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FMLA:

Meeting the Challenge of Compliance

and Cost

Cheryl Jez, Regional Practice Leader

Cheryl.jez@rsli.com

214-432-1311

• FMLA – What is it?

– Intent/Eligibility

– Why is it so challenging

• FMLA Facts and Statistics

• Case Law and Non-Compliance Exposure

• Building a Business Case to Understand Your Options

• Industry Best Practices

• Questions

4

Agenda

Intent of FMLA

• Balance workplace demands with

family needs

• Ensure job-protection

• Healthcare continuation

• Minimize discrimination related to

approvals

www.dol.gov

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FMLA Eligibility

• 12 months; need not be consecutive (exclusion: 7 year gap)

AND

1250 hours in the preceding 12 months (24 hrs/wk) - Some states

may vary on requirements for both months and hours

• 50+ employees/75 mile radius – surface miles by available

transportation from worksite (usually waived)

– “No fixed worksite” (i.e. sales): headcount of site they report to

– Determined at time of request; may re-request count during a

leave

• Key employees: 10% highest paid within 75 mile radius - not

denied coverage; employer allowed to deny job restoration if

grievous economic hardship (usually waived)

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Health Benefits Under FMLA

• Employers must maintain group health coverage

• Employees must pay their portion of premium. If

unpaid, benefits could cease with appropriate

employee notification

• Employers can recover unpaid premiums

• Employer not obligated to maintain any other

benefits unless benefits are continued for other

leave types

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Job Protection Under FMLA

• Entitles employee to resume pre-leave or equivalent position

with equivalent pay and benefits

• No FMLA protection for layoffs or a reduction in work force

• If employment would end as an active employee, the

employee can be terminated while on leave

• No entitlement to accrue seniority while on leave (promotions

and benefits)

• Employment contracts

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FMLA Serious Health Condition definition is broad

and is intended to cover many physical and

medical conditions

• Employees Own Serious Health Condition

• Care for employees (well) child after birth, or

placement for adoption / foster care

• Care for employees spouse, child, parent, (next of kin

if service member) who has a serious health condition

• Deployment Activities for Military

Qualifying Event

9

Impact of State Regulations

Key: colored areas indicate states with

additional leave regulations

WA MT

OR ID WY

NV

CA

UT

AZ

CO

NM

TX

OK

KS

NE

SD

ND

WI

IA

MO

MN

IL IN OH

MI NY

VT

ME

NH

PA

MA

RI

CT NJ

DE DC

MD

WV VA KY

FL

NC TN

SC GA

AR

AL MS

LA

AK

HI

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ADA Considerations

Consider ADA:

• when an employee requests restrictions

• when you receive a Healthcare Provider’s

certification requesting restrictions

• when FMLA exhausted

• when a company policy exhausts

• when you are considering terminating an employee

• when you are considering replacing an employee’s position

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ADA Considerations

• If an employee is on leave and you want to affect a

change in their status

• Obtain current medical information

- Will the employee be able to return to work with or

without restrictions if they are allowed an extension of

their leave?

- If no, can proceed with action.

- If yes, how long to you anticipate the employee will

need?

1 week, 4 weeks, 2 months, etc. ?

- Depending on the anticipated RTW date and any

potential restrictions the employer is to make a

decision on extending the leave based on business

necessity and “burden on the employer”.

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Why Is FMLA So Challenging?

• Complexity and exposure in three overlapping areas:

• Overlay of state regulations; constantly changing

• Relation to other programs

• Hard-dollar costs (real as well as potential)

Legal

ComplianceAbuse of

Privilege

Administration

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Employer Leave Policy

• Employer must specify in FMLA policy that

FMLA time runs concurrent with Group Disability

and Workers’ Compensation

• Employer must specify if employee is unable to

return to work after 12 weeks, he or she may lose

job and benefits protection (must consider ADA rights)

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Absence Types

• Continuous

– Four or more consecutive calendar days off of work

• Could be Friday, Saturday, Sunday and Monday

• Intermittent

– Reduced number of days in a workweek

– Reduced number of hours in a day

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Intermittent Criteria

• Must meet a serious health condition definition

• Can be a single injury/illness day

-doctor appointment, prenatal exam, physical therapy, chemotherapy,

morning sickness

• Must be measured in smallest increment of time that other leaves

are allowed but not longer than one hour

• Can be intermittent for care of newborn if agreed upon by employer

– CA requires 2 week minimum with twice less than

2 weeks allowed

• Must be calculated according to employees schedule

– Regularly scheduled required OT missed can be FMLA

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Drivers/Trends of Intermittent Leaves

-Chronic diseases of self or family members

-Care of Adult Child-definition of disability is ADA

-Strict Attendance Policies leads to increased open leaves for

protected time off

-Winter Holidays, Summer Time, Weekends

(seen often with high PTO balances)

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Intermittent FMLA Management

-Verify the doctor is qualified to certify FMLA

-Consult with Medical Professionals

-Verify the certification is complete; frequency and duration are clearly indicated

-Frequency and duration is checked for each absence and if trends develop, request is made for updated information

-Check patterns of multiple intermittent leaves which may be indicated for one person; child's asthma, employee’s migraine, father's chemotherapy

-Routinely analyze the file for patterns and every 60 days analyze the “day of the week” usage

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FMLA Facts and Statistics

DOL FMLA Facts

• 2012: Approximately 10 million employees took FMLA leaves of

absence

• Employees have utilized FMLA over 100 million times since it

went into effect in 1993

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FMLA Facts and Statistics

• Between 4% and 10% of U.S. employees are absent on any

given day. (Employee Benefit News September 2010)

• Lost time claims can cost organizations more than $19,000 per

employee per year. (Employee Benefit News September 2010)

• 40% of leaves are > 10 days (US Department of Labor, 2012)

• It costs employers an average of $78,000 to defend an FMLA

lawsuit, regardless of outcome (U.S. Department of Labor Wage and

Human Resource Division 2006)

• Employers using decentralized FMLA management are more at

risk of over-entitling their employees to FMLA leaves. (Mercer,

Sept 2009)

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Regulatory Outlook

• Health Family Act - Federal Paid Family leave as an option

• State Leave Laws

– As of April 2013 - 96 bills since January 1, 2013

– 13 states have proposed paid family leaves

• Military leaves – increase activity of employees taking extended

leaves for injured service members and their parents; increased

rest and recuperation leave from 5 to 15 days, coverage for all

service members

• Leave laws ever changing:

– Federal Law: Major overhauls in 2009 and 2013

– Multiple requirements surrounding eligibility, qualifying reasons,

time available

– DOMA impact on FMLA entitlement – June 2013

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FMLA Metrics by Industry

(EMPAQ Annual Report, Program year 2010)

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Internal FMLA Headaches

• Inconsistent internal administration

• Intermittent leave usually over 20% reported

• Incorrect information relayed to employee

• Supplementary use of sick and vacation time

• Domestic Partner eligibility concerns

• Integration of federal/state and company policies

• Denying a leave based on not meeting the definition of a Serious

Health Condition

• Cannot require employee to return to a Transitional Work

Assignment

• Ever expanding and complex State Leave Laws

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Companies Turn to Experts-Outsourcing

• Impact of DOL 2013 Changes

– More time off of work is protected

• Why employers outsource

– Consistency in administration

– Risk avoidance (Litigation, HIPAA, GINA)

– Compliance with the law

– Reduce Internal Management Costs

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Employer size 2007 2010

All employers 14% 25%**

100 – 999 employees 5% 13%*

1,000 – 4,999 employees 11% 29%*

5,000 or more employees 25% 37%**

10,000 or more employees 24% 39%**

** Up by 50% or more

* More than doubled

(Mercer Absence and Disability Management Survey, 2010)

Companies Turning to Experts

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Case Law

&

Non-Compliance Exposure

Failing to Train Supervisors

Hurley v. Kent of Naples, Inc (January, 2013)

– Employee fired after requesting leave. Hurley claimed

interference with his FMLA leave rights. Awarded

damages of over $750,000. Employers total cost with

attorneys fees and costs for both sides, exceeded $1.2M.

Planning: Train managers and supervisors on the basics of

FMLA. Have a clear process for managing FMLA within

your organization and enlist the aid of human resources.

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Intersection of FMLA and ADAAA

Interstate Distribution Company – Class Action Suit

(November, 2012)

• Interstate’s FMLA policy violated ADA. They had a “no

restrictions” policy. Denied reasonable accommodations

and automatically fired employees when FMLA exhausted

with no accommodations. ADA requires employers to offer

reasonable accommodations to disabled employees.

• Judgment rendered: $4.85M

Planning: Employers need to ensure their polices do not

interfere with another entitlement an employee may have.

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Interference – Preventing Double

Dipping

• Pellegrino v. Communications Workers of America (CWA) (3rd

Circuit Court of Appeals, 2012)

• Pellegrino went on vacation while on FMLA leave and was fired

upon her return and sued for interference.

• – CWA policy required:

– Employees on paid sick leave must “remain in the immediate vicinity

of their home during the period of such a leave,” unless they obtain

prior written permission to travel.

– Employees on FMLA leave must use their paid sick leave

concurrently until it runs out

The latter requirement is a common policy that federal law has deemed OK.

Planning: Appeals Court said that employers can require employees to

remain home during sick leave. The fact that the leave ran concurrently with

FMLA leave didn’t make the no-vacation rule illegal.

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Misuse of Leave

Lineberry v. Richards (February 2013)

• Richards was scheduled to go on a prepaid vacation to Mexico

the same month her FMLA started. With doctor’s approval, she

went to Mexico and posted her vacation photos on Facebook. (There she was having fun in a motorboat … lying on a bed holding beer bottles

… and even holding her two 15-pound infant grandchildren in her arms.)

• While on leave, she sent her supervisor an email saying how

hurt she felt that her co-workers hadn’t given her a get-well card!

Instead of a get-well card, Carol’s supervisor replied with his

own email, saying, “The staff were waiting until you came back

from your vacation in Mexico to determine the next step.”

Planning: Clearly communicate that misuse of leave is grounds for

termination

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FMLA Non-Compliance Costs

• Employees who successfully sued for wrongful termination

based on FMLA Absence received on average between

$87,500 - $450,000 in damages (Source: EEOC)

• According to the U.S. Department of Labor, managers and

supervisors can be sued directly and held personally liable for

paying damages (Shultz v. Advocate Health & Hospitals Corp.)

• A federal jury recently awarded a Chase Manhattan regional

manager more than $2.2 Million for violations of the FMLA

(Lore v. Chase Manhattan Mortgage Corp.)

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Non Compliance Penalties

Failure of the employer to provide the required written notice can

be considered “interference” with employee’s FMLA rights

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Potential Costs

Employers may be liable “for:

– compensation and benefits lost by reason of

the violation

– for other actual monetary losses sustained

as a direct result of the violation

– for appropriate equitable or other relief,

including employment, reinstatement,

promotion, or any other relief tailored to

the harm suffered

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Direct cost of FMLA and Absence

• Payroll costs due to unscheduled absences - $760,000

annually. (Commerce Clearing House (CCH) Unscheduled Absence Survey)

• Overall direct costs of FMLA nationally was $21 billion (Employment Policy Foundation Analysis)

– Lost productivity due to FMLA cost employers $4.8 billion in profit.

– Employers paid $10.3 billion to replace workers who took FMLA and paid

$5.9 billion in healthcare coverage for employees on FMLA.

• Costs of unscheduled absence plans (sick leave, Short and

Long Term Disability, salary continuation, workers’

compensation) can add up to 4.4% of payroll (Marsh/Mercer Survey)

• The most common method of covering unplanned absences is

OVERTIME WORK

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Potential Cost of Mismanagement

• Actions by employees:

– Civil actions under State Laws

– Civil actions under the ADA

• lost wages, liquidated damages, prejudgment

• interest, relief; attorneys’ fees, individual liability

• Civil Actions by the Dept. of Labor

– 60% of actions filed with DOL are resolved in employees favor

– Penalties for Non-compliance

– recover lost wages, salary, employee benefits and actual monetary losses suffered

• Class Action – Litigation $$

– (Schultz v. Advocate Health and Hospitals Corp $12,000,000); (Charlene Roby v. McKesson $19,000,000)

– Verizon Settlement – California $6,000,000 - 2011

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Building a Business Case and

Understanding Your Options

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Building a Business Case

• Consistency

• Compliance

• Reduce administration expense

• Reduces litigation exposure

• HIPAA

• Tracking tool

– FMLA requirements

– “Where are my employees?”

• Productivity value

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Do Nothing

“As is” with best practices review

Invest in “human capital” (administrative, legal)

Invest in a technology solution

Outsource administration (tracking and/or management)

Other (hybrid models)

Leave Administration Options

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System Features/Technology

– Counts time by federal, state, local requirements and company paid

and unpaid policies (roll backward, roll forward, fixed date)

– Streamlines eligibility determination

– Captures complex intermittent leave scenarios

– System programmed for accuracy and administrative ease

– Call center and telephone technology must be state of the art

– Technology driven communication process to all levels

– Ability to capture ROI – denied leaves

Best Practices to Outsourcing

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Best Practices to Outsourcing

Strong Processes

-Management of medical certification (not tracking of

the leave)

-Medical escalation process

(managing complex issues)

-Legal escalation process

keeping employer informed of “red flags”

-Structured return-to-work process

-Intermittent absences managed to certification

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Industry Best Practices:

“What Can I Do Right Now?”

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Industry Best Practices

1. Review and update leave policies for accuracy and thoroughness:

– The law has recently allowed for more controls if documented

2. Develop leave policies which can be applied uniformly across

organization:

– Provides for ease of use and reduced “inconsistency”

– Reduces training complexity

– Increases compliance

3. Centralize your approach to leave:

– Significantly reduces exposure for inconsistent management

– More comprehensive and accurate data

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Industry Best Practices (cont.)

4. Establish relationship between HR/Benefits and Risk Management:

– Ensure tracking and consistency for work comp lost time

5. Seek out technology and its applications across all leaves:

– Ensures compliance from Federal / State perspective

– Ability to track and report

– Best opportunity to manage “productivity”

– Tracking, management, or both

– Standalone or bundled

6. Set base line metrics that can be tracked against over time:

– Data is power

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