to or more “generous” than the state program, according to Liz Richards, the executive director of the recently-launched Delaware Cares Coalition for Paid Leave, a group of 35 state organizations backing the effort.
To qualify for paid leave, Delaware employees would be required to work a certain number of hours per week or year, and to have worked at the company for a specified amount of time.
Lawmakers said they will also consider the seasonality of some businesses, particularly those in Sussex County’s resort towns that make the bulk of their profit during the summer and hire temporary employees.
Not just about affordability
A government-run paid leave policy can be more affordable than paying out of pocket, McBride said.
“A lot of smaller and medium-sized businesses struggle to offer this benefit to their employees on their own dime,” McBride said. “These state social insurance programs are really the most economical way to get this benefit to every worker.”
Employers can use wages saved by the employee’s absence to hire temporary workers or find a way to divide the work amongst existing staff, Richards said.
But affordability isn’t the only factor at play, according to business advocates.
“Fortune 500 companies have a lot of flexibility if someone is out on paid leave,” said Michael Egenton, the vice president of the New Jersey Chamber of Commerce. “They have more employees to pull from. What we were concerned about initially is that the small employers don’t always have that ability.”
New Jersey has required paid leave since 2009. The state expanded its paid family leave insurance program to 12 weeks in the midst of the coronavirus pandemic last July.
Business advocates worry the requirement won’t consider the diverse sizes, locations, markets, and finances of the business community.
“It doesn’t mean you never do anything, but it is incredibly important for people to recognize that a single policy written without those realities and considerations will only have limited effect,” Quaranta said.
According to a 2012 survey of 259 businesses by the New Jersey Business and Industry Association, 54% of small businesses and 59% of large employers said they experienced increased administrative and overtime pay costs, respectively, due to the state’s Paid Family Leave Law of 2009. Those financial hits “can be harmful to businesses that continue to struggle with rising economic costs,” per the study.
“It’s never just the one issue,” Egenton said, when asked how paid leave was affecting New Jersey employers. “It’s all of them piled up. I’ve got taxes. I’ve got regulations. I’ve got agencies doing spot checks. Let’s throw a pandemic in.”
By Taylor Goebel