NJ Business Matters: The Blog of the CIANJ

Is Paid Family Leave Already Running a Deficit?

This may be interesting to those of you who have been closely tracking New Jersey's Paid Family Leave program since the legislative stage...

When the bill was debated, the legislature operated under the OLS Fiscal Note, which assumed the program would generate $97 million in revenues to match the $97 million in expenses. However, the shrinking economy has forced the Governor's budget estimate to be less than that.

Paid Family Leave is run through the state's Disability Insurance Fund, and page H-9 of this budget document shows that fund growing by less than $70 million from FY08-FY10. Meanwhile, page D-235 of this budget document shows PFL expenses at $89 million in FY10.

So in year one of the new benefit program, the state believes it may run at a significant loss, and that assumes just a 0.8% utilization rate. By the way, in California the number of PFL claims filed is up 27% from its first year of implementation. Let's hope advocates for the new program will paint an accurate picture of its true costs.

How to Comply with Paid Family Leave

Last week, HR professionals from more than 50 New Jersey companies gathered for a compliance workshop on New Jersey's recently-enacted Paid Family Leave mandate. The law impacts virtually every New Jersey company as there is no exemption for small businesses.

The feature presentation was delivered by Laura H. Corvo of LeClairRyan. The event was free to CIANJ members and we have posted the PowerPoint presentation to CIANJ's website. Click here to view it in its entirety and e-mail your friendly blogger with any questions.

Expect Paid Family Leave Lawsuits

During the debate on the newly-signed Paid Leave mandate on virtually all New Jersey employers, CIANJ and other business groups argued the bill left small businesses exposed to potential lawsuits. While the law's intent is not to require companies with fewer than 50 employees to hold a job open for employees on leave, dismissed employees could still have grounds to sue based on other state and federal laws.

Today's Record offers even more support for that argument against paid leave,

"I find it interesting and very contradictory that they would ... put such an explicit statement in there that anybody who takes it is subject to replacement as long as it's a small employer, with 50 or less employees,'' said Chris Mills, a partner in Murray Hill-based labor law firm Fisher & Phillips. "I'd be astonished if employee advocates didn't try to find a way around this. It's almost a lose-lose situation here.''

Even if the law says workers at small businesses who take paid leave can't sue their bosses if their job is filled while they're caring for a new child or ill family member, Mills said legal challenges are almost certain. People who already have job protections based on age, gender, race, and/or sexual orientation, likely will have their day in court....

Of course that also means small businesses will endure the hardships and costs associated with being a defendant.

[Two A]ttorneys are recommending their clients, mostly large companies, prepare to implement the law, which workers will be eligible to take July 1, 2009. Smaller operations, each lawyer said, should look to local business associations for guidance. And no boss, they recommend, should risk being sued by either denying leave or not holding a job, if possible, for employees who take the time.

"Because it's only six weeks, companies with under 50 employees ... most are going to hold a job open because of concern they'll get sued,'' said [David I. Rosen, a shareholder at Littler Mendelson in Newark.]. "It's just not worth it.''

The threat of lawsuits and the conflicts with other statutes was a good reason not to pass the paid leave mandate into law. Now that the bill has been signed by Governor Corzine, it is an excellent reason for legislators and the Administration to monitor lawsuits and adjust the law periodically.

Sadly, some small business would have to serve as a test case for that to happen, spending attorney fees on their defense in the process. Surely the paid leave advocates who helped create the situation would come to their aid, no? 

Paid Leave Mandate To Be Signed Friday

On Friday, Governor Corzine will sign legislation making New Jersey a more expensive place to live, work and do business. The bill (A-873) will make NJ the second state with a paid leave mandate on virtually all businesses. 

From CIANJ's press release,

“Once again, Trenton has chosen to increase the cost of doing business in one of the nation’s most expensive states,” said CIANJ President John Galandak. “Creating this mandate during an economic downturn only exacerbates the negative message sent to companies considering locating to or expanding within New Jersey. Benefits are nice, but a job is essential.”

Remember that last line. In 2007 New Jersey added just 3,700 private-sector jobs, growing only 0.1%. That put the Garden State 41st in the nation. Meanwhile, NJ has already lost 10,000 private-sector jobs in 2008. Adding mandates unique to the state only worsens that trend. Call it subtraction by addition.

Jersey's Job Growth Continues to Slide

In a year in which New Jersey has already lost more than 10,000 private sector jobs, Rutgers University has unveiled a study demonstrating our 2007 growth was slower than neighboring states. In 2007, NJ added only 3,700 private sector jobs, or about 0.1% of its workforce. To compare, here is a rundown of growth figures in nearby states:

• New York - 1.2%
• Connecticut - 0.8%
• Massachusetts - 0.7%
• Pennsylvania - 0.6%
• New Jersey - 0.1%

Overall, New Jersey ranked 35th in job creation as a percentage of its overall workforce. If we want to maintain a high quality of life, those numbers have to change - and fast. A good start would be for Governor Corzine to veto the job-killing paid leave mandate that sits on his desk.

The Record Holds Its Applause on Paid Leave

Kudos to the editorial board at The Record for acknowledging the legitimate questions being asked about New Jersey's proposed paid leave mandate - questions still not adequately answered by NJ legislators.

All two of you regular blog readers know CIANJ's objections to the paid leave bill sitting on Governor Corzine's desk: that it will put NJ's already fragile business climate in further jeopardy, it could leave small businesses exposed to lawsuits and no one really knows what the program will cost. There are no contingencies in the bill if the paid leave fund were to run a shortfall.

As the Record aptly notes,

The state's business climate is not robust. Any bill that may further erode the stability of small businesses across the state gives pause for thought.

We still believe that paid family leave is well intended. But given the current business climate and the unknowns in implementing paid family leave in New Jersey, we are also concerned that paid family leave may do little good if workers find themselves unemployed.

As your trusty blogger wrote to the Star-Ledger on Sunday, business groups have not argued that paid leave is a bad idea...as a benefit offered by companies. However, government should not be mandating how each business in the state manages once-in-a-lifetime events.

Who Cares About New Jersey's Competitiveness

CIANJ thanks the 15 Senators who voted "NO" on making New Jersey the second state with a paid leave mandate on virtually all employers. The full roll call vote is available here.

The Senators who voted NO, despite enormous pressure are:

Senator Kip Bateman (R-16)
Senator Jennifer Beck (R-12)
Senator Anthony Bucco (R-25)
Senator Gerald Cardinale (R-39)
Senator Andrew Ciesla (R-10)
Senator Leonard Connors (R-9)
Senator Nia Gill (D-34)
Senator Phil Haines (R-8)
Senator Tom Kean, Jr. (R-21)
Senator Leonard Lance (R-23)
Senator Steven Oroho (R-24)
Senator Kevin O'Toole (R-40)
Senator Joe Pennacchio (R-26)
Senator Robert Singer (R-30)
Senator Shirley Turner (D-15)

In the previous voting session on the issue, Senators Joe Kyrillos (R-13) and Sean Kean (R-11) voted no. Neither were present today. Senator Ron Rice (D-28) was present, but not voting. In the previous session, Senator Rice said that he supported the spirit of paid leave, but noted his concerns over the impact on small businesses. He cast no vote during that session as well.

The Governor has already hailed Senate passage of the mandate, which is obviously bad news for those of us calling on him to veto it.

"Liberty and Prosperity" - Update: Paid Leave Mandate Passes

With the state motto used as a headline for this entry, we direct you to the video of today's Senate session. Paid family leave is one of the few agenda items on this rare April voting day, and its debate and vote will consume the majority of floor time.

We'll post the final vote and CIANJ's response as soon as it happens.

Update: The Paid Family Leave Mandate has passed by a final vote of 21-15. Because of the "special" nature of today's vote, not all Senators were in attendance. We will post the roll call shortly.

In the interim, here is a link to CIANJ's press release.

Roll Call Vote on New Jersey's Competitiveness

Early this afternoon, the Senate will cast its final vote on whether to impose a paid leave mandate on virtually all employers in the state. It's a new week, and there is a new study regarding just how expensive the program will be. This time, it is the American Consumer Institute that claims the Office of Legislative Services has underestimated the program's costs.

Bill advocates have claim that only about 1% of New Jersey's workforce will utilize the program, and the bill uses these assumptions when setting the tax rate. This is based largely on California's experience with paid leave. What they fail to mention is that because it is so new, only 28% of Golden Staters know about the program. They also do not take into account the increasing number of paid leave applications and the rising costs - an $80 million jump in just two years. Remember, there is no contingency in the bill for what would happen if the $33 per year tax on employees is not enough to cover expenses.

This is all in addition to the issues of competitiveness and lawsuit exposure that we've already detailed here at NJ Business Matters.

It's a special voting session for an especially harmful bill. We will post updates throughout the day. 

Paid Leave Vote Monday

The Senate rarely meets in April, but Monday the 40 legislators will be back in Trenton to cast their final votes on the job-killing paid leave mandate. The program would make New Jersey only the second state with such a program, joining California, and the vote comes at the same time Governor Corzine admits tax receipts are coming in below expectations and that he may have to cut an additional $500 million from the state budget. Remember that the state has already lost more than 10,000 jobs in 2008.

When the Senate last voted on paid leave a month ago, it narrowly passed, 22-16. Since then we've learned a few things,

• Job losses for the year increased, bringing unemployment up .3% to 4.8%
• The non-partisan Office of Legislative Services indicated the bill could leave small businesses exposed to lawsuits.
• New data from California puts in doubt the assumption that only 1% of New Jerseyans will use paid leave. There are no details in the bill outlining what would happen if the paid leave program ran a shortfall.

All of this in addition to what we already knew - the mandate will harm New Jersey competitiveness, drive costs higher for our companies and put small businesses in the position where they may be violating federal anti-discrimination laws.

We need a special voting day for that? Click here to show your opposition.