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The paid family and medical leave (PFML) bill barreling its way toward passage at the State Capitol sounds like a great idea on the surface, but there are significant problems with the proposal that must be addressed to ensure it doesn't negatively impact workers throughout Minnesota.
Minnesota's large employers support paid employee leave. In fact, they voluntarily offer some of the most generous employee benefits in the country. Unfortunately, the current DFL plan would actually reduce paid leave benefits for thousands of Minnesota employees, force them into a new state bureaucracy to receive benefits, and impose a new payroll tax on nearly every employee in the state.
Fortunately, there is time to fix this flawed proposal — but only if the will exists to make it happen.
Here are some facts about this sweeping legislation that haven't received enough attention:
- Keeping employer-provided paid leave benefits will be nearly impossible. While the legislation purports to allow companies who already provide PFML benefits to their employees to "opt out" of this new state-run plan, in reality, no Minnesota employer will be able to meet the requirements of the bill. As a result, employees who currently enjoy employer-provided leave benefits will lose them and be thrust into the state-run system.
- Benefits under the state-run system will be worse for some. While employer-provided plans typically provide 100% of pay during leave, for many employees the state plan will provide only 66% of wages or less. Additionally, many companies currently provide more than the 12 weeks of paid leave for the birth of a child provided by the bill. Employees who currently receive more than 12 weeks paid leave will lose those extra weeks under this legislation.
- If you like waiting in line at the license bureau, you're going to love this. The bill creates a new state insurance program with more than 400 new state employees, a new claim processing system, appeals process, and more. If you're a pregnant woman trying to manage your paid leave benefits, imagine taking a number and waiting for the next available bureaucrat to discuss personal information or help you coordinate PFML with your other employer-provided benefits. Instead of walking down the hall to speak with a trusted HR expert at your workplace, you'll be dealing with anonymous state employees.
- It will make Minnesota a national outlier: Only 11 other states have attempted a state-run paid leave program and none are as restrictive or complicated as this proposal. While advocates claim workers will flock to Minnesota to obtain these benefits, the opposite is true. There is nothing attractive about losing employer-provided benefits, paying a new tax and navigating a new government bureaucracy. And because this proposal penalizes their employees and creates an administrative nightmare for employers, it is yet another reason for employers to reject Minnesota as a place to grow jobs.
- It will be costly: The legislation includes a permanent payroll tax on employees and employers of roughly $1.5 billion a year, 50% higher than the original estimate. And the tax increase falls on every employer in the state, including nonprofits, cities, counties and school districts. This will undoubtedly lead to property tax increases that will cost every homeowner and business, whether they participate in this new program or not.
- It will have unintended consequences: Things have not gone smoothly in the 11 other states that have already passed PFML programs into law. Washington state, for example, has had to raise its PFML tax rate since the program's inception in 2019 and concerns about the fund's long-term solvency remain. In Connecticut, backlogs in the state's PFML program have resulted in some recipients going weeks without income.
- It deepens Minnesota's workforce challenges: It is already hard for employers to find workers in this tight labor market. Under this proposal, businesses would be forced to find short-term replacement workers to cover absent employees. At small businesses or for highly specialized jobs, that will be difficult if not impossible. Further, the bill allows individuals to take "intermittent leave" — two weeks family leave, return for a month, another two weeks family leave, return for a month, etc. Imagine the headaches for small-business owners and co-workers as well.
One again, Minnesota's large employers are not against paid family and medical leave. Those benefits are important to their employees and their families. Our goal is to improve the proposal. Just one month remains in session and legislators are anxious to pass this bill, a complicated piece of legislation that will impact millions of Minnesotans.
Let's take the time to get it right. Minnesota businesses stand ready to work with legislators on both sides of the aisle to make that happen.
Charlie Weaver is executive director of the Minnesota Business Partnership.