Bret Asmussen saw a big opportunity for his payroll services company when the Minneapolis City Council began talking about requiring businesses to provide sick time for part-time employees.
“I went to my boss and said we need to start marketing this,” said Asmussen, a manager at CSI Accounting and Payroll in St. Louis Park. They did, but the flood of business didn’t come.
Even though Saturday marked the official start in both Minneapolis and St. Paul of rules aimed at allowing workers to stay home if they are ill or need to take care of someone who is, many small businesses aren’t ready to comply.
“They don’t think it will actually happen, or they are delaying and procrastinating,” said Lee Goudzwaard-Vaught, CSI’s business development manager.
Some are waiting to see the outcome of legal challenges to the new rules. The debate in Minneapolis in recent weeks over a rule that would be even more costly to many businesses — a $15 minimum wage — was also a distraction. And at least for a while, officials in Minneapolis and St. Paul are offering some leeway from penalties for businesses that don’t comply.
“When I brought it up to other people, honestly some don’t know it takes effect July 1,” said Dave Benowitz, chief executive of Craft and Crew Hospitality, a catering service that works with several bars and restaurants in the Twin Cities. “Some of the bigger restaurants know about it, but the smaller ones still don’t have a plan for tracking it.”
The payroll service firm he relies on, Payroll Control Systems, or PCS, has been getting calls from clients and prospective clients who weren’t sure about the implementation date, said Joe Weepie, a vice president in PCS’ Minneapolis office.
“Any HR manager and payroll company has this on their minds right now, but the reality is, many likely don’t have a system to deal with it or have not properly prepared and executed all aspects of time collection, recording and communication,” he said.
For businesses, complying with the new rules comes at a price. PCS charges about $2 per employee a month to be compliant. Benowitz, a client of PCS, said they pay an extra $300 a month for its hundreds of employees who work at the restaurants they serve to meet the mandate.
Jeff Mulfinger, vice president of marketing and communications at the HR company Marsh and McLennan Agency LLC, said it would cost “a few hundred dollars” to have them draft an order to bring an employer into compliance.
Over the past few months, the cities and business groups held informational sessions to educate business owners on the ordinances. But the rules also faced legal challenges that created uncertainty.
The Minnesota Chamber of Commerce sued Minneapolis last year in an attempt to halt the city’s sick-time ordinance. A Hennepin County judge in January ruled the city could move forward with most of the rule, but the chamber has since filed an appeal, which will be heard July 11.
The Minnesota Legislature this spring passed legislation to pre-empt the ability of local governments to create city-specific work rules like the sick-time requirements. Gov. Mark Dayton vetoed it.
Some businesses have delayed compliance because the cities are offering leeway for a while, said Tammy Tyler, senior employment law compliance analyst at Paychex, one of the largest payroll providers in the Twin Cities and in the U.S.
Minneapolis is giving out warnings to those who are not complying with the ordinance during its first year, instead of stricter penalties. St. Paul businesses with fewer than 24 employees are not required to pay for sick leave until January 2018. Minneapolis employers had to be compliant by July 1, but businesses with five or fewer employees only have to offer unpaid sick and safe time. St. Paul is also providing an Excel tool that helps employers track sick time for those who can’t afford a full-time payroll service provider.
“Since both cities have indicated they will focus on educating employers, rather than enforcing penalties during the initial year, many businesses are taking a wait-and-see approach,” Tyler said.
Weepie of PCS said he’s now focused on trying to get all of his current clients compliant. He noted businesses need to do more than simply keep track of the sick time that workers are owed. He asked one business owner last month whether she had updated the employee handbook to reflect the new benefit. “She said, ‘Oh, I didn’t even think about that,’ ” Weepie said. “Changes for the ordinance need to be made in a number of places.”
CSI created a spreadsheet of all Twin Cities clients to track compliance, sent numerous letters and published tip sheets on its website. Even with the leeway from the cities, businesses that don’t follow the rules could open themselves to legal problems, Goudzwaard-Vaught said.
“You’re going to have part-time people work 20 hours a week and weren’t offered any sick and safe time, and someone will try to take the day off and they will get terminated, and then there is going to be suits,” Goudzwaard-Vaught said.