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Paid Leave: New Jersey’s Family Leave Conundrum

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Paid Leave: New Jersey’s Family Leave Conundrum

In addition to the federal Family and Medical Leave Act (“FMLA”), several states have their own family leave laws. New Jersey is one of those states. With some relatively minor differences, the New Jersey Family Leave Act mirrors the FMLA. The provisions of the two laws could sharply diverge in the near future as the New Jersey legislature is expected to consider the issue of providing a monetary benefit to those taking family leave. In the paragraphs below, we shall examine this issue.

Currently, neither the FMLA nor any state family leave law provides for paid leave. Proponents of paid leave claim that several other countries provide paid leave and that America is simply behind the times. Argument and philosophy aside, if the newly-elected New Jersey legislature passes a paid leave bill, and likewise newly-elected Governor McGreevey signs it, New Jersey will stand alone as the one and only state providing this benefit. This fact alone helps one to understand the coalescence of interest groups behind or in opposition to this idea.

In fact, the concept of paid family leave was introduced by way of Assembly No. 3049 (“AN 3049”) on December 11, 2000. This bill, which died due to inaction at the end of December 2001, had several sponsors, including South Jersey’s influential Joseph Roberts. AN 3049 provided that a parent could take up to twelve weeks of paid leave in the event of a child’s birth or placement for adoption. The source for payments was to be the state operated fund for unemployment compensation and the benefits were to replicate benefits under that law. However, unlike the unemployment compensation payments to laid off workers, an employer’s account was not to be charged for benefits paid under AN 3049.

During the first quarter of year 2001, AN 3049 ignited a firestorm of advocacy at both ends of the political spectrum. Groups, such as organized labor, voiced support for the bill, while organizations such as the New Jersey Business and Industry Association opposed it. Proponents claimed that:

  1. this is simply an issue of basic right and wrong and most western style democracies already provide this benefit;
  2. since the maximum weekly benefit is $446 per week, most eligible beneficiaries of the law will not be able to afford to take advantage of it; and
  3. many businesses already offer benefit packages more generous than mandated by the bill.

Opponents claimed, among other things, that:

  1. employees will have an incentive for not working;
  2. employers will have to pay a replacement worker who will be less effective;
  3. the unemployment fund will become depleted and need to be reimbursed by some method; and
  4. paid leave will have a devastating effect on small business.

Then candidate McGreevey indicated that he supported the bill, but once the race for the Governor’s office began in earnest, the focus on paid leave subsided. Now that Mr. McGreevey has been elected by a landslide and the Democrats have captured the Assembly and drawn even in the Senate (where a few Republicans have previously expressed support), the issue has again begun to pick up steam.

But economic times have changed since the first quarter of 2001. Specifically, the nation has slipped into a fairly deep recession, which has included a significant spike in unemployment. Even proponents of paid leave acknowledge that the draw down on the unemployment fund triggered by the recession has been so dramatic that it can no longer serve as the source for funds for paid leave. As a fall back position, proponents now suggest that the state’s temporary disability fund could be the resource to fund paid leave.

Estimates of the cost of paid leave start at approximately $100 million dollars up to over $250 million per year. It strains credulity that a yearly draw down of this magnitude can go on very long without placing the fund at risk. And it likewise is compelling that in one way or another the employer community, and their ultimate consumers, will have to pay the cost once the fund is depleted.

This is not the only partially hidden cost that paid leave implicates. Currently, New Jersey is but one of five or six states that provides temporary disability benefits (“TDB”) for those taking maternity leave. Were New Jersey to superimpose paid family leave onto the existing TDB system, it would truly be out of pace with all of America.

A vibrant private sector requires investment of capital. It is at least logical to believe that the more New Jersey becomes cost prohibitive on a domestic and world basis the less likely the investment of major new capital. Having programs which implicate hundreds of millions of dollars the expenditure of which is unique to this State does nothing to market this State in the eyes of potential investors. To phrase it another way, compassion comes with a cost.

If all those who have previously indicated that they support paid leave do so during the upcoming legislative term, there is a strong likelihood that a bill will pass and be presented to Governor McGreevey. The partially hidden costs associated with this initiative should be strongly considered but may or may not be. The premise that some public fund can simply provide the benefits year after year without costs being passed on is insulting to the intelligence of New Jersey residents. The aligned premise that New Jersey can have paid family leave without adverse impact, most especially on small business, is likewise doubtful.

Generally speaking, family leave is a concept which is noble and desirable but human resource professionals express the view that there is not a more abused or misguided piece of employment legislation. Now, in New Jersey, again with a noble motivation, we appear on the verge of significantly enlarging benefits, which many would argue are already out of control. Perhaps paid leave might make sense as part of a “soup to nuts” federal and state retrospective on family leave in its practical application. However, such a retrospective cannot be realistically anticipated and one fears we will continue to cascade toward making New Jersey closer to the last, rather than first, choice for investment dollars.

Should you have questions or are currently addressing issues related to the existing NJFLA which you would like to discuss, please contact Mr. Harrison directly at 856.914.2073 or by e-mail at bharrison@capehart.com .

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