Battleground New Jersey

Entrepreneurs in the Garden State are fighting a bill that would guarantee all new parents 12 weeks of paid leave -- and perhaps set a precedent for the entire nation

The political stars are aligning over New Jersey in a way that's alarming business owners -- especially entrepreneurs.

Business is closing ranks against proposed legislation that would give 12 weeks of paid time off to any employee with a newborn or newly adopted child. Unlike the federal Family Medical Leave Act, which mandates 12 weeks of unpaid leave and applies only to companies with 50 or more employees, the New Jersey legislation would cover businesses of all sizes -- down to those with just a single employee.

Similar legislation has been tried -- and has failed to pass -- in more than a dozen states. But this bill is given a bigger chance of passage because of the wide-open political climate this year in New Jersey, where all seats in the Senate and Assembly, as well as the governorship, are on the ballot. The legislation has bipartisan support and is a top priority for labor and other groups.


  "This is just crazy," says Kathleen Davis, senior vice-president of the South Jersey Chamber of Commerce, who thinks the bill would have a devastating effect on businesses large and small. "This No. 1 on our agenda, and anything else is a very distant second."

Employees on family leave would be paid from the state's unemployment insurance fund, which has a $700 million surplus, and would be limited to a maximum of $429 a week, the cap on unemployment benefits. Even though the employer would not be cutting the check, employee absence would be a hardship, say business owners, who cite the cost of finding and training temporary workers or paying other employees overtime to cover for those on leave.

The timing couldn't be worse, says Chris Biddle, spokesman for the N.J. Business & Industry Assn., which has some 16,000 members. "Here we are in the worst labor shortage in a generation, already having trouble finding workers," he notes, adding: "You can't go to a temp agency to replace key personnel."

Employees would be entitled to their jobs, or equivalent positions, upon return from leave. Because state family leave would run consecutively with federal family leave, and because New Jersey is one of the five states that provide temporary disability benefits for pregnancy, time off for many new parents could surpass six months.


  The state's AFL-CIO will be pushing hard for the bill. In a "legislative alert" to members in January, union leaders outlined a lobbying strategy, encouraged members to write to their lawmakers, and invited workers who would be willing to testify at legislative hearings to come forward. "We're confident that by pursuing an intensive lobbying campaign...New Jersey will become the first state in the nation to adopt paid family leave legislation," the statement said. None of the sponsors of the bill -- Republican Senators Jack Sinagra and John Lynch, and Democrat Arline Friscia and Republican Charlotte Vandervalk in the New Jersey Assembly -- returned phone calls seeking comment on the bill.

Although New Jersey has a family-leave bill, which was passed nine years before the 1999 federal law, it does not mandate payment nor does it apply to companies with fewer than 50 employees. The new legislation, as well as earlier efforts in other states, follows the federal Labor Dept. regulations by permitting state unemployment insurance funds to be used to pay leave to new parents. Other states have broadened the federal family-leave bill. For example, in California, new parents and others caring for family members get 16 weeks off, unpaid. In Indiana, proposed legislation would apply the Family Medical Leave Act to all companies with 20 or more employees.

The New Jersey bill has grabbed the attention of small-business lobbyists elsewhere, too. Terry Neese of Oklahoma City, co-founder of Grassroots Impact political consultants and the owner of an employment agency, says: "Here's the problem with paid leave: I have to pay someone to be off, then I'd have to pay a temp to come in." Adds Neese, who is considered a contender for the top spot in the Small Business Administration under President George W. Bush: "[If] I'm running a temp service, it would be great for me. But there's no way a small-business owner can afford to do that."


  Neese and others say company owners want flexibility. Says Kathleen Davis: "Right now, we will work with people who need to go out on family leave -- most employers do....We want those people to come back."

But employees may not have jobs to come back to, since many small businesses "may not survive the hardships this legislation would cause," warns Donna Myer, owner of a marketing and communications company in Holmdel, N.J., and president of the N.J. Association of Women Business Owners.

Although the bill's backers note that the U.S. is the only developed country without paid time off for parents, Myer calls such regulations "job-killing mandates" and notes the high unemployment rates in many European countries with relatively liberal family-leave policies.

And attempts to frame the bill as a "women's issue" are off base, its critics say. "Speaking as a professional woman, that is insulting to me," says Davis. "There are many women managers and women business owners who will have to deal with this." It could actually hurt women, says Myer, who notes that female employees are more likely to take family leave then men, thus making women less likely to be hired.


  AFL-CIO figures show that almost half of all American workers get a fully paid leave from their employers upon the birth or adoption of a child and that most members of this group are highly paid. Fully compensated leave goes to 76% of salaried workers but only 32% of wage earners, figures compiled by the union coalition show. The union also says that because the benefit would be coming from the state's unemployment insurance fund, it wouldn't be a financial hardship for company owners, and that the cap of $429 a week is low enough to discourage "frivolous leave-taking." The AFL-CIO is joined by a coalition of organizations, including the N.J. Partnership for Working Families, in pushing for the bill's passage.

Estimates on what it would cost the state's unemployment insurance fund range from $100 million to more than $200 million a year, although the proposed legislation would cap annual costs at $130 million. Some critics say the cap is unrealistic -- that once the benefit is established, it couldn't be arbitrarily cut off.

The fact that all Senate and Assembly seats, as well as the governorship, will up for grabs this year makes the fate of the legislation less predictable than during former-Governor Christine Todd Whitman's administration, which was considered very friendly to business.

"The politics of this are what's so dangerous," says Robert Tartaglia, New Jersey director for the National Federation of Independent Business. "If this comes to a committee vote, we're going to have a serious problem stopping it because it's an election year -- anyone in a tough race would feel they have to vote for it." Tartaglia notes that his state tends to be a bellwether for labor issues.

Right now, unions have turned the heat up high under this bill. Look for the pot to be boiling briskly in the months ahead.

By Theresa Forsman in New York

Edited by Robin J. Phillips

Before it's here, it's on the Bloomberg Terminal.