Introduction to FMLA and FMLA Outsourcing. Ellen McCann January 2016
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1 Introduction to FMLA and FMLA Outsourcing Ellen McCann January
2 Presentation content FMLA history FMLA 101 Legal considerations Employer challenges FMLA administrative options Impact of lost time: What are the costs? ADA considerations 2
3 FMLA history 3
4 FMLA history Enactment The Family Medical Leave Act ( FMLA ) of 1993 was enacted on February 5, 1993 and became effective on August 5, 1993 for most covered employers. Revisions New regulations interpreting the FMLA were issued in November 2008 with an effective date of January 16, These amendments included active duty and military caregiver leave. Additional revisions were issued February 6, 2013 (effective March 8, 2013) implementing National Defense Authorization Act for Fiscal Year 2010 and the Airline Flight Crew Technical Corrections Act. Accountability The United States Department of Labor is the governmental agency responsible for enforcement of the FMLA. Coverage Nearly 60% of employees meet all criteria for coverage and eligibility under FMLA. 1 Utilization Based on a 2012 survey, 13% of all employees reported taking leave for a FMLA reason in the past 12 months. 2 1, 2 Source: US Dept of Labor Wage and Hour Division, FMLA is Working (2013). 4
5 FMLA 101 5
6 Employer obligations An employer must, within pre-determined time frames: Evaluate eligibility for leave Hours worked Location Tenure Employee status Calculate entitlement for leave How much time available Coordination with state leave laws Determine qualification of leave Meet the definition of a serious health condition or military leave entitlements through review of employee-provided medical certification or information Meet the definition of non-medical leaves Follow applicable state leave laws Confirm in writing within five business days of notice or leave Eligibility Rights and responsibilities Confirm in writing within five business days of receipt of information Designation of leave 6
7 Methods for calculating FMLA leave Fixed year method Under the fixed 12-month period method, an eligible employee (EE) can take up to 12 weeks leave at any time within the fixed 12- month period selected. Employer can select one of the following: The calendar year Any other 12-month period Rolling forward method Under the forward method, an EE s 12-month period starts on the day the EE s first FMLA leave begins and ends 12 months later. The EE can take 12 weeks of FMLA leave during that 12-month period. The EE s next 12-month period begins the first time he/she takes FMLA leave after completing the previous 12- month period. Rolling backward method Under the backward method, an EE s 12-month period is measured backward from the date an EE uses any FMLA leave. Every day an EE takes FMLA leave (including intermittent leaves) he/she is entitled to any remaining balance of the 12 weeks of leave that has not been used during the immediately preceding 12-month period. Note: Flight crew employees have fixed entitlements of 72 days for regular FMLA and 156 days for military caregiver leave. 7
8 Who is covered by the FMLA? Which employers are covered? Private Sector: 50 or more employees for at least 20 weeks in the current or preceding calendar year What about temporary employees? Time worked counts toward employee s hours and tenure requirements Which employees can take FMLA leave? Been employed for at least 12 months (does not need to be consecutive) Any week in which employee is maintained on the payroll counts (including weeks when no work is performed) Employed at a site with 50 or more employees within a 75 mile radius Has worked at least 1,250 hours during the 12 months prior to the leave request (consecutive) Only actual work is counted Leaves of absence, paid or unpaid, including FMLA leave, are not counted Pursuant to USERRA, employees returning from military service shall be credited with hours that would have been performed but for the military service Note: Flight crew members have different requirements based on airline industry scheduling equivalents 8
9 When can an employee take FMLA leave? Birth of a child Placement of a child for adoption or foster care To care for a spouse, child, or parent with a serious health condition Because of the employee s own serious health condition Because of a qualifying exigency To care for a family member injured in the line of duty military caregiver leave 9
10 Birth of a child Both mothers and fathers are eligible But if they work for the same employer and are married, they are only entitled to 12 weeks jointly They can split up the leave however they want Leaves can overlap Each spouse eligible to take his or her own remaining weeks for other purposes Remember, this is a separate kind of leave from leave related to pregnancy. 10
11 Adoption or foster care Covers absences required in order for the placement to occur Attorney meetings Court appearances Doctor visits Going to pick up the child Foster care leave only applies to arrangements sanctioned by state Employer has right to request documentation Rule applies even if children are relatives of your employees 11
12 Care for loved ones Spouse Husband or wife (as defined by the state where marriage was entered into) Includes common law marriage Son or daughter Biological child Adopted or foster child Stepchild Legal ward Any child employee has day-to-day responsibility for (practical or financial care if the person intends to assume the responsibility of a parent) Under 18, or incapable of caring for herself due to mental or physical disability at the time FMLA leave is to commence Parent Biological or adopted parents Does not include in-laws or grandparents, except if that individual acted as a parent to the employee when he/she was a child You can request documentation but proceed with care! 12
13 General categories of serious health conditions Inpatient care Pregnancy-related conditions Continuing treatment: incapacity and treatment Chronic health conditions Permanent long term condition Treatment to prevent incapacitation or restorative surgery 13
14 Serious health condition: examples Allergies Asthma Alzheimer s disease Remember: Applies to employee or loved one Diabetes Epilepsy Mental illness Restorative/plastic surgery after an injury Removal of cancerous tumors Stroke 14
15 Examples of medically related absences NOT typically covered by the FMLA Routine check-ups Minor illnesses, injuries Even if there is a doctor s visit Child falls on playground at school, needs stitches Employee goes to emergency room with chest pains, turns out to be gas Elective cosmetic treatments not requiring inpatient care Lasik eye surgery But if inpatient care is required (as part of standard treatment, or due to complications) it will qualify Absences caused by substance abuse But absences caused by treatment for addiction typically will be covered 15
16 Qualifying Exigency Up to 12 weeks of unpaid leave to address a qualifying exigency arising from the fact that a spouse, son, daughter, or parent of the employee is on covered active duty (or has been notified of an impending call or order to covered active duty) in the Armed Forces Covered active duty must involve deployment to a foreign country and includes members of both the regular and reserve components of the Armed Forces Qualifying exigency is specifically defined by the regulations and includes: short notice deployment; military events and activities; urgent child care and school activities; financial and legal arrangements; counseling; rest and recuperation leave; postdeployment activities and parental care. 16
17 Military caregiver leave Leave to provide care for covered service member who is employee s injured spouse, son, daughter, parent, next of kin Covered service member Current member or veteran of either the Armed Forces, National Guard or military reserves. Veteran s discharge or release must be under conditions other than dishonorable during the 5-year period preceding the start of leave October 28, 2009 March 8, 2013 excluded from 5-year period Not a SHC (serious health condition): a serious illness or injury incurred by service member in the line of duty on active duty, and which may render service member unfit for duty Serious injury or illness extended to also mean those that existed before the beginning of the member s active duty, which were aggravated by service in line of duty on active duty In the line of active duty is defined in military regulations to include any injury suffered while in the military, even if not caused by the performance of military duties, i.e. cancer There is an exclusion for injuries caused by the service member s misconduct 17
18 Military caregiver leave (continued) An eligible employee is entitled to 26 workweeks of leave to care for a covered service member with a serious injury or illness during a single 12-month rolling forward period, regardless of the calculation method used by an employer. Different (and potentially separate) 12-month period(s) The leave entitlement is applied on a per-servicemember, per-injury basis, such that eligible employee may be able to take more than one period of 26 workweeks of leave if leave is to care for different covered servicemember or same servicemember with subsequent injury or illness; but maximum 26 weeks in each 12 month period Employee entitled to both caregiver leave and regular FMLA (even for same SHC of covered military member) Maximum 26 weeks in each 12- month period for regular FMLA and military caregiver leave Employer responsible for designating leave as FMLAqualifying 18
19 Types of leave Single, continuous block of leave Intermittent leave Leave taken in separate blocks of time for a single illness or injury Can be for planned treatments Or for conditions which flare up unexpectedly and prevent employee from doing his job (migraines, arthritis, lupus, bad back, etc.) FMLA does not require an employer to allow employees to take intermittent or reduced schedule leave for bonding; however, an employer can choose to allow this under their leave policies But an employee cannot be forced to take more time off than needed Reduced leave schedule Leave which results in regular alteration/reduction of scheduled work hours during the certified period Employee is entitled to be given a reduced leave schedule if condition qualifies and schedule is medically necessary FMLA does not require an employer to allow employees to take intermittent or reduced schedule leave for bonding; however, an employer can choose to allow this under their leave policies 19
20 How do you deduct leave for intermittent or reduced schedule absences? FMLA leave is based on the employee s normal work week If employee normally works a 5-day week and takes off one day, the employer should deduct 1/5 of a week of FMLA leave If employee who normally works an 8-hour day is put on a 4-hour per day reduced leave schedule, he would use ½ week of FMLA leave each week When employee works part time, FMLA deduction is made on a pro-rata basis by comparing new schedule with old schedule If employee normally works 30 hours per week, but is put on a 20-hour per week reduced schedule, he is using 1/3 week of FMLA leave each week 20
21 Intermittent and reduced schedule leave Increment of time clarified Employer must account for leave using increment no greater than the shortest period of time that employer uses to account for other forms of leave Increment cannot be greater than 1 hour Cannot reduce by more than amount of leave actually taken If increments for other forms of leave vary based on time of day or shift, FMLA increment can vary as long as it remains consistent with other forms of leave taken at the same time of the day Flight Crew increment no greater than 1 day 21
22 Tips for managing intermittent leave Remember eligibility rule: Once employee is deemed eligible, he remains so for 12 months going forward But he still can only take 12 weeks during your chosen 12-month period Always require medical certification Form should specifically state whether intermittent or reduced leave is required; send it back if it does not Require re-certification as allowed by the regulations Require foreseeable leave to be scheduled to reduce disruption to your operations 22
23 Tips for managing intermittent leave (continued) Consider possibility of temporary transfer to a position where intermittent absences won t have such an impact This is only allowed for planned medical treatment Carefully track all time Be careful about enforcing attendance policies Check with Human Resources Recertify as often as possible 23
24 Legal considerations 24
25 FMLA/Leave management services Scope and complexity of the law WA OR CA NV ID MT WY UT CO AZ NM ND SD NE KS OK TX MN IA MO AR LA WI MI MD IL IN OH PA KY WV VA TN NC MS AL SC GA VT NY NH NJ DE DC ME MA RI CT AK FL HI Key: colored areas indicate states with additional leave regulations 25
26 State leave laws FMLA-like leave laws Pregnancy disability Bonding Bone marrow Volunteer fire fighters (emergency workers) School activities leave laws Domestic violence/crime victim leave laws Kin care 26
27 The risk of non-compliance Failing to comply with the law can be costly. Managers can be held personally responsible for violations. Companies can be faced with expensive legal fees and settlement fees. The Case: In Schultz v. Advocate Health and Hospitals Corp., a long-time employee alleged his former employer terminated him in retaliation for using FMLA to care for his two ill parents. The employee took intermittent leave over several months and during this period began having problems with his supervisors who established performance standards he was unable to meet. The problem escalated until the employee was terminated. The Result: A federal jury awarded $11.65 million to the employee. The award consisted of $10.75 million against the employer and $900,000 individually against the two supervisors. 1 1 Schultz v. Advocate Health and Hospitals Corp., N.,D. Ill., No. 01 CV 702, 10/30/02. 27
28 The risk of non-compliance Failing to comply with the law can be costly. Managers can be held personally responsible for violations. Companies can be faced with expensive legal fees and settlement fees. The Case: In Allen v. A.G. Edwards & Sons*, Inc., the plaintiff, Donald Allen, brought suit against his employer, A.G. Edwards & Sons, Inc. for violations of the ADA and FMLA as well as state laws on constructive discharge. In 2001, he was diagnosed with bi-polar disorder and briefly hospitalized. When he returned to work, the company refused to reinstate him to his old job. A.G. Edwards had options under FMLA and ADA but was concerned about the plaintiff s ability to perform his job. Allen claimed he was demoted to a financial consultant job that required him to report to the former assistant branch manager and was not reinstated to an equivalent position. The employer argued that there was no FMLA violation because they had returned him to a manager position. The Result: The arbitration panel ultimately found for the plaintiff and found that the employer violated the FMLA. Allen was awarded 1.25 million dollars. *NASD # , June 26,
29 The risk of non-compliance Failing to comply with the law can be costly. Managers can be held personally responsible for violations. Companies can be faced with expensive legal fees and settlement fees. The Case: Lubke v. Arlington.* The plaintiff, Kim Lubke, sued the City of Arlington, alleging he was discharged in violation of FMLA as a result of missing work to care for his ill wife. Lubke was scheduled to work from December 31, 1999 through January 1, On December 30, 1999, Lubke telephoned a call box and left a message stating that he would not be working during the Y2K weekend because he needed to stay home with a sick wife. Lubke was terminated for dereliction of duty, unauthorized absence and insubordination. At trial, the employer asserted that Lubke s leave was not protected by the FMLA because he failed to provide timely and adequate medical certification supporting his leave. The Result: The jury rejected the employer s claim and found that the employer had violated the FMLA. They awarded the plaintiff over 1 million dollars in damage. On appeal, the Fifth Circuit affirmed the jury verdict. *2006 WL , June 30, 2006 US Court of Appeal, Fifth Circuit 29
30 The risk of non-compliance Failing to comply with the law can be costly. Managers can be held personally responsible for violations. Companies can be faced with expensive legal fees and settlement fees. The Case: Lore v. Chase Manhattan Mortgage Corp.* The plaintiff, Nicholas Lore, requested leave to address several health issues. He was told an additional manager would be hired to assist with his responsibilities and enable him to take leave. When the additional manager was not hired, Lore inquired of his manager again requesting leave. Less than one month later, Lore was terminated. Lore sued Chase Manhattan for failing to grant him, an eligible employee, leave under the FMLA. In addition, Lore argued Chase Manhattan unlawfully retaliated against him for his attempts to exercise his rights under the FMLA. The Result: A jury found for the employee and awarded him $2,227,241. With liquidated damages equal to the amount of the verdict and prejudgment interest added in, the recovery equaled between $6.2 and $7.6 million. *2008 Lore v. Chase Manhattan Mortgage Co., 2008 WL (N.D. Ga., 2008) 30
31 The Risk of non-compliance Failing to comply with the law can be costly. Managers can be held personally responsible for violations. Companies can be faced with expensive legal fees and settlement fees. The Case: Dotson v. Pfizer*. The plaintiff, Dotson, was seeking to adopt a child from Russia and took intermittent time off to attend to the adoption, taking two trips to Russia. The employee kept his employer informed and spoke to his HR Dept. After returning from Russia with the child, the employee was terminated based on an alleged violation of company policy. Dotson sued for FMLA retaliation. The employer argued that the employee was not entitled to FMLA protection because he failed to indicate that he needed FMLA leave. The court rejected this argument, noting that an employee does not have to expressly state that he needs FMLA or use any magic words to trigger the employer's obligation. The Result: A jury found for the employee and awarded him more than $1 million plus prejudgment interest. The employer appealed but the court affirmed the decision in the employee s favor. The court also held that the lower court erred when it failed to award the employee prejudgment interest, making the judgment even larger than that awarded by the jury. *2009 Dotson v. Pfizer, No (4 th Cir. March 4, 2009) 31
32 Employer challenges 32
33 Key FMLA findings from employers The most frequently cited HR organizational challenges with FMLA:* FMLA Activities Ranked as Difficult or Extremely Difficult Source: 2014 Employer Leave Management Survey DMEC/Spring Consulting, January
34 The challenges facing employers Leave policies must comply with both federal and state leave laws Each leave request must be individually evaluated for eligibility and qualifying conditions Documentation must be collected, verified, recorded and filed for every leave request Managers may be found to be individually liable. Employers are subject to fines and/or other penalties if there is a violation of the FMLA Intermittent leaves are difficult to track It is difficult to coordinate STD & FMLA when they are outsourced separately Retention and termination of employees Productivity and employee morale Indirect costs of covering absences (overtime, temporary workers, outside contractors) 34
35 FMLA administrative options 35
36 FMLA administrative options In-source Decentralized model Centralized model Out-source TPA Carrier/TPA Carrier with dedicated capabilities 36
37 The costs of in-house administration Productivity Employee leaves disrupt work routines and cause confusion and distraction among remaining staff. Leaves can require replacement workers and/or overtime wages. Managers must consider any impact of FMLA absence separately from other performance issues, complicating the entire management process. Legal/Compliance State leave laws are numerous and change often. Employers and their legal counsel must constantly survey court rulings and changes in the laws to remain up-to-date. Failing to comply with the law can be costly and managers can be held personally responsible for violations. Litigation costs are roughly $100K to $200K per claim not including settlement costs. 1 Tracking & Administration About half of employers report that the cost of complying with FMLA has increased over the years. Less than 1% said the cost decreased. 2 Other tracking and administration costs include maintenance of records, storage and supplies in conjunction with the administration of other benefits such as STD and workers compensation. 1 Based on Unum internal experience, ABT Associates for U.S. Dept of Labor, Family and Medical Leave in 2012: Technical Report (2013). 37
38 FMLA administrative options In-source versus outsourcing factors to consider: Employer size Demographics Industry Location and number of operational sites Absence management philosophy Company culture Current capabilities 38
39 Outsourcing evaluation look for robust leave management services capabilities Whether managing in-house or with a Carrier/ TPA, look for these capabilities: Single integrated solution, one vendor administering STD and FMLA Single point of intake (STD/FMLA) Web-based reporting that allows drill-down into data Real-time updates to changes in state leave laws or federal In-house legal and technical expertise, includes newsletter to employer Proven scale with large customer base and covered lives, strong customer persistency Superior customer satisfaction survey results Administration for all separate state leave laws Look for case studies showing enhanced productivity though reduction of lost time Indemnification 39
40 Lost time costs 40
41 The case for integration Because of the significant overlap that exists between short term disability and FMLA leaves, managing these leaves separately can cause additional costs and result in employees absent from work longer than entitled. 41
42 Clients benefit from our centers of excellence Absence Management Specialists Intake new leave/claim and inform employee Set expectations and next steps Record intermittent hours Answer questions related to leave and disability claim FMLA Specialists For disability claims, follows STD decision State and Federal leave eligibility and designation Coordination between Federal, State and Corporate policies Family leave, bonding Intermittent management Clinical Resources Legal Counsel Employer or Employee Absence Management Team FMLA Specialist Toll-free call Absence Management Team Absence Management Specialist Knowledgeable about customer s unique needs STD Specialist Clinical Resources Vocational Resources Short Term Disability Specialists Quarterback of the overall process Determine benefit eligibility Assess medical expertise for disabling condition Evaluate functional capacity Complete job analysis Calculate benefits Support return-to-work efforts Support integration with health programs 42
43 Employee absences impact employer s bottom line and productivity Direct cost of paid time off for full-time employees in 2013 accounting for wages, overtime and replacement workers was equivalent to 15.4 percent of payroll. When indirect costs such as lost productivity were added, the total cost of paid time off was between 20.9 percent and 22.1 percent of payroll, with unplanned absences having the highest overall cost. Supervisors spent a average of 4.2 hours a week or 5.3 weeks a yeardealing with absences, including finding replacements, adjusting workflow and providing training. The highest average loss in productivity, 36.6 percent, was the result of replacement working being used to cover for an unplanned absence, making this type of absence the greatest cause for concern in controlling costs. Daily Document Update: HR Compliance Library, 33,636, Employee absences have consequences for productivity and revenue, SHRM research shows SURVEY RESULTS, (Dec. 30, 2014) 43
44 Case study intermittent leave management* Company outdoor clothing and gear retailer # US Employees 4,500 year round 11,500 at peak (December) Products and services retail sales Offers clothing and outdoor gear for customers to enjoy the outdoors Contact Centers provide world class legendary service to customers Four year-round centers and one seasonal center in Northern New England Handle inbound order and customer service calls 24 hrs/day, 7 days/week 365 days a year Daily call volume 35,250 calls off peak; 133,500 calls during peak *This case study is true, although the employer name and other identifying characteristics have been removed or changed to preserve confidentiality. Call center operations are supported by centralized planning functions (finance, systems/technology, quality, training, workforce planning) 44
45 Case study Intermittent leave management (continued) Flexible call center staff numbers adapted to meet changing needs from 1,170 yearround employees to over 4,340 at peak times Annual turnover 7-8% Short term disability absence in 05 2,850 days (est. equivalent of 11 full-time employees) Workers compensation lost time in days Intermittent FMLA absence: Year prior to outsourcing: Equivalent of 1,100 days or est. 92 days/month First 5 months after outsourcing: Reduced to the equivalent of days or est. 38 days/month 58.7% reduction in lost time 45
46 ADA Considerations FMLA is exhausted. Are you done? Maybe not 46
47 ADA Considerations A covered employer may not discriminate or retaliate against a qualified individual on the basis of a disability. A qualified individual is any person with the skill, experience or education to perform the essential functions of the job they hold or seek, with or without a reasonable accommodation. A disability is: a physical or mental impairment that substantially limits one or more of the individual s major life activities; a record of such an impairment; or being regarded as having such an impairment. An employee who has exhausted FMLA and has a disability may be entitled to additional leave provided it does not create an undue hardship. One of the most important aspects of ADA compliance is engaging in the interactive process. Determine: Is the employee disabled? Is the employee qualified? Is the employee entitled to a reasonable accommodation? Is leave a reasonable accommodation? Indefinite leave is not reasonable. 47
48 Questions? 48
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