Biweekly pay measure is stalled

Rhode Island businesses would save a total of $16 million annually under a legislative proposal that would allow private-sector employers in the state to pay workers once every two weeks or twice a month. State law now says workers must be paid once a week, with certain exceptions.
“The requirement of Rhode Island employers to pay weekly is an antiquated system that is a relic of the first half of the 20th century,” said Grafton H. “Cap” Willey IV, one of the state’s leading small-business advocates, during a House Labor Committee hearing earlier this year.
“We operate in a global economy in which we cannot be viewed as an outlier with regulations that inhibit our ability to compete,” he said.
Rhode Island is the only state in the nation that requires weekly paychecks for most workers, according to Willey and other advocates, and it is one reason that the Ocean State often ranks at or near the bottom on rankings of business-friendly places, they say.
“It stands out like a sore thumb,” said Gary Ezovski of the state’s dubious distinction.
Owner of Lincoln Environmental Properties LLC, a real estate management company, Ezovski chairs the subcommittee on regulations for the U.S. Small Business Administration’s local economic summit, held every January in Providence.
He brought the issue of biweekly/bimonthly paychecks to the summit’s attention this year. As a result, the Rhode Island SBA summit endorsed the proposal and included it in its legislative package for 2011.
Willey and Ezovski both pointed to the $16 million annual aggregate savings, an estimate they said was compiled by the American Payroll Association, as reason enough to allow biweekly/bimonthly paychecks, even if businesses saved only half of the estimate. “We wouldn’t be mandating it. We’d be giving employers the option,” Ezovski pointed out.
As things now stand, state law says that, with the exception of several situations outlined in other state laws, “every employee … shall be paid weekly.” Current law explicitly exempts employees of the state, as well as those who work for “religious, literary or charitable” corporations and those unionized workers whose collective bargaining agreements govern pay periods. Management-level employees also are generally not covered by this law. The law would be changed to read that every employee “shall be paid weekly, bi-weekly, or semi-monthly,” under a House bill sponsored by Rep. Patricia A. Serpa, a West Warwick Democrat who chairs the House Committee on Small Business, and the existing exemptions would remain in place.
There is no Senate version that mirrors the House bill, but Sen. John J. Tassoni Jr., a Smithfield Democrat, introduced a measure that would allow biweekly/bimonthly paychecks for financial services and investment firms with more than 2,000 employees in the state, whose compensation levels are at least 125 percent greater than the state average. Tassoni did not immediately return calls seeking comment.
After a hearing in April, the Senate Labor Committee held the Tassoni measure for further study. The House labor panel also held Serpa’s bill for further study after a February hearing. Bills held in committee generally die there, but committee chairs in some cases can bring tabled measures to the full chamber for a vote.
Willey, co-chair of the Smaller Business Association of New England, said most employers in Rhode Island use professional payroll companies to pay wages.
So if, for instance, a company has 100 employees and is charged $1 for each check, it could cut payroll expenses in half or less, from approximately $5,200 a year to $2,600 biweekly or $2,400 bimonthly. An employee’s annual salary would be parceled out in 24- or 26-week installments rather than the full 52, Willey noted, so employees would not lose money.
A savings of several thousand dollars each year may not seem like much, but Willey pointed to his own corporate experience to illustrate why the current law can be so damaging to Rhode Island’s business reputation. He is managing director of CBIZ Tofias, a national accounting and consulting firm with offices in Newport and Providence.
In the past seven years, he told Providence Business News, his business has been part of two mergers with first a regional company and then a national corporation. In both cases, he said, parent companies based out of state were “shocked” to learn that they had to pay workers weekly and only learned of the law once settled here. “A lot of businesses don’t know about the law until they get here,” he said. “If they knew beforehand, you have to wonder if they would come here.” The parent company that currently owns CBIZ Tofias now has a special weekly payroll prepared only for Rhode Island workers by its Kansas City payroll firm, he said.
While businesses have shown “overwhelming” support for the change in law, unions strenuously oppose it, Willey said. But he argued that such a change would not affect average workers that much. He said he checked with one of his own employees who, after noting that her bills are paid monthly and her checks deposited directly, concluded that it would be “no big deal,” according to Willey.
A spokesman for the Rhode Island AFL-CIO did not return calls seeking comment.
Ezovski called weekly wages one of those regulations “that doesn’t mean much, but holds us back” on the national front. “I am sure the residents of Rhode Island are not unable to keep pace with the rest of the country” when it comes to managing their private finances, he said. He also suggested that some employers would choose to continue weekly payments, depending on the makeup and needs of their work forces.
Willey maintained that opposition stems from a situation dating back about 30 years ago when the former Almacs supermarket chain entered bankruptcy proceedings and, as a result, some unionized workers lost one week’s pay. Weekly paychecks become a “secured preference” in bankruptcy proceedings, requiring payment, while biweekly/bimonthly do not, he explained.
To avoid such a situation in the future, the SBA subcommittee mentioned using existing payroll tax resources to establish an insurance fund that would protect workers from losing a week’s pay in such cases. Another way, Willey said, would be to set up a provision in the unemployment insurance fund whereby workers in such cases could collect unemployment one week earlier than usual. &#8226