This past January, a new Minnesota law took effect entitling private sector workers to take up to 12 weeks of leave for family or medical needs, with a state-paid benefit of up to $1,423 a week, and a guarantee of reinstatement once the leave is over. In response, Steve Gilbertson, the owner of Electramatic, a custom electrical cable assembly manufacturer in northern Minneapolis. decided to hire a dozen extra employees just to make sure both shifts at his plant would be fully staffed. “Someone could come in today and ask for (time off starting) tomorrow,” worries Gilbertson, who currently has about 175 workers. He sees the new law as a competitive handicap when he bids against companies in neighboring states without mandates. “I’m not able to compete any longer with North or South Dakota, Iowa or Wisconsin. My competitors that are there have lower overhead rates and they can win projects away from me,” he complains.
The United States remains the only wealthy industrialized nation without a national paid family and medical leave program. Congress last acted in 1994, when it passed the Family and Medical Leave Act, mandating that companies with 50 or more employees provide up to 12 weeks of unpaid job-protected leave for medical, parental and family caregiving purposes.
But Democratic controlled states have been going further; 14 of them, plus the District of Columbia, have laws mandating paid leave. Not surprisingly, workers (and in particular, lower paid ones) do take more leave when they’re not being forced to do so without any pay and when they know their job will be waiting.
In addition to Minnesota, laws are now on the books in California, Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Virginia and Washington. These laws typically are passed with a delayed implementation date, so two of the mandates, in Maryland and Virginia, have yet to even take effect. Except for the decade-old New York law, all are structured as social insurance, with payments made by the state and financed by a payroll tax that (in newer laws) is typically split between employer and employee. (New York requires employers to provide benefits, either through private insurance or a self-insured disability plan, and allows employers to require some contributions from workers.)
In the majority of these states, tiny businesses get a break on the new taxes that support these programs, but still need to provide the leave, which to hear small business folks tell it (in surveys and anecdotally), is a bigger challenge. Delaware exempts businesses with under 10 employees from its mandate completely, while the District of Columbia exempts those with under five employees.
According to a review of paid family leave laws by the Bipartisan Policy Center (BPC), a centrist think tank, the top weekly benefit on-leave workers can receive ranges from $1,765 in California down to $900 in Delaware. The paid-leave period varies widely too, though it’s generally around 12 weeks, with some states allowing longer periods for a worker’s own medical problems than for parental or family caregiving. California, for example, provides only 8 weeks of paid leave for family caregiving, but a full 52 paid weeks for a worker’s own health problems–the longest of any state.
Back in 2019, as some Congressional Democrats were pushing a national paid leave plan that wouldn’t exempt small businesses, BPC and Morning Consult surveyed 500 owners of businesses with 50 or fewer workers and found that 60% thought having one or more workers out for 12 weeks on unpaid or paid leave would be “hurtful” to their business. More of those with 15 or fewer workers expressed worry, while fewer of those with 16 to 50 workers were concerned. The survey, taken before most of the current state laws were on the books, also found that while small business owners (and particularly younger millennial ones) supported the idea of paid family leave in the abstract, most didn’t actually provide it in the real world. Even the most common paid leave–for an employee’s own medical care–was offered by fewer than 45% of the firms.
Meanwhile, seven Republican controlled states (Alabama, Arkansas, Florida, Kentucky, South Carolina, Tennessee and Texas) have responded to the push for paid family leave with laws that allow private insurers to offer family leave insurance for employers who choose to buy it. New Hampshire and Vermont have set up voluntary insurance plans that employers can buy into and launched those plans by putting their own state workers in the risk pools. (Virginia also adopted a voluntary private insurance plan, but that was superseded by a new mandate passed in 2026 after Democrats gained full control of the state government.)
There’s an argument to be made that state paid and administered family leave programs actually help small businesses compete with larger businesses for top talent.
That’s the way John J. Kalamarides, a visiting nonresident fellow at the BPC (and a former Prudential Financial executive) sees it. “Paid family medical leave is actually a great budget solution for small businesses, because they’re not self-insuring,’’ he says. “It’s not coming out of that employer’s pocket to pay for that person while they’re out on leave. The insurance is doing that, and instead, they can redeploy that payroll elsewhere.” The programs also help employers, he says, by reducing staff turnover, increasing employee loyalty, and increasing worker productivity, because their financial and family stress is lessened while they’re on the clock.
Kalamarides acknowledges that labor shortages are a common complaint from business owners in states that have adopted paid leave mandates, but says the fix is often quite simple: Cross-train employees so that they’ll be able to take care of work that needs to get done while any of their coworkers are absent. “It’s a backup approach,” he adds. “I’d rather have the worker have the baby and not quit, but come back,’’ when they are ready.
As Kalamarides sees it, workers are going to take unpaid time off in many cases anyway, so cross-training is crucial even if there’s no state paid leave law. “A baby’s born, which is what 60% of these claims are. That woman and that father in the case of paternity leave, they’re going to take it anyway,” he says. “We might as well make sure that there’s a paycheck and payroll insurance along the way.”
Even if a state paid leave program helps small employers, there’s a potential risk: Once they have the payroll tax funds, the politicians might use it for other purposes. In Washington, D.C., the new city budget, which began Oct. 1, rolled back the number of paid weeks off employees could take for personal medical leave to 10 from 12, and to six from 12 for family caregiving leave. The city also trimmed the maximum weekly benefit for workers to $1,100 from $1,190. Why? It siphoned off some of the funds raised from a 0.75% of payroll tax on employers to balance the city’s budget.
New Mexico’s legislature has debated for three years running whether to hop on the paid leave bandwagon. Opposition by the National Federation of Independent Business has so far helped stymie that move. Jason Espinoza, NFIB’s New Mexico state director, points out the law is essentially a new payroll tax, but adds, “We think the larger issue is the staffing issue.”
“We think certainly the state can help through those payroll taxes in their program to replace a portion of the employee’s wages, but what the state can’t do for us is really provide a qualified person to perform that work,” Espinoza says, noting that for small businesses in particular, “that labor force is already super thin. So an extended absence impacts the entire operation.”
He adds: “When you look in healthcare, construction or any of the skilled trades, those are almost irreplaceable individuals and skills at that point that you’re just like, `I cannot find a temporary employee for 12 weeks to cover that.’”
Colorado State Senator Scott Bright, a Republican, says he hears from small business owners “at least weekly” with complaints that Colorado’s newish paid family leave law is creating staffing shortages and boosting costs. “They’re handcuffed with how to handle the employees as they depart for medical reasons, and how they handle that while they’re gone.”
The law was approved by voters (58% to 42%) in 2020, with payroll deductions beginning in 2023 and actual benefits kicking in a year later, with up to 12 weeks of paid leave at up to $1,448 a week. While the law exempts businesses with under nine employees from the payroll tax, they’re still subject to the mandate to grant leave and guarantee workers a job when their leave is over.
As the third-generation owner of ABC Child Development Centers, in Greeley, a city of 115,000, about 55 miles northeast of Denver, Bright says he’s struggled with the problem himself. His centers provide everything from childcare for infants, to preschool and pre-kindergarten classes, to before-school and after-school care for older kids. On paper, it looks like a nice sized business, with 170 employees. But those workers are spread out over 20 locations, with staffing at those sites ranging from two to 45.
“It has been really difficult since the law was implemented to find qualified people to step into those places. They don’t just come trained in the door,” Bright tells Forbes. “We have to train those people over six, 12, 18 months to be able to do that work. And we can’t afford to just hire a pool of substitutes that just wait in the wings for the next person that needs to step out on family medical leave.”
Bright was one of the small business owners who testified against mandated paid leave when the Colorado legislature was considering it in 2019. After businesses pushed back, the legislature opted for a study instead of a mandate and the pro-leave forces took it to the voters directly. “Should parents stay at home with their kids, the answer unequivocally to that is ‘yes,’’’ says Bright. “Should all the rest of us pay for that? The answer for me unequivocally is ‘no.’” He ran for office in 2024, he says, because he objects to what he views as the state government’s broad intrusion into the childcare industry.
Beyond labor shortages and costs, the new laws can create confusion for small business proprietors. Last year, the left leaning Small Business Majority group, which supports a national paid family leave program, conducted two focus groups with Colorado owners. According to its report on those sessions, some owners found the new law confusing and burdensome, particularly if they didn’t use a payroll services company, and doubted all their small business peers even knew about the mandate, particularly in rural areas. “Due to a tight labor market, it’s difficult for (small businesses) to hire temporary employees to backfill a position during an extended employee leave period,” the report noted.
State governments have recognized that new paid family leave laws can create hardships for small businesses. In Oregon, for instance, lawmakers established a grant program with awards of up to $3,000 for small businesses that need to hire temporary help to cover workers who are out on leave. Washington state also has a grant program to help small businesses with up to 150 employees, as does Minnesota.
Back in New Mexico, Espinoza argues that it’s not just small businesses that have a problem with the spread of state mandates. Companies with multi-state footprints would like a streamlined national policy too, he says. “A state-by-state patchwork is generally problematic,” he says. Not that the NFIB actually supports a national paid family leave law. Instead, it argues for businesses to be able to set their own leave policies.
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