NFIB
Breaking the Small Business Bank
By Dan Danner
May 4, 2009 - 1:23:42 PM

As small businesses struggle to keep their heads above water, some in Congress want to push them back down. An effort has begun in Congress to expand the Family Medical Leave Act into a program that would force small employers to provide up to 12 weeks of paid leave to all workers.

The Family Leave Insurance Act, introduced by U.S. Rep. Pete Stark of California, would impose a new payroll tax on any business that employs two or more workers for 20 or more weeks in the current or preceding calendar year. It would grant the benefit to any worker, full- or part-time, who has worked at least six months.

The evidence shows that small businesses are hurting in this economy. Congress just added expensive new requirements to COBRA and unemployment insurance laws. Small business owners can't afford to pay for more new benefits.

The benefits would be paid from a new "Family Leave Insurance Fund," which would funded by a payroll tax paid by employers, employees and the federal government. In a business with 20 or more workers, the employer, worker and federal government each pay a premium—really, it's a new tax—of 2/10 of a percent of a worker's earnings into the fund. In businesses with 19 and fewer workers, 1/10 of a percent would go to the fund.

For example, if you have 12 workers and your total payroll is $540,000 a year, you'll pay $540 to the fund. That may not seem like a lot, but when you're an entrepreneur struggling to make a profit in a harsh economy, every penny counts.

And larger employers are hit harder. If a business has 90 workers and total payroll of $4,050,000 a year, that business will pay $8,100 to the fund.

In addition, the business owner would not be allowed to replace the worker who takes leave; they must old that job open until the worker returns. In that event, picking up the slack in a small business puts a real strain on the owner and the remaining employees.

Many small business owners hate to see a bill like this, which amounts to the government telling them how to run their small businesses. Laws like required paid leave force small business owners to implement policies that may not be in the best interest of their workers. Rather, small business owners should be free to do what is best for them and their employees when they determine what package of wages and benefits to offer.

In addition to the federal proposal, there are about 10 states that either have a paid leave program or have one proposed. In one case, the state of Washington, a paid leave program was supposed to go into effect this year, but was cancelled by the governor.

Many states don't call paid leave a "leave" program. Rather, it's called "temporary disability insurance," which tends to temper the tone of the debate over these types of proposals. States currently considering TDI program include Arizona, Massachusetts, Minnesota, Pennsylvania and Oregon.

Unlike the federal unpaid FMLA law, the state laws do not guarantee that a job will be held for the leave recipient. Although the laws generally are called TDI laws, a person can take leave for the usual FMLA reasons: birth of a child, illness of a spouse or guardian, adoption of a child, or personal illness. The periods of leave are generally six-12 weeks, depending on the state.

When will these new burdens stop? Small businesses can lead this country out of the recession, but only if government leaves them alone.

Dan Danner is president and CEO of the National Federation of Independent Business in Washington, D.C.

National Federation of Independent Business (NFIB)