Every day, franchise owners face the challenges and obstacles of owning a business, and every day, government officials are approving and vetoing legislation that affects those challenges. Independent Joe has been monitoring a number of bills, in several states, as they move through the halls of their state houses. Some of these initiatives were proverbial flashes in the pan, while others, present new challenges for franchisee profitability.
Paid Sick Leave
Fictional employee Mary Smith, a mother of two, is a part-time worker who doesn’t have health insurance. When she gets the flu and misses work, she also loses her daily wages, something she can’t afford to do. Mary works in Connecticut, which means she is able to receive paid sick leave. Connecticut’s law impacts all employers who employ 50 or more individuals in the state during any quarter in the previous year. It stipulates each employer shall provide paid sick leave annually at a rate of one hour of paid sick leave for each 40 hours worked by a service worker. This includes part-time workers.
Similar legislation has been debated in a number of states and several U.S. cities this year, with some approving some form of paid sick leave and others vetoing it. In September, employees in the City of Seattle begin to accrue paid sick and paid safe time, described on the City of Seattle website as, “for use when an employee or family member needs to take time off from work due to illness or a critical safety issue.” The ordinance applies to all employers with more than four full-time equivalent employees. All employees are eligible for the new benefit including full time, part-time and temporary workers.
In Philadelphia, supporters of a Paid Sick Leave bill failed twice to make it law. Both times the measure was vetoed by Mayor Michael Nutter, who said it would, “hurt the city’s existing businesses and negatively impact its ability to attract new ones.” The effort to override the Mayor’s veto failed by one vote.
The opposite outcome happened in New York City, where the City Council was able to override Mayor Michael Bloomberg’s veto establishing sick leave pay for one million workers. Employers with more than 20 employees will have to cover the cost of as many as five sick days per worker.
New York City Council member Gale Brewer called it a tremendous accomplishment. “No worker will be fired if they must stay home,” she said.
Yuwen Chen and his brother Yu-Shin own three Dunkin’ Donuts shops in New York’s Hudson Valley, about 80 miles north of New York City. They have been closely watching how the new paid sick leave law in New York City will affect franchise owners and remain hopeful it does not become a state law. “I wouldn’t want it to pass statewide, because not only do you have to pay for the employee to be out for the day, you have to pay the salary of their replacement,” Chen said. “If they call out last minute, then you might be putting in an employee who is about to go onto overtime, so the costs can really hurt the business owner.”
That sentiment is shared by another franchise owner we interviewed in Newburgh, New York. We asked this owner, who wished to remain anonymous, to comment on the fictional employee named Mary, a part-timer who needed a day off to combat the flu. While he was empathetic to the employee’s situation, he said laws calling for paid sick leave hurt employers in the long run.
“Whenever the government gets involved in things like this it doesn’t help the employer. How we handle a situation like Mary’s should be up to us,” he says. “You’re going to have people who are going to abuse the system and just call out to use the days up.”
After President Barack Obama proposed raising the federal minimum wage from $7.25 to $9.00 per hour during his State of the Union Address in January, Democrats in Congress proposed making the minimum $10.10 per hour and indexing it to the rate of inflation each year thereafter. Immediately, battle lines were drawn.
On the one hand, there are those like Lynda Fote of the Ocean County, NJ Chapter for the National Organization for Women who said, “We need to support the increase in the minimum wage and give them that extra dollar to spend. Not only is it morally right but it is economically smart.”
But, leading Republican lawmakers have voted down the federal proposal citing economists who argue that raising the cost of employing workers results in fewer workers. “What happens when you take away the first couple of rungs on the economic ladder, you make it harder for people to get on,” said U.S. House Speaker John A. Boehner.
Still, 10 states have already increased their minimum wage rates: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island, Vermont and Washington.
A majority of franchise owners oppose mandating a higher minimum wage. Many already pay their long-tenured employees more than the minimum required. The Newburgh, New York franchise owner says a mandate is a threat to the business. “Increasing minimum wage would be detrimental unless it’s only 25 cents or 50 cents per hour,” he said.
Regulations that impact franchisees are coming at the federal, state and local level. We have written many times in this space about how the Affordable Care Act–Obamacare–will increase costs and create compliance issues for franchisees. On the local level, Chelsea, Massachusetts is the latest community to enact a ban on the use of trans-fats, joining at least 15 other municipalities and the state of California. Important rules changes can come from a local board of health or a member of Congress. In either case, it’s vital that franchisees stay informed about laws and regulations that are coming down the pike. You can’t fight City Hall–or any federal mandate–unless you know what’s brewing.