Compliance FAQ: What Are the Most Common Mistakes Employers Make When Administering FMLA?

The Family Medical Leave Act (FMLA) was enacted on Feb. 5, 1993, which means it celebrated its 25th anniversary this year.  Even after all these years, it can still be one of the more complex laws with which an employer needs to comply and continues to be a hot topic among our client base.

So, we figured where better to start with our Compliance FAQ series than with the FMLA:

“What are the most common mistakes employers make when administering FMLA?”

It’s Important to First Understand to Whom FMLA Applies

FMLA applies to governmental agencies and schools (public school boards, public and private elementary and secondary schools) of any size. It also applies to private employers with 50 or more employees in 20 or more workweeks in the current or previous calendar year.

Covered employers must post the General Notice in the workplace. Additionally, covered employers must include the language of the notice either in an employer handbook, if available, or as a separate notice distributed to new employees.

FMLA Eligibility Criteria

An employee is eligible if they meet all of the following service requirements:

• Have worked for the employer for at least 12 months;
• Have at least 1,250 hours of service within the last 12 months;
• Work at a location where the employer has at least 50 employees within 75 miles of the employee’s worksite (more on this at the bottom of this post); and
• An employee without a specific worksite (such as a salesperson or a telecommuter) is considered to work at the home base from which they are assigned work or to which they report. When determining whether an employee meets the service requirements, it’s important for an employer to consider the service time performed for a predecessor employer when there’s been a corporate restructure or merger.

An eligible employee is entitled to leave for any the following qualifying reasons:

• Birth of placement of a child for adoption or foster care;
• To bond with a child up to 1 year following birth or placement;
• To care for the employee’s family member who has a serious health condition;
• For the employee’s own serious health condition;
• For qualifying exigencies related to the deployment of a military member who is the employee’s family member; and
• To care for next of kin who is a covered service member with a serious injury or illness.

FMLA is Generally Unpaid Leave

While on leave, though, an employee has the right to continue health plan coverage at the same cost as an active employee. They cannot be charged more than the normal required contribution. If the employee is receiving compensation (such as accrued paid time off), health plan deductions would be taken as normal. However, if the employee isn’t receiving compensation, the employer will need to make other arrangements for the employee’s contributions. The employee may choose to prepay the contributions if the leave is foreseeable, the employer may require the employee to pay during the leave or the employer may permit the employee to pay upon return.

It’s important for the employer to communicate the employer’s payment policy as soon as possible upon designating the leave. The combined Notice of Eligibility and Rights and Responsibilities Notice includes language related to payment of contributions. Employers should make sure that the language accurately reflects their policy and procedures. Further, an employee may choose to terminate coverage during the leave and be reinstated upon a timely return.

When to Terminate Health Plan Coverage and Offer COBRA

Finally, there’s often confusion as to when health plan coverage would terminate if an employee doesn’t return to work within 12 weeks. There are many considerations with this issue. The employer should first determine whether the employee is eligible for continuation of coverage under any other leave entitlement, including state law and employer policy.

Next, the employer should review its terms of eligibility in the plan documents. Often the plan document states that employees remain eligible if they work a specified number of hours per week or are on a specific type of leave. Applicable large employers need to also consider their look-back measurement method procedures under the ACA’s employer mandate, if applicable. If an employee was determined to be an eligible full-time employee during the most recent measurement period, they’ll remain eligible during the entire stability period regardless of current hours worked.

Once the employee no longer meets the terms of eligibility, health plan coverage should be terminated and COBRA offered. A common mistake is that employers continue eligibility for employees who have exhausted all leave and no longer meet the terms of eligibility. This exposes the employer to risk, as an insurer or stop-loss provider may deny claims for the ineligible employee, leaving the employer to possibly self-insure the expense.

Other Common Misconceptions and Mistakes

• The failure to recognize an employee’s leave for a work-related injury or illness under FMLA. If an employee is absent from work due to their own serious health condition, FMLA applies regardless of whether the injury or illness is work-related.
• FMLA only applies to employers with 50 or more employees within a 75-mile radius. The mileage provision is related to which employees are eligible for leave — not which employers are subject to FMLA. This means that all covered employers, discussed above, must comply with the posting requirement regardless of whether they would actually have any employees eligible for FMLA under the mileage provision.

Resources on FMLA

• The DOL publication entitled “The Employer’s Guide to the Family and Medical Leave Act” provides helpful guidance to employers.
• Our parent company, NFP, created this FMLA Checklist, which also may be helpful in ensuring your compliance with the law.