November 16, 2009

November 16, 2009 | WebMemo on Jobs and Labor Policy

Swine Flu and Sick Leave: Improvements to the Emergency Influenza Containment Act Would Save Jobs

The Emergency Influenza Containment Act, currently being considered by the House Education and Labor Committee, requires employers who direct their employees to stay home because of a contagious illness—such as the swine flu—to provide those workers with paid sick leave. While this legislation responds to a genuine public health concern, it would also have unintended consequences: costing jobs and encouraging employers to keep sick employees at work. Two improvements to this legislation would solve these problems while protecting employees from financial hardship.

  1. The bill should treat employers that provide paid leave benefits as already providing paid sick leave.
  2. In lieu of providing paid leave, employers should be allowed to schedule their employees for additional hours when they recover and return to work. By making this change, Congress would protect employees financially while allowing small businesses to avoid paying employees for work they did not perform.

Swine Flu and Sick Leave

The highly contagious H1N1 “swine” flu poses a threat to public health. Some employers are now requiring workers who contract the swine flu to stay at home rather than report to work and risk infecting their co-workers. This mandate creates a financial hardship for employees who do not have paid sick leave: If they do not come to work, they lose the income they need to support themselves and their families.

In order to address this problem, Representative George Miller (D–CA), chairman of the House Education and Labor Committee, introduced the Emergency Influenza Containment Act (EICA, H.R. 3991). This legislation requires employers to give five days of paid sick leave to workers whom they direct to avoid work because of a contagious illness. The mandate applies to all employers with 15 or more employees.

EICA avoids some of the problems that have plagued other bills mandating paid sick leave, such as the Healthy Families Act. For instance, the leave covered by EICA is less likely to be abused because it only applies to workers whose employers direct them to take it. Consequently—unlike the Healthy Families Act—employers are less likely to respond to EICA by reducing wages. As written, however, EICA will still endanger jobs and counterproductively discourage employers from directing workers with the swine flu to stay home.

Few Exemptions for Existing Leave Policies

EICA burdens businesses in two ways. First, many employers currently offering leave benefits would have to overhaul their plans to comply with the law. While EICA technically applies only to employers that do not already provide their workers with paid sick leave, the bill defines sick leave plans very narrowly. For example, under EICA paid time off (PTO) plans, which give workers a set number of paid days off to use a year that they may use for any reason, do not qualify as “sick leave.”

Additionally, most sick leave policies would also not qualify. The legislation only exempts firms that provide employees with paid sick leave “that may be used at the employee’s discretion.”[1] Few businesses with sick leave plans provide this kind of discretionary sick leave: Most companies with sick leave benefits require employees to request leave from their supervisors. Some require workers to show a doctor’s certifications for their illness. Few businesses allow workers to call in sick at their discretion with no policies to prevent abuse.

Consequently, most businesses with paid leave policies would have to restructure their benefits to comply with EICA, a process that would impose considerable costs. Businesses with PTO plans would probably respond by reducing PTO by five days and giving the workers five new sick days. This reduction would deny workers the highly popular flexibility provided by PTO leave.

Burden on Small Businesses

Second, EICA would burden employers by requiring that workers be paid for work they never perform. The goal of protecting employees from financial hardship due to the swine flu is commendable. However, EICA simply transfers the economic cost of lost work due to the swine flu from employees to their employers.

In the current economic climate, many businesses are struggling to avoid bankruptcy and have little cash with which to pay extra benefits. This financial drain could push businesses on the brink of insolvency over the edge and destroy jobs. Small businesses would be particularly effected buy this new requirements. A firm with 25 employees has fewer resources to cover such costs than one with 2,500. Many relatively small businesses exceed EICA’s 15-employee threshold and would face financial hardship under the bill.

Counterproductive Unintended Consequences

Businesses would respond to this mandate by attempting to minimize the costs it imposes on them. Unfortunately, their responses would be counterproductive to Congress’s goals: Many businesses would probably require sick employees to come into work instead of staying at home. Businesses with fewer than 15 employers would also become less likely to hire additional workers. Since EICA imposes costs on firms that hire 15 or more workers but none on firms with 14 or fewer workers, small businesses would be reluctant to hire their 15th employee.

Fortunately, simple amendments to EICA would allow Congress to protect employees from hardship while avoiding these unintended consequences and protecting jobs.

Protect Employers and Employees

Congress should clarify that employers are considered as providing paid sick leave if they provide their employees with any form of paid leave. This would sensibly recognize that employers using PTO plans already provide their workers with leave. It would also acknowledge that plans that do not give employees unlimited discretion in taking sick leave nonetheless provide real sick leave benefits. This change would prevent employers with leave benefits from being required to restructure their benefit plans in response to the law.

Congress should also give employers an alternative to providing mandatory paid sick leave: allowing employers to schedule employees they require to stay home with additional hours of work to make up for their lost earnings. Congress could require employers that use this option to pay their workers for these hours in advance as though they had worked regular hours. This would avoid the problem of workers putting expenses on their credit cards at high interest rates until they could work the make-up hours.

This compensatory hours requirement would allow part-time workers to make up their lost earnings with little difficulty. Full-time workers might have to work overtime to recoup their lost pay, but overtime pay would put much less of a burden on employers than paid leave.

Compensatory hours would protect employees’ finances without risking their jobs. They would ensure that worker’s earnings remain steady even if they fall ill. At the same time, they would shield employers from the burden of paying for work never performed. Instead of a paid leave mandate, Congress should create an allowable substitute, especially for part-time employees.

Protection from Financial Harm

Congress wants to protect workers who contract the swine flu from financial harm. Improvements to EICA would accomplish this goal without risking jobs. As written, the act requires businesses to pay for work never performed, something struggling business cannot afford to do.

Congress should also allow employers to reschedule their employees for additional hours that make up their lost earnings in lieu of providing paid sick leave. Rescheduling missed hours would reshuffle work across weeks rather than inflicting another financial hit on either employees or employers. Finally, Congress should clarify that employers that provide any paid leave meet the requirements of the act. This mandate would prevent employers with paid time off plans from needing to restructure their benefit plans.

About the Author

James Sherk Research Fellow, Labor Economics
Center for Data Analysis

Show references in this report

[1]Emergency Influenza Containment Act, H.R. 3991, Section 10(3)(B).