Proposition 206’s Mandated Paid Sick Leave Affecting Small Businesses

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Proposition 206’s Mandated Paid Sick Leave Affecting Small Businesses

The largest obstacle facing small businesses in the valley stems from Proposition 206’s mandated paid sick leave rather than the minimum wage increase, according to a panel of commentators at Arizona’s Small Business Summit in Phoenix last Tuesday morning.

The panel, hosted by the Phoenix Business Journal, was moderated by Jack Lunsford, President and Chief Executive Officer of Arizona Small Business Association. Sharon Bondurant, CEO of Techfinders, Aregnaz Mooradian, Lender Relations Specialist at Small Business Administration, and Laura Lawless Robertson, Labor and Employment Partner at Squire Patton Boggs were the panel commentators for the discussion.

The mandated paid sick leave aspect of Proposition 206 goes into effect for all businesses on July 1 this year. Lunsford said the issue lies in a lack of awareness for some small businesses. “Many businesses don’t know about it, don’t know that they need to be in compliance,” he said.

According to Robertson, while there are no unique minimum wage laws beyond the required number that must be paid, the paid sick leave mandates apply to every employer with at least one employee and can be confusing to navigate.

The mandates require 1 hour of paid sick leave for every 30 hours worked, whether full or part time employees. A business with 14 employees or less can put a per employee cap at 24 hours paid sick leave per year. A business with 15 employees or more can put a per employee cap at 40 hours paid sick leave per year. However, the confusing aspects occur in how the hours are counted and the usage of leftover hours at the end of the year.

“At the end of the year you can either pay out the monetary equivalent of those unused hours to current employees, but you must provide an immediately available bank of 40 hours at the start of the new year. The second option is you roll over those remaining hours starting [in the new year], but accrual also starts again,” said Robertson.

According to all panelists, the confusion and uncertainty of how this all works is leaving many local small business owners in a vulnerable state come July 1.

“With the Affordable Care Act, for instance, there were so many assumptions over how things were or were not going to play out. And then you begin to see the reality of how things end up playing out. Which is why it’s important to try to get as much information on the front end as you can, so you’re not making those costly mistakes on the back end and you’re not wasting time,” said Mooradian.

During the Q&A, a local business owner raised concern regarding whether the rollover sick days must be paid out when an employee leaves the company. “You can have a policy that says, ‘We do not pay out unused, accrued time off at time of termination.’ But be sure to make that clear…as a black-and-white issue, that we will or we won’t,” said Robertson.

All panelists concurred that the most important way for a small business to avoid confusion and vulnerabilities over these changes is to stay informed and seek help.

“One of the things that I’ve tried to do in my business is to obviously be as knowledgeable as possible in a lot of different areas, so you always have to wear a lot of hats. But you can only do so much, so you have to have a lot of key people in play. That’s one of the most important things that I’ve found through the years; you’re only as good as the people that you have in the company, but also you’re only as good as the vendors that you have as your partners,” said Bondurant.

The discussion panel concluded by encouraging small business owners to jump in, stay informed, and learn with persistence.

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