Marcia Wiggins hustled to the front counter to attend to a rush of customers earlier this week, helping them choose between Strawberry Shortcake, Spicy Hot Chocolate, Salted Caramel, Maple Sunday and other treats baked by her staff at Cape Whoopies.

Wiggins’ small business success story started 10 years ago in her kitchen and the bakery now produces more than 200,000 gourmet whoopie pies a year. They sell in Wegman’s grocery stores and have been served at the Super Bowl. Since she moved to South Portland in 2018, she’s nearly doubled her staff, which ranges from five or six employees during slow periods to as many as 20 workers during the busy winter holiday season.

Despite that growth, the small business owner says she still has to carefully manage every expense. “You’re busy looking at every detail of what everything costs, every week. It’s a constant struggle, like standing on a teeter-totter,” she said.

Marcia Wiggins, owner of Cape Whoopies, helps customers at the South Portland business on Wednesday. Wiggins said she’s not against paid family leave but thinks a state mandate may hurt small businesses already facing higher supply and labor costs. Gregory Rec/Staff Photographer

So Wiggins is leery of any extra costs that could be imposed by state government, including a paid family leave proposal making its way through the Legislature. Cape Whoopies is still small enough that it might not immediately be subject to paid family leave requirements if it were to pass, but she worries it soon would be if her company continues to grow.

With Democrats in control of the State House, and enough signatures gathered by a liberal advocacy group to force a statewide referendum if lawmakers do not act, advocates for paid family leave say the timing is right for a bill to pass this year.

But the plan is expected to require a payroll tax on most employers and employees, and Gov. Janet Mills has not yet revealed whether she would support a tax increase to fund the comprehensive benefit.

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Eleven states and the District of Columbia currently have paid leave laws on the books. Laws also could be passed this year in Michigan, Illinois, Minnesota and New Mexico. There is no national paid leave mandate, but a federal law dating to the 1990s requires companies to hold jobs open for workers needing to take unpaid leave. Most developed countries, including Canada, mandate paid family and medical leave.

Exact details of the Maine proposal have yet to be decided, but lawmakers are discussing funding the benefit through a payroll tax that could be 0.7% to 1%, with costs shared between the employer and employee. Employees would be able to take up to 12 weeks of paid leave, likely at 80% to 90% of wages. The leave would be used for such life events as the birth of a child or a significant illness or the need to care for an elderly or sick relative.

Employers with fewer than 15 workers would be exempt from contributing to the payroll tax, but all employees, including self-employed workers, would be eligible to receive the same paid leave benefits.

The current recommendation is to allow workers at small companies that would be exempt, as well as the self-employed, to opt in individually, but how much they would need to pay into it is still being discussed. Small employers could also opt into the program, but how that would work is also still being negotiated.

The costs to individual employers won’t be known until the details are decided. But, as an example, if Maine were to approve a 0.8% payroll tax split evenly between worker and employer, a person making $50,000 a year would pay $200 extra in annual taxes. A business with 100 employees who earn an average salary of $50,000 would pay $20,000 a year into the program. Smaller companies or businesses that pay lower average salaries would pay less, while larger employers would have to pay tens of thousands of dollars a year.

Cape Whoopies is right on the edge of the 15-employee threshold, depending on how the state ends up calculating the number of workersincluding seasonal and part-time workers – a business employs. But even if not immediately subject to the new tax, Wiggins expects she soon would be as the business continues to grow.

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Wiggins said she’s not against paid family leave, but that making it mandatory is a burden for small businesses already weighed down by the cost of goods, labor and other government mandates. For instance, Wiggins said the increased price of eggs is “killing me” and she’s reluctant to raise prices on her products because she doesn’t want to drive away customers.

“Of course we all want to help people, but I want to survive as a business, and maybe get a little bit bigger,” said Wiggins, who pays employees $15 per hour to start. “If I don’t survive, then we won’t have any jobs.”

The balance between offering a new benefit to employees and minimizing the cost to business owners is foremost on the minds of lawmakers, said state Sen. Mattie Daughtry, D-Brunswick, one of the politicians spearheading the paid leave effort.

Daughtry, owner of Moderation Brewing in Brunswick, said lawmakers plan a “listening tour” to hear different points of view before deciding exactly how to craft the bill.

“As a small business owner, this is something I will see on my bottom line,” Daughtry said. “For me, it’s not a hypothetical question, but a fiscal reality.”

Daughtry said the goal is to create a system that is “accessible and affordable and easy to navigate for employers and employees.”

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Depending on negotiations, the tax burden could end up falling more on the employee. Instead of an even split, some proposals would have workers paying 60% to 75% of the tax.

But Daughtry said regardless of the precise proposal, paid family leave should be seen as a benefit to businesses because it is a tool to attract and retain workers.

Small businesses typically can’t afford to offer paid family leave if they have to bear the cost alone, she said. Large employers can purchase family leave coverage at a cheaper rate and are more likely to already offer the benefit. For instance, Idexx and MaineHealth offer paid family leave, although not the full 12 weeks.

About 25% of workers in the U.S. are currently covered by a paid family leave plan, according to federal statistics. Maine, thanks to a law signed into effect in 2019, currently requires up to 40 hours of paid leave per year for employers with 10 or more employees. The proposed 12-week paid family leave law would be a substantial expansion of that benefit.

Daughtry said a comprehensive state program would help smaller businesses compete with big employers for workers. It also would be a tool to attract and retain employees to Maine  and compete on equal footing with nearby states like Massachusetts and Rhode Island that have mandatory paid family leave programs for workers, she said.

James Myall, economic policy analyst for the Maine Center for Economic Policy, said paid family leave would be a boon to the economy because there are many indirect costs to businesses that don’t offer the benefit. Those costs include reduced participation rates in the job market, worker shortages, workers leaving their jobs because of the need to take time off and training for new employees when workers quit their jobs.

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“The lack of leave drives women in particular out of the workforce,” Myall said. “It should be a big factor in keeping people in the workforce. It should also help reduce the ‘motherhood penalty,’ which is when women stop working for a few years and then find themselves with lower earnings for the rest of their lives.” The ability to take paid leave when needed would encourage more mothers to remain in the workforce, Myall said.

Myall said for self-employed workers, it “could be a game changer” for those who opt into the program. A snow plow driver, for instance, who breaks his leg and can’t drive, could use paid leave to keep himself financially afloat until his leg heals.

But David Clough, Maine state director of the National Federation of Independent Business, said he sees a lot of downsides in statewide mandatory paid family leave because businesses in various parts of the state have different needs and challenges. A rural business may be severely hampered by an employee taking a 12-week leave, while it may be less disruptive in southern Maine, where the larger population would make it easier to find a temporary replacement.

“What one business can do in South Portland is not the same as what some businesses can do in Fort Kent. What works for some people isn’t going to work for all people. But the politicians in Augusta are going to decide what works for everybody,” Clough said.

And trying to implement paid leave would be an administrative burden for small businesses that can’t afford human resources departments, Clough said.

California has had statewide paid family leave since 2002, and the impacts of the law have been the subject of numerous studies. A 2013 Cornell University study found that 87% of California businesses had no increased costs from the paid family leave program, and 9% reported that paid family leave created cost savings for their businesses, because of indirect cost savings, such as less employee churn.

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Cathy Rasco, founder and owner of Arabica Coffee, is a strong proponent of paid family leave and is eager for the law to pass so she can offer paid family leave to her employees. Gregory Rec/Staff Photographer

The Maine State Chamber of Commerce has not yet taken a position on the proposal and said it is waiting for details to be presented.

Among the details still to be worked out is how small employers might participate.

Daughtry said the program may include financial incentives to encourage businesses with fewer than 15 employees to opt in. She said it’s also still undecided whether an employee who works at an exempt business would have to pay the full payroll tax or just the employee’s portion.

Cathy Rasco, owner of Arabica coffee shop in downtown Portland, said her business is a low-margin company, and at roughly a dozen employees, her business would be exempt. But Rasco said she’s crunched the numbers and would want to opt in for her employees if the state adopts a paid leave program. She figures her cost would be between $150 to $400 a year per employee.

“It’s relatively inexpensive,” Rasco said. “To me, it seems like money well spent. If my workers benefit, it benefits me as well. As a small business owner, I need to compete with big business, and this helps us do that.”

And supporting workers who need paid time off for important reasons – such as the birth of a child, or to care for an elderly parent – is also a matter of ethics, she said.

“This provides a little bit of a safety net for people,” Rasco said. “It’s simply the right thing to do.”

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