A standoff between the D.C. Council and the business community might impede District employees from receiving two months of paid universal leave.
Lawmakers voted in favor of the country’s most generous paid family leave policy in a 9-4 vote on Tuesday, which would give more than half a million non-federal employees up to 90% of their salary — with the benefit capped at $1,000 per week — beginning in 2020.
The bill requires a 0.62% payroll tax increase to employers in the District, uniting businesses to fight for an amendment to a policy that would require the sector to pay more than $240 million a year.
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“Most businesses already provide this leave,” says Janene Jackson, an attorney with law firm Holland & Knight and a board member for the D.C. Chamber of Commerce. “Our concern is the new business tax.”
The tax would fund the establishment of a new government agency, which Jackson says will be the fourth or fifth largest in the District. The money generated from the payroll tax will be used to staff the agency with about 100 new federal employees and build a new IT system to implement the application, approval and distribution of recipient funds. The IT system alone is expected to cost between $40 and $80 million, says Jackson.
Non-federal employees will have to apply for their paid family leave benefit and wait for approval before receiving a direct deposit or a check in the mail, says Jackson. The details have not been sorted out, but she describes the process as “an administrative nightmare.”
She’s not the only one who thinks so.
DC Mayor Muriel Bowser, a proponent of universal paid leave, is unhappy with the policy.
“Today, Chairman [Phil] Mendelson and the Council passed a $250 million tax increase to mostly benefit residents of Maryland and Virginia,” she wrote in a statement following the meeting. “It is wrong to raise District taxes to fund a costly, new government program that sends 66% of the benefits outside of the city, and leaves District families behind. If the Council wants to raise $250 million in new taxes, shouldn’t the focus be on District residents and their needs?”
When the bill was preliminary passed two weeks earlier, Ward 2 Councilman Jack Evans expressed similar concerns.
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Evans, a Democrat, said he couldn’t vote in favor of a bill that disproportionately affects Virginia and Maryland residents over D.C. residents. The paid benefit would give about $2 to residents of the generally affluent D.C. suburbs for every $1 given to D.C. residents.
D.C. Council Chairman Phil Mendelson was not available for comment but his spokeswoman said in an email, “his staff, who has been working on this legislation, has not received any indication from the Hill at this point that they would interfere with the legislation.”
At Tuesday’s meeting, Evans and Ward 3 Councilwoman Mary Cheh unexpectedly offered an alternative proposal that spares the business sector from a tax hike, replacing it with a $200-per-employee tax credit.
“The alternative that is offered would have required the same leave provisions,” says Jackson. “The employer mandate model could be given as soon as the law takes effect. It’s better, faster, cheaper.”
D.C.’s paid family leave policy offers eight weeks of paid parental leave for any parent expecting a child. The measure also includes two weeks of paid leave for a qualifying individual who becomes unable to perform his or her job functions because of a serious health condition and six weeks of paid leave for an individual who is caring for a family member with a serious health condition.
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Jackson says many employers offer similar leave policies to the proposed universal leave policy, but the employer mandate would create a standard of compliance without the need for a tax.
However, “firms that currently offer paid family leave benefits could offset $33.2 million of the new payroll tax, in the aggregate, by shifting existing benefits onto the new public program,” according to the Office of the Budget Director’s Universal Paid Leave Amendment Act of 2016 statement.
Businesses in the District won’t be taxed until 2019 if the bill is passed, but Jackson says there are more challenges for the fledgling policy.
While Bowser has expressed disdain with the bill, she has three options once it reaches her desk: sign the bill, return the bill unsigned and permit it to take effect, or veto it. Should the Democrat reject the bill, it will be her first veto since taking office in January 2015. However, the Council has enough votes to override her veto and send it to Congress for approval.
Another tactic to include the business-supported provisions suggested by Evans and Cheh is to propose the universal paid leave act’s repeal in next year’s budget, Jackson says. Bowser can then substitute it with the employer mandate, which gives control back to businesses.
“I suspect some of the business organizations will marshal together and start to figure out what’s our best course of action,” Jackson says. “We will start the conversation for this policy.”
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If the Council should move forward with the bill as is, it might not have any teeth by the time it reaches Congress.
D.C. is the only jurisdiction that requires Congressional approval to turn a bill into a law, and the bill is likely to have problems in the Republican-controlled House and Senate.
In the District’s history, Congress has repealed a D.C. law only four times. However, the Committee on Oversight and Government Reform can insert language that prohibits the District from using local tax dollars to implement the policy.
“The law takes effect, but they couldn’t set up a government agency, hire an employee or draft regulations,” Jackson says.
