Lawsuit leaves new sick leave law in flux

Anita King: Employers should review their mandatory paid sick leave policy.

Erik Milan is paying his small staff above the minimum wage.

• 
• 

The Missouri Supreme Court is weighing a challenge from several business groups that want the November election results overturned for Proposition A, the minimum wage and sick leave ballot initiative.

The Missouri Chamber of Commerce and Industry is among organizations that filed a petition in December that challenges the Prop A election results. Chamber president and CEO Kara Corches said she expects the state Supreme Court decision will arrive before mid-April but hasn’t been given any guidance as to when.

“We have no clue. I don’t know right now what the timeline is,” Corches said.

The court on Dec. 24 appointed Boone County Circuit Judge Josh Devine as the commissioner required by statute to take evidence in the election challenge. He is to report his findings to the court by Feb. 10.

The Missouri Chamber of Commerce and Industry filed the petition along with Associated Industries of Missouri, the Missouri Forest Products Association, the Missouri Grocers Association, the Missouri Restaurant Association and the National Federation of Independent Business. In the case, the plaintiffs seek to overturn the voter-approved law based on allegations that include several state constitutional violations, such as two subjects included in a single proposition, which is contrary to the requirement of a single subject on ballot initiatives, as well as a misleading and insufficient ballot measure summary.

“The election irregularities and the constitutional violations are so significant that the election results must be overturned and Proposition A must be declared invalid,” the petition states.

The lawsuit lists Missouri Secretary of State Jay Ashcroft and Missouri State Auditor Scott Fitzpatrick as defendants.

“We stand by the process we have used for decades to produce fair and accurate fiscal notes and fiscal note summaries,” said Trevor Fox, spokesperson for the auditor’s office, via email. “We look forward to defending this process that allows our office to provide unbiased cost estimates that voters can trust.”

Officials with Missourians for Healthy Families and Fair Wages, which led the Proposition A campaign, argue that minimum wage and paid sick leave fall under the single subject of paid compensation.

Proposition A, which passed with roughly 57.6% of the vote, raised the state’s minimum wage to $13.75 per hour as of Jan. 1, up from $12.30 per hour. Prop A then increases the minimum wage to $15 per hour in 2026, which will again be adjusted each January based on the consumer price index.

Additionally, the initiative mandates employees be given one hour of paid sick leave for every 30 hours worked, with enforcement and oversight by the Missouri Department of Labor and Industrial Relations. Governmental entities, political subdivisions, school districts, educational institutions and those who work at businesses with less than $500,000 in annual revenue, are among exemptions, according to the secretary of state’s office. Under Prop A, employees are scheduled to start accruing paid sick time on May 1, and employers must provide written notice of the paid sick time by April 15, according to the state labor department.

In discussion
Anita King, learning and development adviser with HR Advantage LLC, said her company is regularly having discussions with clients – and even some nonclients – about the mandatory sick leave policy as the May 1 implementation date approaches.

“Employers, especially small employers, are having to take a step back and look at what is their policy currently,” she said. “How does this mandated paid sick leave fit into that? And then if anything, what do I do to still make an attractive (paid time off) package for my employees?”

The new law also forces employers to look at the financial impact with increased labor costs. For example, she said the $1.45 per hour minimum wage increase equates to $58 per week for a 40-hour workweek. That equates to over $3,000 per year, per employee, she said.

“For a small business, that $3,000 could be something else on their budget line. So really it is taking a step back and looking at are we doing things that can maybe help minimize the impact of this change,” she said, adding that could include cross-training employees, streamlining processes and scheduling more efficiently.

For employers with fewer than 15 employees, workers are entitled to use no more than 40 hours of paid sick time per year, according to the state labor department. That total increases to 56 hours of paid sick time per year for employers with 15 or more employees. However, an employer may permit employees to use more through their written policies.

“They can front load the sick leave when someone is hired, or they can accrue it throughout their time as long as it accrues to the 56 hours per year,” King said regarding the larger employers. “But whichever option they choose, they have to do for all of their employees.”

There’s also the decision some must make to either allow employees to carry over unused sick leave – with employees eligible to start a 12-month period with up to 80 hours of new and carry-over time – or be paid out at the end of the 12 months. King said they are working with clients to study budgets and determine the most financially feasible option.

“There are a lot of things that employers really need to sit down and think about prior to that May 1 implementation date for that paid sick leave,” she said, noting HR Advantage plans to host informational sessions in the coming weeks to review Proposition A for those with questions.

Supportive stance
Springfield Area Chamber of Commerce President Matt Morrow said his organization is supportive of the Prop A challenge. Additionally, he said the chamber has for years favored eliminating the indexing portion that ties minimum wage increases to the CPI.

“We’re pretty far out of step with other states now on minimum wage in terms of our neighboring states,” Morrow said. “It’s probably wise to proceed with caution in that regard before we get too far out of balance from an economic competitiveness standpoint.”

Except for Illinois, currently at $15 per hour, all other states bordering Missouri have a lower minimum wage, according to the Economic Policy Institute.

Corches said she’s hopeful the Missouri General Assembly can address concerns through legislation that she sees with Prop A. Several bills that would restrict provisions of the law were prefiled by Missouri lawmakers ahead of the legislative session that began Jan. 8, she said. Some seek to exempt seasonal businesses or those employing 50 or fewer workers from minimum wage increases or delay implementation and accrual date of paid sick leave for certain employees.

“We will be looking at a variety of legislative proposals to provide more clarity because there are a lot of gray areas and a lot of concerns with how businesses are going to comply,” she said.

Prior to Prop A’s passage, the Missouri Budget Project reported over 562,000 Missouri workers would get a raise if the measure was approved by voters.

Finding value
Erik Milan, owner of new and used record store Stick It In Your Ear LLC, said he was confident that voters would approve Proposition A in November.

“It’s good for the economy in general. Obviously, it’s more money in people’s pockets, which means that they can come spend at stores like mine,” he said, noting he also advocated for the issue through Missouri Business for a Healthy Economy. “I pay my guys here well above minimum wage. I don’t have any turnover because of it. I don’t think it’s just that, but it’s definitely a part of it.”

Two of Milan’s six-employee staff worked at the record store even before he took over ownership in 2019, while another has been on staff since 2021.

“Probably by the time it actually gets to $15 an hour for minimum wage, these guys will probably be closer to $20 [per hour],” Milan said.

He said the paid sick leave component also isn’t a worry for his business, noting his employees already get two weeks’ vacation and a week of paid sick leave.

For now, it remains a waiting game for the state chamber and its coalition on the Prop A challenge. Corches said a reason for filing the petition after the election rather than before was a matter of resources.

“A legal challenge is not cheap, and so we needed to build a coalition, and that took time,” she said, declining to disclose legal costs. “I wish money was no object. The reality is we do have constrained resources, and especially when you look at the primary general election, there was other key races that we were involved in.”