A recent letter to city councilors from one of Duluth’s largest employers provides background on the cost companies could face if the proposed Earned Sick and Safe Time (ESST) ordinance is approved. 

St. Luke’s, which has 2,869 employees, annually would face $337,612 in added costs, the healthcare provider said in a letter dated April 3. That for just the 314 workers who aren’t eligible for benefits but would qualify under the ordinance. The finding is based on each of those people taking five days off and St. Luke’s not bring in replacement workers.

“If 25 percent of the shifts go unfilled but 50 percent of the shifts filled are at a non-overtime rate of pay, the annual cost increases $168,806. If we fill 25 percent if the open shifts at overtime, the cost is an additional $127,814. The total could exceed $600,000 per year,” the non-profit wrote. The average hourly wage of those 314 people is $26.88.

Explaining another scenario, Human Resources Director Marla Halvorson said current part-time employees generally schedule their personal medical appointments outside of their shifts to avoid using vacation time.

“The actual average hourly wage of these 1,230 employees is $35.41 per hour. If each employee only takes 4 hours of time in a year, the additional cost to St. Luke’s is nearly $175,000 per year,” she wrote.

St. Luke’s is one of many companies that have expressed concerns about the ESST proposal. On March 12, Duluth Area Chamber of Commerce President and CEO David Ross told city councilors, “Your disregard for our concern is difficult to witness and challenging to accept. We asked for your support; you responded with indifference,” he said.

Restaurateur Carol Valentini noted that 50 percent of restaurant start-ups fail within three years. Proven financial formulas that guide restaurants to be profitable, she explained, “will be completely out of balance with the high cost of this ESST.”

Grandma’s Restaurant Co. President Brian Daugherty said he invited city councilors to sit down with him so he could explain the firm’s policies and the ESST’s financial impact, but received no response. He noted the added benefit costs for this year exceed the profit estimate for all of 2018.

St. Luke’s went beyond the cost arguments. In one part of its five-page letter, the company questioned how much of the paid time off would be legitimate.

“While many instances of sick leave are clearly appropriate, abuse of sick leave is already extremely costly to employers. According to the nationally published CCH2 Unscheduled Absence Survey, only 34 percent of ill calls are actually related to personal illness. 22 percent are related to “family issues”, 18 percent “personal needs”, 13 percent due to stress and 13 percent to an “Entitlement Mentality”. In addition, more than 37 percent of employers report a noticeable pattern of ill calls on Monday and Friday and 17 percent report a noticeable pattern of illness around holidays, such as Christmas or the 4th of July,” Halvorson wrote. 

St. Luke’s also expressed concerns about provisions that should be included in this type of an ordinance but are missing from the current ESST proposal.

“We have considerable concern about the economic impact on the City to enforce the ordinance. The City Clerk’s Office has sole discretion to decide to investigate and pursue violations under the ordinance. However, there are no time limits placed on the Clerk’s office decision to investigate but the employer has only 20 days to respond. Similarly, there are no time parameters under which the Clerk has to issue a Notice of Investigation but again the employer is only allowed 30 days for a response,” she said. “There are also no time parameters to issue a Determination of Violation. The entire process is of great concern to employers the employee has one year to file a complaint and if the Clerk’s office waits a year or two to notify the employer (perhaps due to backlog or other priorities), several years can pass before the employer is even notified of an alleged violation. Because the ordinance goes on to create a presumption of violation if the employer cannot produce records, there should be a requirement that the process occurs in a timely fashion to ease the burden of record production. There is also no explicit provision for the employee or employer to appeal an erroneous determination to District Court.”

Also of concern is the definition of some terms in the proposal, including “safe time.” Even without the ordinance in place, some employees have request time off to reconcile with their abuser. The company said it opposes an ESST provision that would mandate that justification for taking time off.

In a summary, St. Luke’s said the ordinance would hurt workers in other ways, along with the overall business community.

“The result will likely be the reduction of other employee benefits and a decrease in business growth and development within the City,” the letter said.