Forty-three million workers don’t receive paid sick leave in the U.S., and if Microsoft has its way, that’s about to change for potentially thousands of people.

Taking its cue from stalled legislation that would require companies large and small to offer seven days of paid sick leave to full-time workers, the Redmond, Washington software giant is mandating 15 days off for vacation and illness for many of its 2,000 contract businesses. The move doesn't sit well with a lot of small business owners, however.

Microsoft, which announced the initiative in a blog post on Thursday, plans to exempt companies with fewer than 50 employees and all employees who have worked with such companies for less than nine months. Here’s what Brad Smith, general counsel and executive vice president of legal and corporate affairs for Microsoft had to say in his post:

The lack of paid time off disproportionately impacts low-wage earners. While estimates vary, the overall trend is clear. As one study found, only 49 percent of those in the bottom fourth of earners get paid time off, compared with almost 90 percent among the top quarter of earners. Lack of paid time off also has a disproportionate impact on minorities at a time when the tech sector needs to do a better job of promoting diversity.

Small business owners say that Microsoft is free to do what it wants, but they say they object to a mandate of any kind, including a federal mandate that’s been kicked around for years requiring seven paid days off for illness.

“Small business owners are not Microsoft,” says Kurt Zanelotti, owner and chief executive of Contract Carpet Systems and CarpetOne Retail Store, of Beltsville, Maryland. The business is a carpet retailer and commercial floor contractor. Zanelotti is not a Microsoft supplier.

Zanelotti, whose father started the business 40 years ago, has 30 full-time employees, and he offers them five days of paid sick leave in addition to their vacation time. Such benefits are critical to stay competitive, says Zanelotti. But proposed federal requirements go too far and could cost his business an additional $20,000 year, he says. While that may not sound like a lot, given how competitive the contracting industry has become since the recession, every penny counts, Zanelotti adds.

The Backstory

Numerous bills have been introduced in Congress in recent years, but they've tended to die in both chambers. More recently, paid sick leave has been an area of focus for the Obama Administration, which hopes to advance legislation that would require seven days of paid sick leave for workers. In his State of the Union speech in January, the president said it would be a key part of his agenda in his final two years.

In February, Senator Patty Murray (D., Washington) and Congresswoman Rosa DeLauro (D., Connecticut) reintroduced the Healthy Families Act, which would require seven days of paid sick leave for companies with 15 employees or more. Workers would accrue one hour of sick leave for every 30 hours worked.

Currently, three states have laws requiring businesses to have paid sick leave. Those are California, Connecticut, and Massachusetts. A handful of cities have also passed paid sick leave laws, including New York City, San Francisco and Seattle.

Business groups, such as the National Federation of Independent Business and the U.S. Chamber of Commerce, oppose such legislation, and they have lobbied aggressively against it in Washington. For its part, NFIB says federally mandated paid sick leave amounts to a tax on small businesses that would enforce a “one-size-fits-all” standard on businesses, regardless of size.

“Big companies can do what they want, but we oppose a government mandate that requires all employers to provide this benefit,” says Jack Mozloom, a NFIB spokesman.

Collateral Damage

Legal experts also worry that Microsoft may be setting a bad precedent.

“Even if some people view this as a positive, we are wary of companies creating a mandate that pushes up the cost of doing business,” says Steven Friedman, a partner at Littler Mendelson in New York, specializing in employee benefits law.

In light of the Hobby Lobby ruling by the Supreme Court last June, which allows businesses to exempt themselves from aspects of the Affordable Care Act for religious reasons, Friedman thinks the Microsoft move could open up a can of worms. Religious businesses could soon mandate that contractors also not offer contraception as a health care benefit to workers.

“You don’t know what types of demands could be placed on companies,” Friedman says.

Meeting in the Middle

Still, business owners say it’s possible to forge a middle ground with such a controversial issue. Joni Green, co-founder of Inc. 5000 company Five Stones Research, builds sick time into what she charges the federal government for her company's services. Her workers start out at 15 paid days off per year, exactly what Microsoft now requires.

The 130 employee defense contractor based in Huntsville, Alabama, provides engineering, logistics, and information management services to the Department of Defense and other federal agencies.

Yet Green, who says she favors a free market approach to setting policies like sick pay and other benefits, says that Microsoft may lose vendors as a result of its new policy.

“We recruit and hire highly educated professionals and thus have to maintain a generous benefits package to attract and retain great talent," Green says. “That model works for us, but you can't expect that would work for every business model.”

 

Published on: Mar 26, 2015