Private company now dictating employment policy to small businesses

Private company now dictating employment policy to small businesses

lsidf16-crop-600x338It’s well-known that small businesses suffer from a crushing burden of employment-related, safety-related, and environmental-related rules and regulations from various government agencies.

It is also understood that small businesses are expected to meet certain relevant requirements from their large private business customers, such as certain product quality standards, pricing guidelines, delivery schedules, etc.

However, there is now a new wrinkle. At least one large private corporation has made the decision to dictate employment policy to its suppliers, many of which are small businesses.

Last month, Microsoft announced that it will require all of its vendors with 50 employees or more to provide a total of 15 days of paid sick time and vacation time to their employees. (Microsoft’s employees currently receive 10 days of paid sick time a year, plus 15 to 25 paid vacation days, depending on their length of service.)

Adding fuel to Microsoft’s fire is the fact that the Administration is pushing Congress to pass a bill giving workers seven days of paid sick leave. According to the president, the U.S. is the only advanced economy in the world that does not require paid sick leave, and 43 million workers do not have it.

Recently, a U.S. senator and a U.S. representative reintroduced the Healthy Families Act, which would give employees seven days of paid sick leave a year. A version of this bill has been introduced every Congressional session since 2004, but has never made it to the floor.

“We believe paid time off is an important benefit for workers in our economy,” said Brad Smith, general counsel and executive vice president, legal and corporate affairs, for Microsoft. “The lack of paid time off disproportionately impacts low-wage earners. While estimates vary, the overall trend is clear. As one study found, only 49 percent of those in the bottom fourth of earners get paid time off, compared to almost 90 percent among the top quarter of earners.”

Smith added: “The people who work for our suppliers are critical to our success, and we want them to have the benefit of paid time off.”

Recognizing that this new requirement may increase costs for some of its suppliers, Microsoft’s plan is to work with these suppliers to implement these changes over the next twelve months. “We appreciate that this may ultimately result in increased costs for Microsoft, and we will put a process in place for addressing these issues with our suppliers,” said Smith.

He added: “We want to be sensitive to the needs of small businesses. For these reasons, we are going to launch a broad consultation process with our suppliers so we can solicit feedback and learn from them about the best way to phase in the specific details. However, we are committed to the direction that we have set.”

In an article in the March 26, 2015, edition of the Boston Globe, Bill Vernon, Massachusetts director of the National Federation of Independent Business was quoted as saying in response to Microsoft’s announcement, “It makes it more difficult to create jobs and grow your company, and there’s a trade-off economically.”

Indeed, according to the article, employees at one Microsoft vendor, Lionbridge Technologies, Inc. (Waltham, Mass.) expressed concern that the company might be required to reduce their pay in order to offset the increased costs the company will face as a result of Microsoft’s policy.

Is Microsoft’s move the beginning of a new trend? Or simply an anomaly? “There may be some ripple effect, as other organizations may want to encourage paid vacation and sick time,” said Carol Sladek, partner and Work-Life Consulting Lead for Aon Hewitt.

“Large corporations have always offered these kinds of benefits to their own employees,” said Mary Tavarozzi, North America Practice Leader – Absence and Disability Management, for Towers Watson. “However, for a private corporation to have this sort of requirement for its vendors is unique at this point. Whether or not this will be a trend is probably too early to say.”