Do State and Local Paid Sick Leave Mandates Spill Over Within Multi-State Firms to Increase Access for Workers in Non-Mandate Locations?

Schneider and Harknett (2026) examine whether state and local paid sick leave laws affect workers who are not legally covered through spillovers within large, multi-state firms. They ask whether firm-level exposure to paid sick leave mandates leads companies to extend paid sick leave to workers in non-mandate locations. They analyze linked employer–employee survey data from the Shift Project, combined with administrative data on firm locations and mandate coverage. They find strong intra-firm spillovers: a 10 percentage point increase in a firm’s workforce covered by mandates raises paid sick leave access among uncovered workers by about 5 percentage points, with larger effects in non-franchised firms and firms headquartered in mandate states.

Why This Article Was Selected for The Policy Scientist

This article addresses a policy issue of broad importance: how state labor standards can shape working conditions beyond their formal legal boundaries in an era of federal inaction and political polarization. Paid sick leave is important to worker well-being, labor market stability, and public health. This question of policy reach is especially timely as states continue to pursue fragmented regulatory strategies. The regression-based design is carefully executed, but future work using quasi-experimental designs would strengthen causal claims.

Full Citation and Link to Article

Schneider, D., & Harknett, K. (2026). Beyond borders: Does firm-level exposure to state and local paid sick leave mandates lead to intra-firm spillovers? Journal of Policy Analysis and Management, 45, e70061. https://doi.org/10.1002/pam.70061 

Central Research Question

This article asks whether state and local paid sick leave (PSL) mandates generate intra-firm spillovers that extend paid sick leave access to workers who are not legally covered by those mandates. Specifically, Schneider and Harknett examine whether workers employed in non-mandate jurisdictions are more likely to report access to PSL when they work for large, multi-state firms with greater exposure to PSL mandates elsewhere in their operations. The core question contrasts two competing models of firm behavior: narrow compliance, in which firms provide benefits only where legally required, versus intra-firm spillover, in which firms standardize benefits across locations in response to regulatory exposure. The study focuses on whether firm-level exposure, rather than worker location alone, meaningfully shapes access to paid sick leave.

Previous Literature

The article builds on several strands of prior research. A large literature documents the direct effects of paid sick leave mandates on covered workers, including increased access to PSL, reduced working while sick, and improvements in health and economic security. Parallel research on minimum wage laws has identified spatial spillovers, whereby labor standards affect wages and employment in nearby, uncovered jurisdictions through worker mobility or firm location decisions. More recent work suggests that firms often adopt company-wide wage and benefit practices, raising the possibility that exposure to regulation in one jurisdiction could affect employment conditions elsewhere within the same firm. While this idea has been discussed conceptually, particularly in legal and institutional scholarship, prior empirical work has not directly tested intra-firm spillovers of labor standards. Schneider and Harknett extend this literature by empirically examining whether firm exposure to PSL mandates leads to benefit extension across firm boundaries, rather than across geographic space alone.

Data

The analysis relies on linked employer–employee data from the Shift Project, a large survey of hourly workers employed at 135 major retail and food service firms in the United States. The sample includes more than 31,000 workers surveyed between 2017 and 2021, with detailed information on access to paid sick leave, employer identity, and geographic location. These data are combined with administrative records on state and local paid sick leave mandates, establishment-level employment counts from ReferenceUSA, franchise disclosure documents, and information on corporate headquarters locations. This linkage allows the authors to construct firm-level, time-varying measures of exposure to PSL mandates based on the share of a firm’s workers or establishments located in mandate jurisdictions. While the Shift Project is a nonprobability sample, the authors apply demographic weights to align the sample with the broader service-sector workforce and emphasize that their design relies on within-sample comparisons across firms with differing regulatory exposure.

Methods

The authors estimate linear probability models that relate workers’ reported access to paid sick leave to their employer’s exposure to PSL mandates, focusing exclusively on workers in jurisdictions without mandates. By conditioning on non-covered workers, the analysis isolates spillover effects rather than direct legal coverage. The models include extensive controls for worker demographics, job characteristics, firm size and industry, state-level labor market conditions, and fixed effects for state and time. Standard errors are clustered at the state level. The authors conduct multiple robustness checks, including alternative measures of firm exposure, exclusion of pandemic-period observations, and falsification tests using other fringe benefits. They also test theoretically motivated moderators, examining whether spillovers are stronger when firms are headquartered in mandate jurisdictions and weaker when firms rely heavily on franchising, which limits centralized control over labor practices.

Findings/Size Effects

The results provide consistent evidence of intra-firm spillovers. Workers employed in non-mandate locations are significantly more likely to report access to paid sick leave when they work for firms with greater exposure to PSL mandates elsewhere. In the preferred specifications, a 1 percentage point increase in the share of a firm’s workforce covered by mandates is associated with a roughly 0.5 percentage point increase in PSL access among uncovered workers. Moving from firms with minimal exposure to those with high exposure corresponds to an increase in reported PSL access from approximately 25 percent to 45 percent among non-covered workers. Spillovers are substantially stronger for firms headquartered in jurisdictions with PSL mandates and much weaker for franchised firms, particularly in the fast-food sector. Falsification tests show that the association is far larger for paid sick leave than for other benefits, reducing concerns that results are driven solely by high-road employer selection.

Conclusion

The study demonstrates that subnational labor standards can influence job quality beyond their formal legal reach through firm-level spillovers. By documenting intra-firm diffusion of paid sick leave, the article adds a new mechanism to the literature on labor policy spillovers and suggests that firm structure and regulatory exposure play an important role in shaping benefit provision. The findings imply that conventional evaluations of labor standards may understate their total effects if spillovers are ignored. While the observational design limits causal claims relative to quasi-experimental or randomized approaches, the analysis is carefully executed and well aligned with theory. Overall, the article makes a significant contribution by showing how firms act as conduits through which local labor regulations can shape working conditions at a national scale.