Last March, as part of Congress’s first COVID relief bill, the federal government enacted a blanket paid sick leave benefit to ensure that people infected with COVID-19 could stay home without fear of losing their wages.
The benefit had gaping holes, including a provision that exempted companies with more than 500 employees from the policy, leaving millions of workers without protections. Then, in December, Congress declined to extend what was left of the COVID-related paid sick leave program.
Now, as a congressional hearing today scrutinizes corporations’ treatment of low-wage workers, the battle over paid leave is being rekindled: Shareholders at a variety of major US corporations are pushing for resolutions asking management to, as one of the proposals put it, “analyze and report on the feasibility of including paid sick leave (PSL) as a standard employee benefit not limited to COVID-19.”
The initiatives are designed to make permanent the leave policies that some of the companies agreed to temporarily extend to workers during the pandemic. However, the companies facing the resolutions are fighting the shareholder pressure every step of the way, asking federal regulators to help block them.
Big Companies Ask the SEC to Intervene
The paid sick leave resolutions, coordinated by the Interfaith Center on Corporate Responsibility (ICCR), a shareholder advocacy organization, have been filed at CVS, Dollar General, Kohl’s, Kroger, McDonald’s, Walmart, and Yum! Brands (which owns KFC, Taco Bell, and Pizza Hut). The efforts are part of an attempt to force companies that have made a point of calling their employees “essential” to put their money where their mouth is.
“These companies have been saying day after day that their employees matter, that their employees are essential,” said Nadira Narine, senior program director of strategic initiatives at the ICCR. “The best way to show that they mean that is to extend a paid leave benefit.”
In response to the proposals, every single company except Dollar General asked the Securities and Exchange Commission (SEC) to agree that they do not need to put the resolutions to shareholders for a vote this spring. In four of the cases, the SEC has sided with the company, while two decisions are still outstanding.
The United States, meanwhile, is the only industrialized country in the world not to mandate paid sick leave on a permanent basis.
If shareholder resolutions end up being put up for a vote, major institutional shareholders such as BlackRock, Vanguard, and large pension funds will have the opportunity to use their huge holdings to support or oppose the measures.
Company executives often try to block the votes from ever happening, for fear that those influential institutions could themselves face public pressure to support the measures and help change corporate behavior.
Elevating Paid Sick Leave to Social Policy
As grassroots momentum for paid sick leave has grown across the country, corporate interests — and their cronies in the GOP — have worked hard to stem the tide. Thanks to Republican-controlled state legislatures, twenty-three states have passed laws preempting local efforts to require companies to provide paid sick leave benefits to their employees.
Now, to keep their shareholders from voting on the matter, the six companies targeted by the ICCR effort argued in their SEC no-action requests that the resolutions amounted to investors “micromanaging” the company by intervening in its “ordinary business operations.” SEC precedent, according to commission rule 14a-8, requires that shareholder resolutions must rise to the level of a “social policy issue” for investors to have a say in the policy.
But investors taking part in the endeavor say paid sick leave is a social policy issue, a fact that has been made even clearer by the pandemic.
“Paid sick leave, especially at companies with heavily customer-facing workforces, should qualify as a significant policy issue now and even after the current pandemic has passed, given the huge increase in public attention to the issue and policy initiatives, many of which are not limited to the COVID-19 context,” Narine said. “Saying that this is not a significant policy issue, in a pandemic world, that raises a red flag.”
The SEC has, for about two decades, taken the stance that issues pertaining to worker benefits don’t amount to social policy issues, according to Jonas Kron, the chief advocacy officer at Trillium Asset Management, which filed the paid sick leave resolution with CVS.
“There are areas that have been typically no-go areas under rule 14a-8,” he said. “Worker benefits is one of them, worker pay is another . . . We knew that going into this filing, but we really thought that, given the amount of attention getting paid to the well-being of essential workers, that this would be one of those occasions where the SEC would take a different approach.”
CVS cited the SEC’s previous decisions to strike out shareholder proposals pertaining to employee benefits in its no-action request, as did the other companies.
However, investors working on the paid sick leave campaign believe that worker benefits have gained renewed attention over the past year.
That has been especially true for a company like Kroger, one of the nation’s largest grocery store chains, whose employees are interfacing directly with customers and are especially vulnerable to COVID. Last month, Kroger shut down two stores in Seattle after the local city council passed a resolution mandating hazard pay for grocery workers.
“At the beginning of the pandemic, Kroger as much as admitted that their paid sick leave policies were not sufficient to keep people safe, at home, and ready to come back to work in a way that was going to help them continue as a business and supply America with food,” said Pat Tomaino, the director of socially responsible investing at Zevin Asset Management, who filed the resolution at Kroger. Many Kroger employees did not have access to any paid sick leave before the pandemic, when the company provided it on a temporary basis.
Taking Corporations to Task
Although the SEC appears to be maintaining its stance against investors who demand more from companies when it comes to employee benefits, the companies are facing scrutiny elsewhere and could face renewed pressure to change their ways thanks to the new chairman of the Senate budget committee, Bernie Sanders.
Sanders, in fact, will begin a series of hearings today to call on corporate executives to answer for how they treat their employees. The first hearing is titled, “Should taxpayers subsidize poverty wages at large profitable corporations?” Executives from Walmart and McDonald’s have been called to testify, but it is not clear yet whether they will appear.
It is possible that through these hearings or other efforts, Sanders could spotlight the need for companies to continue paid sick leave policies long after the immediate danger of COVID-19 has subsided.
In the meantime, the idea of the United States joining the rest of the industrialized world by requiring such worker protections remains a distant dream. The new COVID relief bill put forward by House Democrats, for example, does not require companies to provide paid sick leave. Instead, Democrats will try to persuade companies to offer paid sick leave with tax credits.
Absent any federal policy, investors want employers to act. “These companies should not be waiting for a pandemic to hit to tell employees they can take time off when they are sick,” said Narine, the ICCR program director.