Paid Sick Leave is No Remedy for Small Businesses

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A recent Bank of America survey of Boston’s small business owners reflects growing confidence, even as 65 percent of respondents believe they are still recovering from the Great Recession. However, a ballot initiative passed last November threatens years of hard fought progress in Massachusetts’ small business economy.

Small businesses are the bedrock of any thriving local economy, and despite recent increased obstacles from chains, 64 percent of Boston entrepreneurs plan to grow their businesses in the next few years (10 percent higher than last year), while 49 percent plan to hire more employees this year (an 8 percent increase).

The natural growth of this integral economic sector should be supported, not hindered. The fourth ballot initiative last November, Earned Sick Time for Employees, threatens to reverse this positive trend if improperly implemented.

The law allows employees to accrue 40 hours of sick time a year, which can be used for themselves or immediate family members. Even though the leave time would only be paid in companies with more than 11 employees, the law still disproportionately hurts small businesses.

Large, national corporations who employ hundreds in minimum wage positions are the root of the problem, not Massachusetts’ entrepreneurs. Bank of America’s survey shows that 41 percent of Massachusetts’ owners delayed or forewent compensation for at least two weeks to better their small business, almost 10 points higher than the national average. Would McDonald’s top shareholders do the same?

When one person at a small, struggling company comes down with a protracted illness, the employer either loses productivity or pays double for the week to bring in a replacement. Such an incident could easily force a struggling company to lay off employees, or even close its doors for good.

Larger businesses likely have more resources to comply with new laws. In consideration of the disadvantage that small businesses have in both lobbying efforts and operating costs, Massachusetts requires a Small Business Impact Statement (SBIS) to be drafted for legislation that may negatively affect small businesses.

A SBIS asks for clear analysis and projection of the potential impacts of the law in question. The responsible agency, in this case the Attorney General’s Office, must supply an exact estimate of the number of small businesses affected, projected costs for any additional responsibilities, and an analysis of the legislation’s effect on small businesses formation in the commonwealth.

Typically, the Attorney General takes these questions seriously and reasons to a thoughtful conclusion. Not this time, though.

Guidelines published by the Executive Office of Housing and Economic Development (EOHED) ask for agencies to report a specific estimated number of businesses affected by the law. The SBIS simply says that it applies to all small businesses in the state, and does not provide a count. This makes it very difficult to actually quantify the effects of the law, and ignores similar data available in other locations.

The next question asks for any “projected reporting, recordkeeping and other administrative costs required for compliance with the proposed regulation.” Again, guidelines published by EOHED ask for an estimate of the financial costs of incurring each additional responsibility. The responsibilities are identified, but the SBIS does not even begin to perform a fiscal analysis.

The final question is answered simply: “The regulation is unlikely to deter or encourage the formation of new businesses in the Commonwealth.” Even if correct, the Attorney General owes it to the public to share the reasoning and methodology that led to this conclusion, as is done in all other SBIS’s.

Companies in Massachusetts’ northeast are already tempted by New Hampshire’s favorable tax climate, and our northern neighbor is made even more attractive by this initiative.

Only two other states in the country have similar legislation, both of which are less prescriptive than Massachusetts’ law. Governor Baker has called for increasing the threshold for paid leave time to companies with more than 50 employees, among other changes. While it’s a step in the right direction, without a detailed analysis of the potential cost of this law it is difficult to make a case for an alternative plan that may accomplish the same goals.

Last November the commonwealth took a stand to help some our hardest-working employees in their time of struggle. Now it’s time for us to stand with small business owners as well.


Scott Haller is a student at Northeastern University working at Pioneer Institute through the Co-op Program.