NY PFL, FMLA & FMLA Outsourcing

NY PFL, FMLA & FMLA Outsourcing Ellen McCann June 2017 The information contained herein does not constitute legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have. 1

AGENDA NY PFL Update Top 5 FMLA employer mistakes Legal Considerations Administrative/Outsourcing options 2

NEW YORK PAID FAMILY LEAVE 3

NY PAID FAMILY LEAVE SUMMARY New York passed legislation in April 2016, that created a Paid Family Leave (PFL) benefit under the current Disability Benefits Law (DBL). o This new program will be implemented on January 1, 2018. o All employees working in New York state are required to have PFL, similar to DBL. The entire cost of PFL will be funded by EE contribution. o Like DBL, PFL plans can be obtained by an employer through an insurance company. As of 1/1/18, PFL will be a rider on Unum s DBL policies. o Unlike DBL, PFL will provide job protection. A second set of draft PFL regulations were published on 5/24/17. The state is accepting comments until 6/23/17. As a result, changes could still be made before the final version is released. 4

NY PAID FAMILY LEAVE (PFL) What it provides A fully insured benefit for child bonding, caring for a seriously ill family member, or for a military exigency. Birth mothers may choose to take DBL for their disability, and then take PFL for child bonding; or, they may take PFL child bonding benefits immediately. Who Has it All covered employees working for covered employers in the state of New York (similar to DBL). Coverage applies to both full-time and part-time employees. How it works Benefits are 100% employee funded via payroll deduction. Employees applying for leave must provide 30 days notice, or notice as soon as is practicable. Benefits have been built into DBL via legislation; will be added to policies as a rider. 5

WHO IS ELIGIBLE? DBL-PFL Regardless of ER SITUS, an employee working in New York must have DBL/PFL coverage. NY EE EEs whose regular employment schedule is 20 or more hours per week must be employed 26 consecutive weeks. An employee whose regular employment schedule is less than 20 hours per week will become eligible after working 175 days in 52 weeks. 26 weeks with ER Qualifying Event PFL Those exempt from DBL are also exempt from PFL. 6

QUALIFYING EVENTS Bonding with newborn and foster care/adoption placement Taken within 1 year of birth/placement Family Member Serious Health Condition SHC definition similar to FMLA (pre-2009 definitions) FM=parent/parent-in-law: spouse/domestic partner; child; grandchild; grandparent Active Duty/Qualifying Exigency Leave Absence for FMLA qualifying exigency arising out of FM call/impending call to active duty in) in US armed forces FM=parent/parent-in-law: spouse/domestic partner; child 7

PLAN STRUCTURE PROVISION Coordination with DBL Coordination with ER paid leave policies Coordination with FMLA Intermittent Leave Filing a claim Provisions NY PAID FAMILY LEAVE An employee may not receive PFL and DBL benefits concurrently. Any time taken for PFL is reduced from the 26 weeks allowed under DBL. An employer can mandate that an employee use a more generous leave benefit (i.e. paid parental leave) while on PFL if FMLA is running concurrently. If FMLA is not designated concurrently with PFL, the employee can choose whether to take PFL or use more generous accrued benefits. Will run concurrently with FMLA if leave reason qualifies for both, employee is eligible and employer designates FMLA Intermittent leave must be taken in full day increments. If an employee takes partial paid days under FMLA, employer can deduct a full day from PFL bank once employee has taken paid FMLA that equals one day. An employee will complete a Request for PFL and file with the insurance carrier or self-insured employer within 30 days. May also be required to submit medical certification form or other supporting documentation. Penalties. No benefits-1/2 of 1% of payroll and $500 fine; return or forfeit contribution; pay claims/reimburse fund. Late-25% of amount not paid; $10 per week to employee 8

BENEFITS STRUCTURE DBL-PFL NY DBL - PFL Graduating Benefit Schedule *SAWW = State s Average Weekly Wage (currently $1296) 2018 50% of income to a max of 50% of the SAWW for 8 weeks 2019 55% of income to a max of 55% of the SAWW for 10 weeks 2020 60% of income to a max of 60% of the SAWW for 10 weeks 2021 67% of income to a max of 67% of the SAWW for 12 weeks Benefit schedule will remain the same from 2021 onward. 9

Top 5 FMLA Employer Mistakes 10

The following mistakes allow FMLA abuse and can create liability for employers who are not administering FMLA requests appropriately 11

TOP 5 MISTAKES Improperly determining eligibility Deeming employees FMLA eligible Failure to provide required notices Failure to calculate leave entitlement appropriately Failure to request a new certification and redetermine eligibility in a new leave year 12

1. IMPROPERLY DETERMINING ELIGIBILITY Regulations (825.104; 825.105; 825.110; 825.111) Employee must: Work for covered employer Have worked 1,250 hours and 12 months Work at a worksite where there are 50 employees in a 75-mile radius 13

Improperly determining eligibility (continued) 1. IMPROPERLY DETERMINING ELIGIBILITY, cont. Best practice (825.104; 825.105; 825.110; 825.111) Make sure you are a covered employer. Verify that you had 50+ employees for each working day for 20 weeks in the current or preceding year At the time the leave is requested, determine that the employee works at a location where there are 50 employees within 75 miles Count all employees on payroll (including temps) except expatriates For work at home employees, look to site in to which employee reports or receives assignments from CAUTION: Include temp time in hours worked and tenure for any employee who worked for you as a temp. Verify that the employee worked for 12 nonconsecutive months prior to start of leave Include employment prior to a continuous break in service of 7 years or less Include military service in calculation of tenure and hours worked Verify that the employee worked 1,250 hours immediately prior to the start of leave using FLSA hours worked standard. Do not include leaves or PTO 14

2. DEEMING Deeming employees EMPLOYEES eligible for ELIGIBLE FMLA FOR FMLA Regulations (825.110(d); 825.120(a)(2); 825.121(a)(2); 825.207(c); 825.301; 825.701(a)(3)) An employer cannot deem an employee eligible for FMLA if they are not eligible. An employer cannot deem an absence to be FMLAcovered if it is not Best practice (825.104; 825.105; 825.110; 825.111) Do not count FMLA absences against an employee unless the employee is eligible and the absence is covered If you improperly deduct time from an employee s FMLA bank, the employee may be entitled to an additional 12 or 26 weeks of FMLA leave Do not treat office locations as covered if there are not 50 employees within a 75-mile radius Grant a corporate leave if you wish to provide leave in circumstances that are not covered by FMLA (i.e., domestic partners, grandparents, small offices, new employees) 15

Failure to provide required notices 3. FAILURE TO PROVIDE REQUIRED NOTICES Regulations (825.300) Employers have to give four notices: General notice General rights under the FMLA Eligibility notice Send within five days of request for leave State at least one reason why if ineligible Once eligible, employee remains eligible for remainder of the leave year for that leave reason (although may exhaust entitlement) Rights & Responsibilities notice Provide at the same time as eligibility notice Advise of method used for 12-month period Use of paid leave & conditions Must explain that if employee wants, can go unpaid Designation notice Within five business days of determining that leave qualifies as FMLA, send notice as to exactly how much time is designated If not possible to determine time, provide every 30 days on request of employee if leave was taken within 30-day period Must inform about fit-for-duty requirements and essential job functions if those are to be addressed in fit for duty Failure to designate employer is liable only if employee can demonstrate harm 16

Failure to provide required notices (continued) 3. FAILURE TO PROVIDE REQUIRED NOTICES, cont. Best practice Electronic general notice is sufficient but it must be accessible to employees and applicants If you have a handbook, general notice must be in the handbook If no handbook, must distribute upon hire 17

Failure to calculate leave entitlement appropriately 4. FAILURE TO CALCULATE LEAVE ENTITLEMENT APPROPRIATELY Regulations (825.205(h)) Holidays within a full week of FMLA are counted as FMLA If an employee is using FMLA leave in increments of less than one week, the holiday will not count as FMLA unless the employee was otherwise scheduled to work during the holiday If employer s business activity has temporarily ceased for one or more weeks, the days the employer s activities ceased do not count as FMLA Regulations (825.205(b)) The actual workweek is the basis of leave entitlement to determine how much FMLA leave time an employee is entitled to take For example, a 40 hour/week employee is entitled to twelve 40-hour weeks of FMLA or 480 hours of FMLA A 30-hour/week employee is entitled to 360 hours of FMLA 18

Failure to calculate leave entitlement appropriately (continued) 4. FAILURE TO CALCULATE LEAVE ENTITLEMENT APPROPRIATELY, cont. Regulations (825.200(b)) If an employee s schedule varies from week to week so that an employer is unable to determine with certainty how many hours the employee would have worked (but for the taking of FMLA leave): A weekly average of the hours scheduled over the 12 months prior to the beginning of the leave (including any hours for which the employee took leave of any type) would be used for calculating the employee s leave entitlement Regulations (825.205(c)) If an employee would normally be required to work overtime but is unable to do so because of an FMLA-qualifying reason: The hours which the employee would have been required to work may be counted against the employee s FMLA entitlement but must also be factored into the employee s entitlement 19

Failure to calculate leave entitlement appropriately (continued) 4. FAILURE TO CALCULATE LEAVE ENTITLEMENT APPROPRIATELY, cont. Best practice Take care to appropriately determine an employee s FMLA bank, factoring in the employee s normal schedule and any required overtime Review an employee s FMLA usage to determine if a holiday falls within a full week of FMLA 20

5. FAILURE TO REQUEST A NEW CERTIFICATION AND Failure to request a new certification and redetermine eligibility in new leave year REDETERMINE ELIGIBILITY IN NEW LEAVE YEAR. Regulations ((825.300(b)(2); DOL Opinion Letter 2005-3-A Regulations (825.305(e)) Once an employee is determined to be eligible for FMLA, (s)he remains eligible for one year for that leave reason When the employee s need for leave lasts beyond a single leave year, the employer may require the employee to provide a new medical certification in each subsequent leave year The new medical certification is subject to authentication/clarification and second and third opinions Best practice Establish the one-year period of eligibility for each leave request/ reason. Do not redetermine eligibility prior to that time Re-evaluate eligibility upon the first absence in the new leave year. Employees with ongoing intermittent leaves for chronic conditions may become ineligible due to hours worked Request a new certification if the employee continues to be eligible Authenticate, clarify and request 2nd/3rd opinions on the new certification as warranted 21

LEGAL CONSIDERATIONS 22

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 SC MS AL GA VT NY NH NJ DE DC ME MA RI CT AK FL HI Key: colored areas indicate states with additional leave regulations 23

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 24

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 25

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. 26

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. 27

FMLA ADMINISTRATIVE OPTIONS 28

FMLA ADMINISTRATIVE OPTIONS IN-SOURCE Decentralized model Centralized model OUT-SOURCE TPA Carrier/TPA Carrier with dedicated capabilities 29

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. 30

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 31

LOST TIME COSTS 32

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 workers 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) 33

UNUM S CAPABILITIES 34

LEAVE MANAGEMENT SERVICES Complete Compliance with FMLA Experienced Leave Management since 2000 A KEY DIFFERENCE: Manage over 20,000 new leave events per month 100% Indemnification Seek to operate as an extension of your HR department Communication First in industry Customizable letters for specific messaging System-generated touch points and reminders to develop an FMLA program Real time reporting Unum manages FMLA Resources Dedicated legal resources Fraud investigation assistance and state leaves for more than 1.5 million American workers 2 Support for employer-specific leaves Unum manages more than 225 state leave laws 1,2 Unum internal data, 2016. 35

REAL TIME LEGAL SUPPORT Dedicated resources provide expert support THREE EMPLOYMENT ATTORNEYS Combined 55 years of employment law experience Extensive involvement in creating and delivering Unum s original and ongoing offering Supported by a full-time, dedicated paralegal Unum s Indemnification language is one of, if not the strongest in the industry. Unum indemnifies for negligence. Many carriers do not. There is no cap on damages in Unum s indemnification provision. Many other carriers have a cap on damages. Indemnification by Unum: Unum agrees to indemnify and hold Employer harmless from any and all liability, loss, damage, fine, penalty or cost (including expenses and reasonable attorneys fees) sustained by Employer which is the result of Unum s negligence, gross negligence, willful misconduct, or breach, violation or failure to comply with the express terms and conditions of this Agreement, unless such negligence, gross negligence, willful misconduct or breach, violation or failure to comply was the result of or arose out of Employer s breach violation or failure to comply with the express terms and conditions of this Agreement. 36

Questions? 37

THANK YOU Ellen McCann Assistant Vice President & Special Council emccann@unum.com 774.437.5860 38