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Firms fight change in leave
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June 26, 2000: 5:49 p.m. ET
New Labor Department rules could raise unemployment insurance costs
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LAS VEGAS (CNNfn) - Small businesses could end up paying when employees of big companies take family leave, according to a lawsuit filed Monday by two small firms and three big business groups against the Department of Labor.
The complaint argues that the agency improperly circumvented the unemployment insurance law by establishing new rules.
To Michael Lotito, chair of the Society for Human Resource Management, the rules represent "a back door attempt ... at fundamentally altering" the nation's unemployment law, which he said has been "a safety net since the New Deal."
Lotito made his remarks in Las Vegas, where the society is holding its annual conference. Some 17,000 human-resources experts are attending the event.
 He said the department is attempting to legislate by regulation, to provide a benefit that Congress had chosen not to extend when it passed the law.
The agency differed. "We are quite confident that we do have the authority," said Sally Paxton, the Labor Department's deputy solicitor, asserting that the new rules would help workers "to better balance work and family."
1993 law established family leave
Until now, a worker has been able to claim as much as 12 weeks of leave after the birth or adoption of a child, without danger of losing a job, under the Family and Medical Leave Act of 1993, although such leave could be unpaid.
As a result, very few workers have chosen to take advantage of the existing law. According to a report by the Employment Policy Foundation, the "take-up rate" -- the share of workers who actually use the FMLA to care for a newborn, adopted, foster or sick child -- is about 5.7 percent of eligible and covered women and 3.7 percent of eligible and covered men.
And many workers aren't eligible. Companies that provide fewer than 50 jobs are exempt from the FMLA's rules.
By using unemployment insurance to turn unpaid FMLA leave into paid leave, the new Labor Department rules might expand the number of workers who choose to take advantage of the law.
Impact on small employers
That still wouldn't bring employees at such firms under the FMLA umbrella, but it could raise their unemployment insurance rates.
One of the small-company plaintiffs in the lawsuit, Danneman's Auto Service of Laurel, Md., has 10 employees, including six technicians who specialize in the repair of Volvo and Saab cars. In 1999, the company laid off a service adviser in order to continue employing a longtime mechanic who had become disabled.
The laid-off employee went on unemployment, and as the company's "experience rating factor" went up, its unemployment insurance costs have more than doubled since last year, the lawsuit said.
If FMLA rules cause greater jobless claims, "UI contributions of small employers will be used to subsidize the leave of employees of larger companies," said Randel Johnson of the U.S. Chamber of Commerce.
The cost could run as high as $28.4 billion annually, the Employment Policy Foundation projected, potentially threatening the solvency of unemployment funds of 49 states and the District of Columbia within three years. 
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