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FAMILY Act: A Baby Boon?

More companies are offering paid parental leave for their employees, and a bill in Congress could extend that benefit to all workers in the United States.

May 6, 2014
Related Topics: Family and Medical Leave Act, Employee Leave, The Latest, Benefits, Legal
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FAMILY Act May 2014

When Sen. Kirsten Gillibrand (D-New York) and Rep. Rosa DeLauro (D-Connecticut) introduced the Family and Medical Insurance Leave Act in Congress last December, Morgan Stanley executive Tom Nides was standing at their side to represent the many business leaders who support an upgrade to federal medical leave policies.

If the legislation — known as the FAMILY Act — becomes law, it would replace the two-decade-old Family and Medical Leave Act, which gives workers 12 weeks of unpaid time off to attend to a personal sickness, the birth of a child or to act as a caregiver for an ill family member. The FAMILY Act would instead provide all workers with 12 weeks of paid time off to attend to health-related events. California, New Jersey and Rhode Island are the only states that currently offer 12 weeks of paid time off.

For employees of companies that do not offer maternity or paternity leave, the unpaid leave under the FMLA is about as close as they can get to any such policy — if they’re in fact eligible for federal coverage. Oftentimes, new moms and dads are unable to take the full 12 weeks off because they can’t risk going three months without a paycheck. According to the National Partnership for Women & Families’ 2012 review of the FMLA, nearly half of all workers eligible for FMLA leave were unable to take time off work because they could not afford to go without pay.

FAMILY Act chart May 2014The introduction of the FAMILY Act is part of a broader trend of offering workers paid time off after the birth or adoption of a child. Jim Paul, a shareholder at the law firm Ogletree, Deakins, Nash, Smoak & Stewart in St. Louis, attributes this to changing societal expectations, the easily manageable nature of these programs, as well as the relatively low cost compared to other health care perks.

“Everybody can understand or appreciate paid maternity and paternity leave because so many people have had children,” Paul said. “I think it’s something that everyone can agree on and see as a benefit to everybody.”

Some business leaders like Nides believe it’s time for the United States to offer paid parental leave, which most of the world’s industrialized countries already offer.

“While at the State Department, I watched my staff, who had no paid family leave, struggle to cobble together paid sick leave and annual vacation time in order to take time with new babies,” said Nides, a former deputy secretary of state in the Obama administration and currently vice chairman of global financial giant Morgan Stanley, in a written statement. “A federal law that guarantees all workers paid family and medical leave is critical to supporting our people and economic stability. I support the FAMILY Act because it is not only good for families and businesses, it also makes economic sense.”

But not everyone agrees. A spokesman for the National Federation of Independent Business, which hasn’t taken a formal stance on the FAMILY Act, said in general the proposal is something that the Washington-based organization would oppose.

“Our members have small staffs and work to retain their qualified employees, so maintaining flexibility is key for them,” said NFIB senior media manager Eric Reller in an email. “A government mandate would make it much more difficult to accommodate their employees while still running their business.”

A Trust

In order to provide paid leave, the FAMILY Act would create an independent trust fund within the U.S. Social Security Administration to collect fees and provide benefits. The trust would be funded by employee and employer contributions of 0.2 percent of total wages, creating a self-sufficient program that would not add to the federal budget. The expected cost to the average worker would be similar to the expense of one cup of coffee a week, according to a news release from Gillibrand’s office.

The new taxes that would be imposed on both employees and employers by the FAMILY Act could be major obstacles for the bill in Congress, Paul said. Additionally, because the proposed legislation would offer paid leave, as opposed to unpaid leave offered by the FMLA, there could be higher chances of abuse. Currently the bill sits in the Senate Committee on Finance and the House Committee on Ways and Means.

“Unpaid leave in the FMLA acts as a pretty good checks and balance on abuse. Most employees don’t abuse the current system. Somebody is less likely to abuse the system if it means they’re not getting paid,” Paul said.

Data from the U.S. Labor Department show only 12 percent of the entire working population in the United States had access to paid family leave in 2012, and it was available to just 4 percent of individuals working in low-paying jobs.

The passage of the FAMILY Act would provide stability to families with new babies, employers and society in general, said Vicki Shabo, director of work and family programs at the National Partnership for Women & Families, an advocacy group in Washington, D.C.

“New mothers are more likely to take new babies to checkups or get the post-partum care they themselves need, which makes them more productive when they go back to work,” Shabo said. “In terms of saving for taxpayers, when a family has access to paid leave after the birth of a child, they’re less likely to rely on public assistance and food stamps in the year after a child’s birth.”

Maternity leave advocates argue such policies are necessary to close the gender gap in the corporate world.

“By safeguarding women’s employment and income security during and after maternity, maternity protection is also essential for ensuring women’s access to equality of opportunity and treatment in the workplace, and progress towards gender equality and women’s empowerment,” according to the Switzerland-based International Labour Office’s 2012 report “Maternity at Work.”

Dads, Too

Parental leave isn’t just for new moms, though. Its advocates argue it’s just as important for men. Paternity-leave policies encourage greater participation from fathers in the raising of their children, which can make men happier in the long run and, ultimately, better employees, Shabo said. Such policies also enable women to return to work sooner, allowing them to protect their overall wages and workforce participation.

When his children were born about 15 years ago, Paul said he took time off even though it was a bit unusual at the time for men to do so. Over his two-decade career as a benefits lawyer, he’s noticed that sentiment is changing as more men expect to take time off after the birth or adoption of a child, and more companies are giving new dads the option to take paternity leave.

Closing the Gender Gap

As part of the ongoing effort to close the gender pay gap, one Harvard University economist suggests greater flex-work opportunities could aid that cause.

“The gender gap in pay would be considerably reduced and might even vanish if firms did not have an incentive to disproportionately reward individuals who worked long hours and who worked particular hours,” wrote Harvard economist Claudia Goldin in her recent report, “A Grand Gender Convergence: Its Last Chapter.”

Current numbers show that, on average, a womanearns 77 cents for every dollar a man earns.

Women’s overall participation in the workforce is reduced by childbirth. Women with children work 24 percent fewer hours per week than men or women without children, according to the report.

However, young children have a lesser effect on women who work in the technology industry, which is generally associated with greater gender equality in earnings than other industries, according to the report.

Jody Thompson, co-founder of CultureRx and co-developer of the Results-Only Work Environment, agrees with Goldin’s study. She said because of the flexibility offered by ROWE, her business partner Cali Ressler has been able to have three children without needing to take time off work or sacrifice time away from her children.

“Everybody just supports each other, and you just keep going. I never thought of her as doing less. I just did more of the physical stuff and she did more of the nonphysical stuff for a while,” Thompson said. “Everybody just picks up other things and adjusts around it.”

E&Y’s combination of flexibility and paid maternity leave policies offers additional support for Goldin’s argument.

“It has made a big difference in how successful our women have been,” said Maryella Gockel, Flexibility Strategy Leader at the company formerly known as Ernst & Young. “In the mid-1990s we had very few women in the partnership — about 5 percent — and now we have 19 percent. Women now make up 34 percent of our senior leaders in the Americas. We have five women on the operating board in the Americas now, and back in the ’90s we had none.”

—Max Mihelich

According to a 2013 survey conducted by the Institute for Women’s Policy Research, 20 percent of employees in the United States work for a company that offers paid paternity leave.

“A lot of people are starting to realize that it’s not a bad idea for fathers to take time off as well,” Paul said.

Finding ways to encourage more men to take time off after the arrival of a new baby is an important part of EY’s overall parental leave policy, explained Maryella Gockel, flexibility strategy leader at the company formerly known as Ernst & Young.

The professional services company offers up to 14 weeks of paid time off for birth mothers through a six-week combined disability program, six weeks of parental leave and the use of standard paid time off. All employees are offered parental leave for the birth or adoption of a child.

Trying to get men to take the full six weeks of parental leave is a challenge, but one method used to overcome this is allowing new dads to split that time up however they want.

“A man could take two weeks when the baby is born, for example, then take another four weeks when his spouse, partner or significant other goes back to work,” Gockel said.

EY first offered parental leave to all employees in the early 2000s. Gockel said that perk gives the organization a competitive advantage because it’s able to attract better talent and retain workers.

Supporters of paid medical leave argue that employees feel a greater sense of workforce attachment when they don’t have to make a decision between caring for a newborn child and a paycheck. In turn, employee turnover will likely be reduced and an organization will experience fewer disruptions.

“When we have a culture that enables people to succeed, both in their careers and home lives, that makes a huge difference in how people value their career,” Gockel said. “It positively impacts how long they stay. It has positive benefits from an engagement perspective and how employees feel about the company.”

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