Form revised: December 14, 2010

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	CBO Analyst/Phone:
Legislative	Ben Noble / 684-8160	Not Applicable

Legislation Title:

AN ORDINANCE relating to employment in Seattle; adding a new chapter to the Seattle Municipal Code; establishing minimum standards for the provision of paid sick and paid safe time; prescribing penalties, remedies and enforcement procedures; amending Section 3.14.931 of the Seattle Municipal Code; and requesting a post-implementation assessment from the Seattle Office for Civil Rights.

Summary of the Legislation:

This legislation establishes a requirement that employees working in the city of Seattle be provided paid sick and safe time.  This time is to made be available when: (i) the employee is sick, (ii) a member of their immediate family is sick and needs care; (iii) the employee’s place of work or their child’s school or place of care is ordered closed by a public health official; or (iv) as the victim of domestic violence, or acting in support of family-member who has been a victim, the employee needs time off to address matters related to follow-up care or legal action.  As detailed in the legislation, the minimum amount of leave that must be provided varies by firm size.

The legislation provides an exemption for the first two years of operation for Tier 1 and Tier 2 firms, and also delays initial implementation of the overall ordinance until September 1, 2011 for all firms.

Following the same enforcement model that is now applied by the Seattle Office for Civil Rights (OCR) to address violations of fair employment standards, complaints regarding an employer’s failure to provide leave can be submitted to SOCR for investigation and potential findings.  In situations where an employer is formally found to be out of compliance, SOCR will seek conciliation.  The terms of a conciliation settlement can include elimination of the unlawful practice, restoration of back-pay, rehiring, attorney’s fees and other remedies that could be ordered by a court, expect that damages for humiliation and suffering cannot exceed $10,000.  If no voluntary agreement is reached, SOCR will refer the matter to the City Attorney for a hearing before the Hearing Examiner.  If the Hearing Examiner concurs with the findings of a violation, its settlement order could require affirmative action or other relief deemed necessary to “correct the practice, effectuate the purpose of this ordinance, and secure compliance there with, including but not limited to hiring, reinstatement, or upgrading . . . restoration of lost benefits, attorney’s fees . . . except that damages for humiliation and mental suffering shall not exceed $10,000”; essentially the same remedies that SOCR would seek through conciliation.

A separate “companion” Council Bill provides the position authority (for one new full-time equivalent) and funding needed for implementation, enforcement and outreach.  The sick leave requirements would not become effective until Sep 1, 2011, but staff will be needed sooner than that to begin the required rule making and outreach.

The legislation also calls upon SOCR and the City Auditor to provide Council with a written assessment of whether the policy goals of the ordinance have been achieved and whether the notice and enforcement provisions established by the ordinance have been effective in achieving compliance with the minimum standards for sick and safe time.  To the extent that any shortcomings are identified, this report will include recommendations for potential modifications to the legislation.  The report is due 18 months after the effective date of the ordinance.  This assessment is projected to a have a cost of approximately $200,000, of which $50,000 would be needed in 2012, and the remainder in 2013.

Background:

Consistent with the findings found in Section 1, the ordinance is designed to address a number of related public policy concerns:

· Without paid sick time, employees are more likely to come to work while ill, risking their own health, that of their colleagues, and potentially that of customers and clients.

· Without paid sick time, employees will be less likely to take time off to seek preventive care for themselves or their children; and may be tempted to send unhealthy children to school.  Either of these practices could lead to poorer health for workers and their children.

· Without paid safe time, employees are less likely to take the time needed to address situations where they or a family member has been the victim of domestic violence.  Given the social costs associated with domestic violence, this is not a desirable outcome.

· Workers who do not have paid sick time place themselves and their families at economic risk, due to the impact of lost wages, when they choose to take sick or safe time without pay.

Please check one of the following:

____ This legislation does not have any financial implications.

(Stop here and delete the remainder of this document prior to saving and printing.)

_X_     This legislation has financial implications. (Please complete all relevant sections that follow.)

The potential fiscal impacts to the City of this ordinance include both the direct costs of enforcement and the “indirect” costs associated with extending paid sick and safe time to certain temporary employees of the City, and expanding the uses of City employee’s existing sick time benefit.  The magnitude of these various cost drivers are estimated as follows:

· Direct costs – outreach, enforcement and assessment.  To fully inform employers and employees about the effects of the paid leave requirements, OCR will need to undertake a significant one-time outreach effort.  This will include meetings with stakeholders, distribution of materials, advertisements etc.  The projected cost of this effort is approximately $105,000, including some temporary staffing costs.  These one-time costs would be incurred during the 12-18 months following passage of the ordinance.  

Rule-making and on-going enforcement responsibilities for SOCR will require the addition of one Civil Rights Analyst.  The pro-rated cost of one quarter of staffing in 2011 is $20,900; the on-going full year costs for 2012 and beyond is $84,000.  The position authority and appropriation required for enforcement are the subject of a separate “companion” ordinance that includes its own fiscal note.  In addition, on-going outreach and the cost of printing updated informational materials for distribution to employers could represent as much as $15,000 per year in additional costs. 

And as noted above, the assessment called for in the legislation is expected to have a cost of up to $200,000.  This money will be used to fund an independent entity to conduct the assessment. 

· Indirect costs – temporary employees now to be eligible for sick time.  Currently the City does not offer paid sick and safe time to certain temporary employees.  Instead, these employees receive “premium” pay in lieu of benefits (all benefits, not just sick time).  This premium is computed as a percentage of base salary and varies between 5% and 25%. 

If sick time were added to the total compensation for these positions, one obvious step would be lower the premium to offset the value of sick time.  However, at least some of the existing premium levels are linked to collective bargaining agreements.  Adjustments could still be made, but will likely require significant discussion with the interested parties.

Therefore, the current analysis assumes no such changes and computes the potential cost to the City assuming no decreases in the current premium levels.  An analysis of 2010 staffing data showed that roughly 1,865 individuals worked as temporary employees for the City of Seattle at some point during the year.  In total, these individuals worked more than 720,000 hours.  And at a rate of 1 paid sick hour per 30 worked, they would have earned nearly 21,600 sick hours.  Compensated at their existing hourly rates, this time would have cost the City approximately $375,000. 

However, under the proposed ordinance employees cannot take sick time until they have been employed for 180 days, and some share of temporary workers will not reach this threshold.  Further, it is unlikely that all individuals would take full advantage of the sick time that is made available.  Recognizing that all temporary employees would not be eligible to take sick time, and assuming that those who are eligible will take, on average, half their available time, the effective costs to the City will be less than $200,000 per year.  These additional costs will first arise in 2012, given that the ordinance will take effect until 180 days after its passage.

Department of Parks and Recreation and Seattle Center are among the heaviest users of temporary workers, so they would bear a significant share of the total costs.  In particular, these two departments account for 60% of the total and would face estimated annual of costs of $80,000 and $35,000, respectively.  A portion of the impact to these two departments will be borne directly by the General Subfund, and both might seek financial relief from the General Subfund to address the portion of temporary labor costs that are now supported by other sources.  SPU, City light and HSD are the other departments to face notable impacts, with annual costs of between $20,000 and $30,000.  Given the City’s current financial situation, there would need to be offsetting reductions in other expenses and likely some reduction in direct services as a result.

· Indirect costs – public health closure eligible use of sick time.  The proposed ordinance will extend the eligible use of sick time to the “closure of the employee’s place of business by order of a public official to limit exposure to an infectious agent, biological toxin or hazardous material, or an employee’s need to care for a child whose school or place of care has been closed by order of a public official for such a reason.”  This extension could have some future cost to the City, but these situations are likely to rare and the costs small.

· Indirect costs – sick time restored to re-hired employees.  The proposed ordinance will mandate that sick time be restored to any employee who is rehired within a year of separation, without regard to what caused the original separation from employment.  Current City policy does not provide for restoration of sick time when separation was due to resignation, quitting or discharge.  However, given that, such rehires are relatively infrequent, the cumulative cost of the restored sick time is likely to be insignificant.

This ordinance will also have fiscal impacts on private employers with employees who are working in the city.  This fiscal note is not intended to capture such effects.  Instead, these impacts will be discussed separately as part of Council consideration of the proposed ordinance.

What is the financial cost of not implementing the legislation?

There are no direct costs associated with not implementing this legislation.  Indirect societal costs may arise from having sick employees report to work, having their children attend school while sick, etc.

Does this legislation affect any departments besides the originating department?

As described above, this legislation will increase costs for any City department that employs temporary workers who receive premium pay in lieu of benefits.

What are the possible alternatives to the legislation that could achieve the same or similar objectives?

There are no obvious approaches that would ensure sick and safe time for the full set of workers who would be eligible under this ordinance. 

Is the legislation subject to public hearing requirements?

No

List attachments to the fiscal note below:

None