No Free Lunch, Small Business Edition: The New California Paid Sick Leave Act

Last session, the California Legislature, in its infinite wisdom, decreed that all businesses–no matter how small–must now give paid sick leave to their employees. Effective July 1st, 2015, all employees now get 1 paid hour of sick leave for every 30 hours worked.

Sounds great, no?

Unfortunately, they failed to pass a corresponding provision which automatically made California businesses 3.33% more profitable. Instead they’ve essentially decreed that labor costs for all California employers have gone up by 3.33%, provided the employees ever get sick–or simply “get sick”.

We’re a tiny business, and we’ve always played it straight with our employees, so we asked them what they’d want us to do about this one. Surprisingly, nobody was in favor of taking a 3.33% wage cut, and I think they realized that there was a distinct lack of Scrooge McDuck-style piles of gold in the office which we’d been rolling around in on our breaks. So the 3.33% cost increase wasn’t simply going to come from some our of petty cash as we wheeled gold ingots from the secret vault.

No, new legislated costs like this would have to come out of our operating capital, show up as deferments or cuts to new hiring, or get raided from my kids’ all-too-inadequate college fund. There’s no free lunch here, no matter how much our glorious betters in Sacramento might like to declare such in their great benificence.

In the end, we decided that the meager paid holidays at the company just became unpaid holidays, in approximate proportion to the number of new “sick days” that had magically been created. It sucks for everyone, and I’m a little heartbroken to have to give up on paid time off between Christmas and New Years–a perk we’d been proud to make happen since we had a single employee working out of our living room years ago. It just didn’t seem right to force folks to work over the Christmas break, and we were proud to be able to give our folks that time off. After twenty years, that tradition just ended.

Then there’s the effect on the relationship between the employees and the employers. When paid sick time isn’t part of the employment deal, wondering about motives is rarely an issue. If you called in sick, we sent wishes for your speedy recovery, and tried to juggle things at the office as best we could to keep things running without you. No work meant no pay, so we didn’t need to question your motives too much, if ever.

Now, the incentives have changed, and frankly, any employee who doesn’t take every hour they’re entitled to is the sucker.  I guess we all get to look forward to endless rounds of calls which start with “<Cough!> <Cough!> Gee, I’m feeling sick today and can’t make it in…”, along with the mutual looking the other way and trying not to wonder whether we should feel bad for the employee, or vaguely resentful they were shirking.

So let’s see: more distrust between employees and workers, less predictable work schedules, pro-forma sick-call acting sessions, and cancelled holidays.

Great law, folks. Well done. Well done indeed.

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