ERISA Industry Committee Issues Public Comment on Labor Department Notice

WASHINGTON, Sept. 17 -- Aliya Robinson, senior vice president for retirement and compensation policy at the ERISA Industry Committee, has issued a public comment on the Department of Labor notice entitled "Request for Information: Paid Leave". The comment was written and posted on Sept. 14, 2020:

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The ERISA Industry Committee (ERIC) appreciates the opportunity to respond to the Request for Information 1290-ZA03 (RFI) issued by the United States Department of Labor Women's Bureau (Bureau) and published in the Federal Register on July 16, 2020. ERIC has a strong interest in the national discussion surrounding paid leave benefits as our member companies are at the forefront of innovative paid leave benefit design and provide generous paid leave benefits for millions of their employees. In addition to providing their own nationwide paid leave programs, our member companies interact with every state paid family and medical leave law in the country.

As large, multistate employers, our member companies are committed to providing benefits, such as paid family and medical leave, in a consistent and uniform manner across their workforce. However, the current patchwork of state paid family and medical leave policies has negatively affected the ability of multistate employers to voluntarily provide these benefits effectively and efficiently to their nationwide workforces. ERIC, therefore, appreciates the Bureau's efforts to examine the relationship between employer-provided paid leave benefits and state paid leave programs, and for the opportunity to share the negative impact of state and local paid leave programs on employers who are already providing generous paid leave benefits.

ERIC is the only national association that advocates exclusively for large employers on health, retirement, and compensation public policies at the federal, state, and local levels. With member companies that are leaders in every sector of the economy, ERIC is the voice of large employers on public policies impacting their ability to sponsor employee benefit plans. ERIC supports the ability of its large employer member companies to tailor retirement, health, and compensation benefits to meet the unique needs of their workforces and has a strong interest in policies that impact the ability of employers to provide effective and cost-efficient paid leave programs to millions of workers and their families. ERIC, therefore, represents an important perspective in the paid leave topics covered by the RFI and is well-positioned to provide helpful information to the Bureau.

Comments

Large, Multistate Employers Are a Vital Source of Paid Family and Medical Leave Benefits. Employers design and provide generous paid leave benefit programs not only to recruit and retain talent, but also to ensure financial security and flexibility for their employees. Paid family and medical leave benefits were popularized by private-sector employers to ensure that their employees were financially able to make use of the unpaid leave established by the Family and Medical Leave Act of 1993 (FMLA).

Competitive employment practices continue to foster steady innovation and improvement in paid family and medical leave and have led to the creation by large, multistate employers of the most generous paid leave benefit practices enjoyed by American workers today. According to data from the Bureau of Labor Statistics, 25% of large employers (with 500 or more employees) offer paid leave benefits compared with only 11% of small employers (with fewer than 50 employees)./1

This data shows a direct correlation between the size of an employer and both the ability and likelihood of providing paid family leave benefits to their employees.

To demonstrate the role that large, multistate employers have played in securing and providing paid leave benefits for their employees, ERIC surveyed our member companies to quantify current paid family and medical leave benefit practices among our member companies./2

Of survey participants:

* 100% provide both short-term and long-term disability leave to attend to a serious personal medical incapacity;

* 90% provide paid parental leave to care for and bond with a new child; and

* 65% provide paid family leave to care for a family member with a serious medical illness.

Notably, these numbers dwarf the BLS data described above and national averages of smaller sized employers as multistate employers design their paid leave benefit programs to be efficient and scalable on a national stage. Furthermore, in addition to leave benefits categorized as family and medical leave, ERIC member companies are at the forefront of designing and providing flexible paid leave benefits such as maternity leave, bereavement leave, wedding leave, school event leave, sabbaticals, and general paid time off. These are benefits that are massively valuable to employees, that federal and state laws do not provide or require, and that are not taken into consideration in paid family and medical leave policy discussions.

The successful paid leave programs of large, multistate employers should serve as models and inspiration for federal, state, and local government programs aimed at securing these benefits for a greater part of American workers. The issue at the center of today's political paid family and medical leave debate should be how to best encourage the evolution of private-industry practices and allow private employers to continue to be able to innovate in this area.

State and Local Paid Leave Mandates Have Created a Patchwork of Inconsistent Programs and Standards That Negatively Impacts Employer-provided Paid Leave Programs. State (and some city) lawmakers have created state-administered paid family and medical leave programs to provide wage replacement to employees that need to take family or medical leave.

While these programs are intended to increase access to paid leave, they have been detrimental to employers that must comply with them. According to a 2018 Mercer survey of employer absence and disability management practices, 64% of participating employers (of different sizes and in various industries) reported that they have seen an increase in resources needed to handle state and locally mandated paid leave over the past five years./3

This rise in costs is largely attributable to the nature of state paid family and medical leave programs, each of which features a long list of requirements and definitions that vary from state to state, including:

* Duration of leave;

* Method of program funding;

* Definition of family member;

* Benefit eligibility;

* Job protection;

* Coordination of benefits;

* Benefit accrual--and many others.

Since the creation of the first of these state programs in California in 2004, seven additional states and the District of Columbia have enacted state paid family and medical leave insurance programs, each with its own requirements, standards, and definitions, which employers operating in that state must follow. This means that every time a state creates a new paid leave program or alters their existing program, employers operating in multiple states across the country are forced to reassess and restructure not only their paid leave benefits in that state, but often their national benefits program as well in order to comply. A constantly shifting patchwork of state paid leave policies and standards also diverts employer resources away from being able to design national benefit programs that would provide paid leave benefits equitably and consistently across the entire workforce.

Despite well-meaning intentions, states have adopted crude, one-size-fits-all approaches to achieving their goals. These state paid leave efforts should not to alter or detract from the benefits already enjoyed by millions of employees. Unfortunately, state paid leave programs are also applied to employers that already offer these benefits despite regularly falling short of existing employer-provided paid leave in terms of both benefit value and efficiency of administration.

Employers that voluntarily provide paid leave benefits are most attune to the unique needs of their workforce and are most capable of designing and administering efficient benefit programs for their employees. While there is room for state efforts in the paid leave debate, the patchwork of inconsistent state paid leave programs and policies have created a volatile benefit administration environment and, consequently, have had the unintended effect of stifling private-sector innovation in the area of paid leave benefits.

The Patchwork of State Paid Leave Programs Creates Compliance Burdens that are Counterproductive to Increasing Paid Leave Benefits. The primary source of prohibitive employer costs stemming from state paid family and medical leave programs is not the expense of providing actual paid leave benefits to employees, but the bundle of compliance burdens that employers are forced to contend with in order to meet the requirements of the state program. These employer costs do not translate into increased value experienced by employees; thereby, creating a solution for which there is no problem.

Our member companies have enumerated several common challenges that they regularly face despite operating in different industries and managing separate and unique employee benefits programs. Several member companies also pointed out that they have sometimes had to roll back other aspects of their employee benefits programs (including other paid leave benefits) or abandon planned expansions to compensate for new state paid leave mandates.

Employers incur enormous costs in complying with state paid leave programs. These costs include, but are not limited to, deciphering and translating program requirements, analyzing impacts on and coordination with existing company benefits, hiring benefits administration staff, and building the expansive infrastructure needed to support these new compliance efforts. Predictably, these costs are a major concern for employers. In fact, 47% of employers state that mitigating administrative costs was their single greatest priority within the management of paid leave programs./4

The nature and extent of each costly compliance endeavor depends on the unique features of the state programs and need to be independently repeated for each state. These compliance burdens include the following: Employee Notice Requirements. Each state imposes unique notice requirements that cover not only the content and form of the notices but a range of timing requirements as well. Added together, large employers are required to comply with dozens of notice requirements which, depending on the particular state program, can be duplicative and disorganized.

Record-Keeping and Reporting Requirements. State paid family and medical leave programs typically create requirements that employers collect, retain, and submit data on their employees to the state administrative organization that regulates the program. The required information spans a broad data range from employee wages, hours worked, dates of pay, and dates of hire, to more personal data otherwise protected as confidential, such as tax information.

Information Technology Management. The difficulty of including different or conflicting state program standards in a single employer benefit program means that employers are often forced to hire and manage different technology vendors in order to establish and operate multiple digital systems. Employers often have to hire third-party administrators to stay on top of the tracking, administrative, and compliance requirements of state and local paid leave ordinances./5

However, reliance on third-party vendors means that critical employer databases are often unable to exchange information smoothly between one another, leading to burdensome and inefficient administration of state workforces across the country.

Treatment of Independent Contractors and Temporary Employees. While some state programs clearly and concisely limit benefit eligibility to individuals directly employed by an employer for a certain minimum period, as is the case under the FMLA, many state programs have complicated this area by making employers responsible for the notice, record-keeping, reporting, contribution, and administration requirements related to paid family and medical leave program benefits for contract workers as well. This problem becomes even more complicated for employers that regularly work with federal contractors, as varying state paid leave requirements must then be reconciled with federal benefit requirements on an individual basis.

Employee Benefit Parity. Employers that wish to maintain parity of benefits between employees working in different states have to perform a balancing act to ensure that i) employees in one state are not receiving inferior paid leave benefits compared to their counterparts in another state due to that state's program standards, and ii) employees are not dissuaded from accepting an otherwise desirable relocation offer because of the difference in available paid leave benefits. While employers strive to avoid these discrepancies and maintain uniform benefits across their national operation, it is extremely difficult to do so completely under the current patchwork of state paid leave programs. Therefore, employers have to expend additional administrative resources to implement as much parity as possible.

Complication of Employee Access to Benefits. As mentioned previously, employees participating in and contributing to a state paid family and medical leave program often face benefit application procedures and administrative processes that are far less efficient than those they would be required to complete through a voluntary paid family and medical leave benefit provided by their employer. State programs should not have the effect of making things harder for employees.

Limited Exemption Programs. Although many states provide an exemption for employer-provided paid leave programs that confer all of the same, or better, rights and protections to its employees as would be provided under the state program, there are significant limitations. Many state program exemptions do not entirely relieve an employer from the state administrative and reporting requirements. This limitation, along with complexities in the exemption processes, can dissuade employers from seeking exemptions for their generous voluntary paid leave program. This mechanism potentially denies employees access to potentially more generous and efficient paid family and medical leave benefits from their employers.

Increased Litigation Risks. State paid family and medical leave programs carry with them unseen legal costs that employers are saddled with even after they are able to comply with program standards. As the majority of these state programs are relatively new, there is very little understanding of, or precedent for, how particular state program requirements are to be interpreted and enforced by the courts of different states. At the same time, states have begun to place dangerous legal liabilities on employers, such as presumptions of retaliation, that open employers up to a wide range of extremely costly, and possibly baseless, legal challenges.

Employers Who Provide Paid Leave Benefits Need an Exemption from the Patchwork of Inconsistent State Paid Leave Programs. Federal lawmakers have long understood the importance of national uniformity in the administration of employee benefits across the country, as made evident by the enactment of laws such as the federal Employee Retirement Income Security Act of 1974.

As states have attempted to address the paid leave gap, they have created a range of rules and requirements that have produced counterproductive challenges for employers while impairing the paid leave benefits that many employees already enjoyed. The federal government could correct this problem by providing an exemption from state paid leave requirements for employers who voluntarily offer paid leave benefits to their nationwide workforce.

If large, multistate employers were able to apply a single set of paid leave standards to their entire nationwide workforces and were provided relief from the patchwork of inconsistent state paid leave programs, they would ultimately have the flexibility needed to encourage even more innovation in this benefit space. State and federal lawmakers can remain free to address the paid leave access gap without negatively impacting the millions of employees across the country that already have these valuable benefits.

Conclusion

ERIC and our member companies share the goal of increasing access to paid family and medical leave benefits for American workers and their families. However, the expanding patchwork of state paid family and medical leave programs has a detrimental effect on the paid leave benefits already provided by voluntary employer programs. Compliance with diverse and fluid sets of state standards directly undermines the ability of large employers to provide valuable paid family and medical leave benefits, as well as other paid leave benefits.

ERIC strongly urges federal lawmakers to establish a national paid leave exemption process that provides relief from the state (and local) patchwork of paid leave mandates for employers who already provide generous paid family and medical leave benefits to millions of employees and their families across the country.

Sincerely,

Aliya Robinson

Senior Vice President, Retirement and Compensation Policy

The ERISA Industry Committee

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Direct Question Responses

In addition to the above comments, ERIC would also like to directly respond to several of the questions included in the Bureau's RFI:

What does not work well and why; and what are the existing gaps? What could be done to improve the existing patchwork of programs, which include state and employer-sponsored paid options? What are the impediments, costs and otherwise, faced in implementing those improvements?

Collectively, state and local paid leave programs and policies negatively impact the generous paid leave benefits programs already offered by large, multistate employers by increasing compliance burdens, limiting flexibility, and dampening innovation. The exemption processes currently featured in some states offer limited relief for some employers; however, these processes differ drastically between states, require costly certification efforts, and do not fully exempt employers from burdensome state administrative and reporting requirements. Consequently, a federal exemption or voluntary safe harbor is needed to allow multistate employers to provide uniform paid leave benefits across the country without being hindered by inconsistent state standards.

Are individual businesses, localities, states, or the government best equipped to provide standards for paid leave? Are employer-based or state-based programs more effective in the administration of paid leave programs?

Employers that already design and provide valuable paid leave benefits programs for their workforces are in the best position to effectively and efficiently administer paid leave benefits to their employees. Additionally, these organizations have been the greatest innovators of paid leave benefits and continue to drive the creation of more valuable paid leave benefits. At the same time, government organizations at the federal and state levels do have a role in addressing the current gap in paid leave access by lending aid to employers and employees that are not able to offer or afford these benefits on their own. The goal of government action in this policy area should be to foster the increase of paid leave benefits without negatively impacting the generous benefits that millions of Americans already enjoy.

Do employer-provided paid leave programs offer more generous benefits than state paid leave programs?

Because paid family and medical leave benefits have so many different individual standards and moving parts, it is difficult to compare how "generous" different programs are. However, since large employers fit paid leave programs to the needs of their workforce and design these benefits to be competitive, they tend to be more valuable to their employees than what is provided by state programs or policies. For example, employer-provided paid leave benefits typically grant full wage replacement to employees, while state program benefits replace only a portion of ordinary wages. Employer-provided paid family and medical leave benefits are one aspect of broader paid leave benefits available to an employee, while state programs are focused on a couple of narrow reasons for leave. While employer-provided paid leave benefits are funded directly by the employer, state paid leave programs are funded by employee wage contributions, meaning that inferior state benefits are provided at greater cost to employees. Employer-provided paid leave benefits are administered efficiently and make it easy for employees to take leave and receive their benefit, while state paid leave programs require slow-moving bureaucratic processes that place added burdens on employees in their time of need. These differences highlight the reality that employer-provided paid leave benefits convey more value to their employees than equivalent state program benefits.

Do employers who already offer paid leave programs continue to do so when state mandates or programs are instituted, or does the state mandate standardize the paid leave program offered by employers in the state, leading some employers to drop more generous programs?

When a state paid leave program does not provide exemptions for employers already offering these benefits, it disrupts their ability to operate their own employee benefits and prevents them from providing uniform benefits to their national workforce. State paid leave programs that provide clear and feasible exemption processes for employers already offering paid leave, allow those employers to continue administering their own benefits. However, when state program exemption processes are unclear, or present additional compliance costs without providing adequate relief, employers are forced to abandon the more generous paid leave benefit programs that they have provided voluntarily in favor of participation in the state program. While these state programs do standardize some paid leave standards, they often operate to the detriment of existing paid leave benefits provided by employers.

Are there impediments to making adjustments to your company's paid leave policy?

Absolutely. Because large, multistate employers are forced to react to and comply with every state and local paid leave program and policy that is enacted, their ability to reorganize or even expand their national paid leave benefits administration is severely impaired. Employers that wish to provide uniform benefits to their employees, regardless of where they live or work, find that their goal cannot be achieved when faced with the patchwork of inconsistent paid leave standards. Furthermore, funds that would be used to bolster employee benefits are constantly diverted by the complex compliance requirements of shifting state programs.

What are the benefits and/or burdens of operating a business in a jurisdiction that has paid leave laws?

State paid leave programs create burdensome compliance challenges for employers that already offered voluntary paid leave benefits to their employees. The challenges and costs faced by large, multistate employers do little to improve the benefits received by their employees and can detract from the benefits they receive in many cases. Furthermore, an individual state paid leave program or policy has a sweeping impact on multistate employers beyond the borders of that state, as it impairs their ability to offer valuable, uniform benefits to their nationwide workforce.

Different types and sizes of businesses may face unique challenges to providing paid leave. Please describe unique challenges to your businesses, industry, or locale in offering paid leave.

As we have stated, the current patchwork of state and local paid leave policies presents unique challenges to large, multistate employers. Because ERIC member companies operate in multiple states across the country, they are beholden to, and negatively affected by, the assortment of various inconsistent paid leave standards. When a local or regional employer operating in one state is faced with a new paid leave law, they can adapt their single paid leave benefit program to that state's requirements. Multistate employers, on the other hand, are placed in a perpetual state of reevaluation and redesign of their paid leave benefit programs each and every time a state creates or changes a paid leave law.

What additional cost-benefit research for different sizes of employers, different localities, for state-mandated compared to employer-provided plans, or for employers and workers would be helpful to inform policy?

The question at the heart of this policy discussion should be how to provide access to paid leave benefits for those currently without them; further research must therefore be conducted on how to address this aim without negatively impacting the employers and employees that already have success with these benefits. To best understand the current paid leave landscape and address the paid leave access gap, it is critical to better recognize the negative effect that the current state paid leave patchwork has on employees who already had access to paid leave as well as the ways in which large, multistate employers have restructured their paid leave benefits programs in response to state and local laws. Research should be conducted on the generous paid leave benefits offered by multistate employers and how they have formulated national benefits administration strategies in response to an ever-shifting state and local landscape. Importantly, the Bureau should draw insights from how employers have used paid leave to respond to new employment challenges, such as the COVID-19 public health emergency, and how employer flexibility to do so is impaired by overly-specific, burdensome, and conflicting state paid leave laws.

Are there key insights to be taken from FFCRA?

The FFCRA is the most recent and clear example of federal recognition of large employers as a vital source of valuable paid leave benefits. By limiting the provisions of the FFCRA to employers with fewer than 500 employees, Congress prioritized providing access to paid leave benefits for smaller employers as they are less likely to provide paid leave benefits to their employees. As large, multistate employers have been successful in providing these benefits to their national workforces, federal lawmakers did not attempt to control or disrupt these voluntary benefits.

In keeping with this federal recognition, Congress must provide employer relief from the patchwork of state paid leave laws and grant employers the flexibility they need to continue designing and innovating valuable paid leave benefit programs for millions of Americans and their families.

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Footnotes:

1/ Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Access to paid and unpaid family leave in 2018 on the Internet at https://www.bls.gov/opub/ted/2019/access-to-paid-and-unpaid-family-leave-in-2018.htm (visited October 07, 2019). Eleven percent of private industry workers employed by an employer with less than 50 employees have access to paid family leave benefits; for those working for an employer with between 50 and 99 employees, this rate rises to 15%; for those with between 100 and 499 employees, the rate is 18%; and for those with 500 or more employees, the rate rises to 25%.

2/ Twenty-nine member companies participated in the survey. These member companies represent roughly 3 million employees.

3/ Mercer, Survey on Absence and Disability Management: 2018 Survey Report (2018)

4/ Mercer, Survey on Absence and Disability Management: 2018 Survey Report (2018)

5/ Id.

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The notice can be viewed at: https://beta.regulations.gov/document/DOL-2020-0004-0001

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