Employers' Perspectives on San Francisco's Paid Sick Leave Policy

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Abstract

This report summarizes strategies San Francisco employers used to implement the nation's first law requiring paid sick days for all employees, based on interviews with a sample of businesses. Although employers faced three new policies that affected staff wages and benefits, they were able to implement the paid sick leave requirement with minimal impacts to their business. The report details employer responses to the law in their operations, staffing, employee benefit packages, and reporting requirements. By assessing employers' perspectives on the operational challenges of the law, the study provides lessons to inform future research and policymaking.

Introduction

Over the past several years, paid sick leave has become an important issue on the policy stage. A 2004 report by the Institute for Women’s Policy Research helped thrust sick leave into the spotlight when it found that 49 percent of all workers were unable to take paid sick leave for themselves or for sick family members (Lovell 2004). Other research has confirmed that an even greater share of the workforce— 54 percent—cannot take time off from work to care for sick children without losing pay or using vacation time (Galinsky, Bond, and Hill 2004). Eighty-three percent of workers go to work when they are ill, and 21 percent do so explicitly to save their sick leave to stay home when their children are sick (ComPsych Corporation 2007).

A key finding in much of this research is that low-income workers often lack access to paid time off. In fact, data from nationally representative samples show that high-wage employees are more than twice as likely as low-wage employees to be able to take time off without penalties to care for their sick children (Galinsky et al. 2004). According to the Labor Department, private-sector workers making less than $15 an hour are less likely than higher-paid workers to have access to any paid sick time, paid vacation time, or paid personal time (U.S. Bureau of Labor Statistics 2007). Children in low-income families are also much less likely to have a parent with paid sick leave than children in higher-income families, even among families with two employed parents (Clemans-Cope et al. 2008).

To address this lack of paid sick leave, several jurisdictions have implemented or are considering a new labor standard that would require employers to provide paid sick leave. The city of San Francisco was the first to pass such a law in 2006, but it is by no means alone in its efforts. In March 2008, the District of Columbia became the second locality to pass a mandate on employers guaranteeing paid sick leave to workers. The bill is modeled after the San Francisco ordinance, but it differs on several details. Milwaukee, Wisconsin, voters also passed a sick leave mandate in November 2008. In addition, the federal government as well as other states and localities have introduced legislation on this issue.

A growing body of research shows the benefits to employees of having access to paid sick leave. In particular, the public health benefits appear strong; paid sick leave helps reduce the spread of infectious diseases, such as influenza, and hospitalizations and health care costs for preventable chronic conditions (Bhatia 2007; Hartmann 2007). One analysis finds that workers with preventable chronic conditions have less access to paid sick leave, suggesting that workers with greater medical care needs face an additional barrier to addressing their illnesses (Bhatia et al. 2008).

Information on the business impacts of providing paid sick leave is more limited. To be sure, many employers already provide sick leave benefits to some of or all their employees, in part because of benefits to their business. For example, the availability of paid sick leave has been linked to reduced voluntary and involuntary job turnover for employers (Cooper and Monheit 1993; Dodson, Manuel, and Bravo 2002; Earle and Heymann 2002; Heymann 2000). In addition, the provision of paid sick leave appears to improve business productivity by limiting “presenteeism,” or when employees work while ill, and ensuring that workers are healthier while on the job (CCH Incorporated 2003; Goetzel et al. 2004; Hemp 2004; Lovell 2004). However, mandated employer benefits increase labor costs for businesses, which can lead to employer actions to minimize or offset these costs. A large body of research on employer mandates shows that businesses will generally pass on any increased costs to their employees, through reduced wages and benefits, or to their customers, through increased prices. To minimize costs, employers may also reduce workers’ hours to avoid workers’ benefits from accruing, or maintain lower staffing levels than they otherwise would, for example by reducing the number of employees. This is particularly likely for employers with a minimum-wage labor force, who face wage rigidity (Summers 1989). An initial look at San Francisco’s employment rate in the year following implementation showed that the city “maintained a competitive job growth rate” (Lovell and Miller 2008, 1). However, a paid sick leave requirement has unknown longerterm implications. The Institute for Women’s Policy Research has analyzed potential costs and benefits of paid sick leave policies and predicts a net savings for employers, employees and their families, and society (Lovell and Miller 2005). The National Federation of Independent Business, on the other hand, estimates major job losses and lost sales revenue associated with sick leave requirements (Phillips 2008a, 2008b).

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