Family and Medical Leave
Background
Survey Structure
Family and Medical Leave Policies
The Most Recent Experience with Family and Medical Leave
a. Virtually All Requests Granted
b. Offsetting an Employee’s Absence
Personal Leave Policies
The Most Recent Experience with Personal Leave
Coverage by Existing Law
Final Comments
Background
The Family and Medical Leave Act of 1993 requires those employing 50 or more people to permit employee leave up to three months for a serious family (including personal) illness, or the birth, or adoption of a child. Twenty (20) states also have legislation governing employee leave in the private sector. Some state law codifies a more liberal leave policy than federal requirements, such as lowering the employer size threshold for coverage. But most state laws are similar. Though employer representatives seek modest changes in existing law, primarily to minimize federal/state conflicts and to establish a threshold for minimum leave time (to minimize paperwork), advocates seek major changes. Three are of particular concern to small employers. The first reduces the threshold for coverage from 50 employees to something fewer as a handful of smaller states have already done. The second requires that employees on leave be paid. The third requires leave for medical appointments and certain school activities. Small-business owners have traditionally exhibited considerable flexibility dealing with these types of employee needs. However, to provide current data on a subject that may be debated in Washington as well as many state capitals, The National Small Business Poll directs the current issue toward Family and Medical Leave.
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Survey Structure
The survey on which this report is based is structured to initially inquire about small employer policies toward family and medical leave. It then asks about the most recent experience with a family and medical leave request. Since some small employers will have a policy, but no recent request, while others will not have a policy, but a recent request, those with a policy and those with recent experience are not necessarily the same. The latter portion of the survey follows the identical pattern for short periods of personal leave.
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Family and Medical Leave Policies
Just 12 percent of all small employers have a policy regarding employees who request time off for a serious family illness, a birth, or an adoption (Q#1). Eighty-two (82) percent handle requests on a case-by-case basis. One in 20 (5%) appears not to have encountered the issue as group members have not previously even thought about the matter.
The existence of a policy is directly related to size. While those in the smallest group have a policy in only nine percent of cases, those in the largest have a policy one-third (34%) of the time. The Family and Medical Leave Act tacitly forces a policy even if none existed a priori. Thus, the largest small employers (50 or more employees) effectively must have a policy by law.
The most important reason to establish a policy according to a plurality of owners with a policy (42%) is to attract and/or retain employees (Q#2d). Attracting/retaining employees is the most common reason for instituting virtually any employee benefit, so the response is to be expected. The second most frequent reason cited is legal compulsion (20%). The federal government and 20 states have legal requirements governing private sector leave policy. Not all of these requirements are the same, but effectively only two percent (12% with a policy X 20% primary reason a legal requirement) claim that they instituted a family leave policy primarily to satisfy legal requirements. The third most frequently cited primary reason to initiate a policy is to avoid potential problems and inconsistencies. Seventeen (17) percent cited this reason.
When a family and medical leave policy exists, it is usually written and available to employees upon request. Eighty-four (84) percent of those with policies have these two characteristics attached to them (Q#2). Among employers with 20 or more people, the proportion who make their written policy available to employees upon request rises to 96 percent. As businesses become larger, the human relations (HR) function typically becomes more formalized as illustrated here.
Virtually every small-business owner with a family and medical leave policy has one of two kinds: the first policy is open-ended. The policy allows the employee to come back when he or she is ready. Allowing the employee to return at their discretion does not necessarily imply that leave is unlimited, but that it is flexible and determined by need rather than by a pre-determined deadline. The second policy accommodates leave, but imposes time limits. The identical percentage of small-business owners (49%) identify each policy as the one they use (Q#2a). Larger, small employers are more likely to adopt the less flexible policy (64%), likely due to their propensity to be covered by legal requirements and greater need for uniformity.
Two percent report a policy that does not give time off, but rearranges schedules to help the employee. No employer reports a policy that does not allow time off for family and medical leave and makes no other employee accommodation.
The time limits set by those who bound leave varies considerably. Thirty (30) percent allow one month or less, while 31 percent allow from one to three months (Q#2b). Another 2 percent limit time to some period extending beyond three months. Still, 13 percent say that the limit varies and 22 percent don’t know or refused to respond. The latter response most likely comes from owners who have not encountered a specific situation, but who know that they do not want to offer open-ended leave.
Paid family and medical leave is a public policy issue for some people. Proponents believe employers should be forced to pay employees for the time that they are out of work on family and medical leave. A large proportion of small employers actually do pay employees on leave as part of their firm’s policy. But another large share do not, and much depends on the person and/or circumstances.
The greatest number (38%) of small-business owners with a policy say that pay depends on the person and/or circumstances (Q#2c). Such flexibility implies that pay could range from quite generous to nothing. Factors likely included in pay determination are longevity at the firm and value to it, but the data do not directly address the matter. The second most frequent policy (35%) is to pay people if they take time off as vacation or sick leave. In other words, there are a fixed maximum number of paid working days off and the employee can distribute them as he or she will. Nine percent pay employees as a matter of policy when they are out on family and medical leave; 17 percent have a policy to NOT pay those who are out for such purposes. As a practical matter, both numbers are likely larger as those whose policy varies face real situations. Still, over half of small employers appear to give employees a paid option when taking family and medical leave.
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The Most Recent Experience with Family and Medical Leave
The overwhelming majority (82%) of small employers handle requests for family and medical leave on a case-by-case basis (Q#1). Therefore, a better way to determine how small-business owners respond to requests is to ask about the last request (most recent) rather than prevailing firm policy.
Within the last three years, 34 percent of small-business owners have had one or more requests for family and medical leave (Q#3). The remainder have not. Those with a policy are somewhat, but not substantially, more likely to have had a request for leave than those without a policy.
Small employers receiving at least one request have typically received just one or two requests during the last three years. Two-thirds (67%) report one or two requests with another 16 percent reporting three (Q#3a). The average number of requests is about three per firm over a three-year period or about one per year. Since two-thirds have not received a request in the last three years, the average per firm is about one request every three years. These requests do not necessarily come from different people. A family illness in particular could be recurring. Thus, it is likely some small employers will receive a disproportionately large number while many will receive none.
Fifty-seven (57) percent of the most recent requests involve a serious family illness (Q#3b). One-third (33%) involve a birth and 1 percent an adoption. The curious response is the volunteered “none of these.” Nine percent gave leave for some reason other than family illness, birth or adoption, possibly related to marital problems, a death in the family or similar personal situations. The survey did not capture the nature of these other circumstances. A second potential explanation is respondent failure to consider a personal illness, a family illness.
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a. Virtually All Requests Granted
Virtually all requests for family and medical leave are granted whether required by law or not. Ninety-three (93) percent of small employers say that they granted the last request that they received (Q#3c). Owners of larger firms were marginally more likely to do so, but size of firm is generally not important to a grant of family leave. Another 3 percent report that they gave leave, but scaled back the amount of time requested. Two percent allowed employees to work at home, though it is not clear if action was at the employer or employee’s initiative. Just two percent refused leave, though they rearranged the employee’s schedule or duties. Not one respondent indicated that he or she simply denied the request.
Over two-thirds of owners paid the absent employee directly or indirectly in the most recent instance of family and medical leave. Forty-three (43) percent provided pay or disability; 24 percent gave paid vacation or sick leave; 31 percent did not pay the person on leave in one form or another (Q#3d). Notably, the proportion paid and unpaid varies little by size of firm. The implication is that the ratio of firms paying to firms not paying translates almost directly into employees on leave being paid and not paid.
Most employees take modest amounts of time while out on family and medical leave. Forty (40) percent take one week or less (Q#3e). Another 17 percent take between one and two weeks. Still, one in four (26%) takes more than one month.
Economic logic and prior research suggest that paid time off leads to greater amounts of leave time being taken. That relationship does not hold in this data set. The result is potentially a measurement issue. But it could also result from employer flexibility handling leave. Since many decisions regarding paid time off are dependent on the person or circumstances, small employers may structure pay to encourage an early return. For example, an employer may pay an employee for the first two weeks absence, require paid vacation for the second two, and not pay for more.
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b. Offsetting an Employee’s Absence
When an employee is absent, particularly for an extended period, his or her work needs to be completed by someone. The question is by whom? Or how? One possibility is hiring a temporary employee. Just 16 percent of small-business owners replaced the employee on family leave with a temporary (Q#3f1). Several reasons explain why this option may not be suitable and hence used comparatively infrequently. Expense and firm-based knowledge requirements are two of the most obvious.
The most frequent response is to have other employees cover for the one who is absent. Seventy-one (71) percent use this option (Q#3f2) with 84 percent of the largest doing so. The second most likely option selected (62%) is for the owner and the owner’s family to work more hours (Q#3f3). More owner hours is particularly important in firms with fewer than 20 people. Thus, people covering for one another is the primary way these absences are offset. The longer an employee’s absence however, the more difficult this option becomes.
Another option is to let the absent employee’s work keep. Postponing work or reducing output such as fewer sales calls reduces overall firm profitability, but may be the only realistic course, particularly in the absence of a highly skilled employee who is certain to return. Twenty-one (21) percent used the alternative (Q#3f4), much more frequently in the smallest firms than the largest.
Small-business owners prefer to do almost anything rather than turn down sales. Only one in 10 (10%) decided to temporarily limit sales (Q#3f5).
The most desirable alternative is to increase productivity. Sometimes that does not occur until something like an employee’s absence forces the small-business owner to do things more efficiently. Thirteen (13) percent indicated that they were able to make up for the employee’s absence at least in part by productivity increases (Q#3f6). Twenty-three (23) percent of those owning businesses employing 20 or more people exploited this option while less than half of that number (10%) were able to do so by those owning businesses employing fewer than 10.
Most small employers were able to cope nicely the last time an employee was out
on family and medical leave. The fact that the reference period, the last three years, occurred during an economic downturn may have affected owner evaluations. Nonetheless, when asked about the principal problem caused by the employee’s absence, the most frequent response was “no real problems.” Fifty-one (51) percent reported no real problems, though the number fell to 30 percent among owners of the largest firms (Q#3g). The latter are also the ones most likely to be covered by family and medical leave rules.
The most serious problem, noted by 30 percent of owners, was the increased workload placed on others. Owners of larger firms appear particularly susceptible. Ten (10) percent noted lost productivity including the disruption of work or customer relations. But comparatively few cited out-of-pocket cost increases or locating a replacement.
Periodically, employees take advantage of an employer’s family and medical leave practice. One of the most serious abuses occurs when an employee quits just before he or she is scheduled to return to work. This is particularly galling when the employee was on paid leave. Ten (10) percent of the one-third who report at least one request say at least one employee in the last three years quit under such circumstances (Q#3h1). Larger small firms experienced such abuse twice as often as the smallest.
Potentially problematic, though certainly more understandable than a quit, are those who stay out longer than originally planned. One in five small employers (20%) report that in the last three years an employee on leave stayed out longer than the employee said he or she would be absent (Q#3h2). No detail was elicited on the situation so it could not be determined if the prolonged absence caused problems or not.
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Personal Leave Policies
Family and medical leave implies an extended period out of the business. Yet, employees often want relatively short periods for important personal matters such as doctor’s appointments and parent-teacher’s conferences. The two types of leave are different, but result in remarkably similar small employer responses.
Sixteen (16) percent of small-business owners have policies governing requests for short periods of time off for important personal business (Q#4). Eighty-one (81) percent handle such requests on a case-by-case basis and 3 percent have never thought about it.
Eighty-one (81) percent say that the policy is written and available to employees upon request. However, that figure rises to 96 percent among those owning businesses with 20 or more employees. As in other areas, larger firms appear to have more structured and formal employee (personnel) procedures for short periods of personal time off.
The best description of the way small employers typically handle such requests is that they grant them. Fifty-six (56) percent report that they grant short periods of leave for personal matters as a matter of policy (Q#5a). Another 35 percent say that they grant this type of leave given adequate notice. An additional 8 percent indicate it is granted if the business is not (relatively) busy. Just 2 percent refuse short-term leave for important matters barring an emergency.
The policy most frequently makes these short periods of leave subject to vacation
time or sick leave for purposes of pay. Thirty-four (34) percent of owners permit paid short-term leave on the proviso that it is taken as vacation time or sick leave (Q#5c). Twenty-nine (29) percent say that the leave is paid and another 13 percent say that pay depends on the circumstances. Twenty-five (25) percent do not pay employees during their short-term leave.
A major issue surrounding short-term leave is record-keeping. Without records, brazen employees can take advantage not only of employers, but also of more conscientious employees. As a result, 60 percent of small employers keep records on short-term leave, larger employers being more inclined to do so than smaller ones (Q#5d). Record-keeping can be an important cost and inconvenience. Obviously, the more importance attached to records and the more detailed the records, the more likely the costs are to be significant. For the most part, small employers with a policy covering short-term leave feel comfortable with what they are doing. Just 2 percent report serious problems with one or more employees abusing short-periods of time off for personal matters (Q#5b). Another 28 percent have occasional problems, but 70 percent report no problems.
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The Most Recent Experience with Personal Leave
As with family and medical leave, almost all requests for short-term leave for important personal matters are granted. Ninety-five (95) percent allowed the last request that they received for personal leave (Q#6). One percent rejected the request and 4 percent could not remember receiving such a request.
Almost one-quarter (24%) of these requests were classified as emergencies by small employers leaving 74 percent that were not (Q#6a). Of those non-emergency requests, somewhat less than half (44%) did not provide the small employer more than 72 hours advance notice (Q#6b). Half did. The employer couldn’t recall in the remaining 6 percent of cases.
Another factor that may make short-term personal leave more or less convenient for the business owner is the time of the day or week when leave is taken. Most businesses have busier and less busy times. It is obviously helpful if leave is taken during a relatively less busy period. But only 52 percent report that the most recent instance of short-term leave was taken during hours relatively convenient for the business (excluding emergencies) (Q#6c). Almost the same number (45%) says that the leave was taken at a relatively inconvenient time (excluding emergencies).
Most employers will be more sympathetic to requests for short-term leave if the requests are occasional rather than regular. While “occasional” and “regular” in this context are arbitrary, the survey question was framed around three months – had the employee made a similar request for leave within the prior three months. Forty-six (46) percent had made a similar request within the prior three months and 47 percent had not (Q#6d). Those numbers argue that a huge proportion of the requests for short-term leave occur within a small number of businesses. While not conclusive, they also suggest that a relatively small number of employees are responsible for a substantial share of the requests.
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Coverage by Existing Law
Notable confusion surrounds who is covered by federal and/or state requirements governing family and medical leave and who is not. Twenty-four (24) percent of small employers believe that they are covered by some federal, state or local law/regulation that governs requests for time off for family- related or health matters (Q#7). Fifty-one (51) percent believe that they are not covered and one in four (25%) is not certain. If all businesses with 50 employees or more are assumed to be covered as are all businesses in states that have lower employee size limits than the federal government, approximately 6 - 7 percent of the small employer population should be directly impacted. Local ordinances (outside the District of Columbia) are not included, but probably do not add substantially to the total. A simple calculation suggests that at least three times as many think they are covered and are not, as actually are. But closer examination shows the number is much greater.
Of those who think they are covered, just 12 percent probably are and 88 percent probably are not. Of those who do not think they are covered, 97 percent are likely correct and 3 percent likely incorrect. Finally, of those who do not know, a substantial 25
percent of the population, are probably not covered and 8 percent probably are. A slightly different perspective yields the same results. Of those who claim that they instituted a family and medical leave policy because of legal requirements (n=20), 85 percent probably are not covered.
This confusion is obviously not satisfactory. More needs to be done to explain to small employers their freedoms as well as their legal responsibilities. But, perhaps more important, the confusion over family and medical leave leads to an entire series of related questions involving not only the Act, but the massive number of other laws and regulations which may or may not impact them.
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Final Comments
Small-business owners exhibit remarkable flexibility when it comes to employee leave for health, family or personal reasons. They allow such leave in almost all instances, often with the lack of prior notice and at less than convenient times. When owners believe they cannot or should not grant leave as happens on rare occasions, they accommodate employees in other ways. Moreover, small employers appear flexible about the duration of leave and pay for time off. It is particularly noteworthy that the actual frequency of pay while on leave is considerably greater than articulated formal policies would lead one to expect.
Such practices are broadly implemented despite the reality that relatively few small employers are legally required to do so. It is unfortunately true that many believe they are legally compelled to offer these benefits when they are not. Presumably, though not assuredly, mis-impressions increase the amount and generosity of the terms of leave given. The extraordinarily tight labor markets of the late 1990s unquestionably influenced small employers to be increasingly flexible in their relationships with employees as well. Flexibility is an important competitive advantage to smaller firms in recruiting and retaining qualified employees. That leave is now routinely given, even by those who know they are not legally bound to allow it, testifies to the fact that market pressures assure leave will continue to be commonly given regardless of legislative fiat. The existing condition seems to work reasonably well for most small employers. They can tighten policy when an employee (among a small minority) abuses the benefit
and grow the benefit when employees need or merit special consideration. But that can only be done when small employers have flexibility. Typically, new laws restrict flexibility and create uniformity. That minimizes the very flexibility that allows small employers to be generous. The existing condition does not seem to work nearly as well for those likely covered by federal and/or state family and medical leave law and who thereby have had their flexibility curbed.