New Vermont legislation that requires employers to provide paid sick leave will have the greatest impact on smaller employers that don’t currently offer a comparable benefit and employers doing business in multiple states.

Under H.187 passed by the Vermont legislature in February, employers must provide employees in the Green Mountain State at least 24 hours (or three days) of earned sick leave beginning in 2017. By 2018 the minimum required leave will jump to at least 40 hours (or five days) of earned sick time in a 12-month period.

All full-time employees who work an average of 18 hours a week in a year are covered by the bill. For newly hired employees, employers may impose a waiting period of up to one year during which employees earn but cannot use sick time.

Employees excepted under the bill include federal employees, employees under the age of 18 and individuals employed by the employer for 20 weeks or fewer in a 12-month period or in a job scheduled to last 20 weeks or less.

Vermont will be the fifth state after Connecticut, California, Massachusetts and Oregon to impose similar rules. Many municipalities (e.g., the city of New York, Portland and Eugene, Oregon) have also enacted sick leave rules. In addition, a September 2015 executive order from President Barack Obama guarantees that workers under federal contracts can accrue up to a week of paid leave a year.

“All employers regardless of the employer’s primary place of business, are covered by the Vermont bill, but businesses with fewer than six employees will have until January 1, 2018, to come into compliance,” says attorney Martha Van Oot, a principal at Jackson Lewis. “A ‘new employer’ is not required to provide earned sick time until one year after the employer hires its first employee.”

The National Federation of Independent Business was the singular Vermont business group to publicly oppose the mandate, regardless of exemptions. In a press release issued by the lobby group, NFIB representative, Kris Jolin said, “mandating paid leave will not only cost small businesses revenue that they do not have, but this will cost employees jobs that will no longer be available when Mom and Pop stores cannot afford the hard working people that they treasure dearly.”

In fact, employees working in smaller establishments are precisely the cohort that motivated Vermont legislators to craft the bill. Section 1 of Bill H.187 as passed by the state general assembly cites data from the Vermont Department of Labor’s 2013 Fringe Benefits Study, which reports that roughly one-half of all private sector employers provide some form of paid leave to their employees.

However, it is estimated that slightly less than 50% of private sector workers employed by companies with fewer than 20 workers have access to paid leave as compared to 78% of workers employed by larger companies. That translates to about 60,000 working Vermonters who lack access to paid leave.

Terri Rhodes, CEO of the Disability Management Employers Coalition says “larger employers with over 5,000 employees typically offer some paid sick leave. Often it is rolled into their paid time off program.”

An employer with a PTO policy or that is a party to a collective bargaining agreement providing employees with paid time-off for the reasons in the bill with accrual and usage rates equaling or greater than that under the bill will be considered to be in compliance. However, the devil is in the details.

The permitted use of Vermont’s new paid leave is expansive and includes not only time off required because an employee is ill or has to attend a doctor’s appointment but absences to care for close relatives or arrange required social or legal services for them. “Some employer-sponsored sick leave plans will have to be revised because they specifically say the time must be used only when the employee is sick,” Rhodes notes.

The primary issue that companies doing business in multiple states and municipalities with paid leave legislation will have to contend with is how to rationalize inconsistent provisions in various jurisdictions. For example, Oregon’s paid leave provisions apply to employers with 10 or more employees but Portland employers with six or more employees are on the hook for up to 40 hours of sick leave. Smaller Oregon employers must still provide employees with up to 40 hours of unpaid leave, a provision not required by other states with small company exemptions.

Van Oot acknowledges “it’s a bit of a patchwork” but says any multi-state or multi-national employer has to deal with conflicting regulations wherever they are doing business. “Employees working in Oregon will be governed by legislation in that state and employees in Vermont will get paid according to the sick leave policy in Vermont,” she says.

The Vermont statute stipulates that any unused earned sick time at the end of an annual period is carried over to the next 12 months. However, an employer may pay an employee for unused earned sick time at the end of a year in which case the time the employee is compensated for does not carry over to the next year.

Rhodes believes that two of the most valuable features of Vermont’s new sick pay provisions are coverage for part-time employees and that employers are prohibited from retaliating against employees who take sick leave or requiring them to find replacement workers. “Even some companies with paid sick leave currently have policies requiring that employees have to meet a certain threshold for good attendance and if they are way more often – even if it is due to illness – they may be disciplined,” she says.

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