By: Kelly Dempsey, Esq.
Many federal regulations are set up to be a floor and not a ceiling – meaning employers and plans are permitted to be more generous than the federal regulation requires. This concept is important as we wade into unknown territories with the constant changes associated with coronavirus and the relevant employer and plan considerations. Two of the more common exceptions here are (1) permitted election changes for cafeteria plans under Code Section 125 and (2) requirements under HSA-qualified high deductible health plans (HDHPs), so we’ll review those quickly.
Section 125 contains specific events that qualify as permitted election changes – meaning if a specific event occurs, a participant may opt to modify their elections in the cafeteria plan (for example, stop paying premiums for medical coverage on a pre-tax basis or change how much is being contributed to an FSA or DCAP during the plan year). The rules indicate that an employer may include any of the permitted election changes in the cafeteria plan, but the employer is not permitted to provide options in addition to what the rules provide. Employers also do not have to include every permitted election change in their cafeteria plan, although most do choose to do so.
Our other example, IRS rules for HSA-qualified HDHPs, also have certain parameters for HDHPs where employers and plans are not allowed to be more generous (specifically, the minimum HDHP deductible and the maximum contribution to HSAs). Each year the IRS reviews these figures to determine if they should be modified based on cost of living changes.
In the absence of any federal or state law, employers with self-funded ERISA plans are generally permitted to expand continuations of coverage associated with leaves of absence or layoffs/furloughs (i.e., leaves and continuations not associated with FMLA or COBRA) for a timeframe that aligns with the employer’s business practices. In this time of great uncertainty with the spread of COVID-19, we understand many employers are in the process of laying off or furloughing employees due to financial strain or simply a stoppage or suspension of business operations. It’s highly likely that the federal government will issue additional guidelines related to leaves of absences and continuations of coverage in the near future, but until then, employers have broad discretion to amend their plans as they see fit. The key word here is “amend” – employers must go through the formal process of amending their SPD/PD if it does not align with the policy the employer is creating. Updating the SPD/PD to addressed modified continuations of coverage is crucial to ensure compliance with ERISA requirements and minimize the potential for creating a coverage gap with stop-loss. It’s still a bit unclear how stop-loss carriers will modify their processes (if at all) to accept changes to SPD/PDs in light of COVID-19 (i.e., if they will accept changes with less notice or if they’ll waive their right to modify premiums). The answers will likely reveal themselves soon.
By: Philip Qualo, J.D.
The complex employment issues surrounding government actions to isolate the new and fatal strain rose to the level of national news this month, as more than 300 U.S. citizens were quarantined on a cruise ship in Japan after a man who disembarked in Hong Kong was diagnosed with the virus. After being quarantined for 14 days, the passengers were finally evacuated from the cruise ship on February 17th. The U.S. government has confirmed at least 14 of those Americans tested positive for the coronavirus just before departing Japan. The majority of U.S. passengers who continued to test negative for the coronavirus, however, will now have to contend with another 14-day quarantine upon reentry into the U.S. Although these passengers are likely relieved to have survived the exposure to virus with their health intact, their eventual return to the workforce has many employers confused on how to treat these leaves of absence, and more importantly, whether they are required to allow them to return to their jobs at all.
Surprisingly, federal laws enacted to protect Americans from job loss as a result of illness or disability generally do not protect individuals who are unable to report to work as a result of isolation and quarantine, but do not themselves suffer from a serious health condition. For example, the federal Family Medical Leave Act (FMLA) provides job-protected leave for specific medical and family reasons. Employers covered under FMLA must provide unpaid leave to an eligible employee who is incapacitated from working because of their own serious health condition or when they need to care for a family member with a serious health condition. So on the one hand, for the Americans that were infected with the coronavirus, FMLA protections will clearly apply to the absences as a result of the quarantine as there is clearly a serious health condition present, assuming the employer is subject to FMLA and the employee satisfies other eligibility criteria. Additionally, an employee caring for a spouse, child or parent infected with the virus will also may also be entitled to FMLA leave. On the other hand, for those Americans and their immediate family members who tested negative but continue to be subjected to isolation and quarantine measures, however, the rule is not so clear cut. Technically, without a serious health condition, or at minimum, some evidence of documented symptoms, FMLA will likely not apply.
Despite the lack of federal protections for employees who are quarantined as a result of exposure to the coronavirus, terminating employees as result of absence caused by quarantine protocols could still result in significant liability for employers under state laws. Recognizing the lack of statutory protections for employees in prior pandemics where isolation or quarantine was necessary, several states already have laws that explicitly prohibit the termination of an employee who is subject to isolation or quarantine. For example, in Delaware, Iowa, Kansas, Maryland, Minnesota, New Mexico, and Utah, an employer is prohibited from terminating an employee who is under an order of isolation or quarantine, or has been directed to enter isolation or quarantine.
For states that have yet to enact similar protections, there is an important exception to the employment-at-will doctrine that could still expose employers to liability when terminating an employee due to absences as a result of isolation and quarantine measures. Most states adhere to the common law employment-at-will doctrine, which generally allows an employer to terminate an employee from employment for any reason other than those prohibited by statute. Under the public policy exception, however, an employee may be deemed wrongfully discharged when a termination violates an explicit, well-established public policy. The public-policy exception is the most commonly accepted exception to the employment-at-will, recognized in the vast majority of states.
A claim for wrongful discharge in violation of public policy is grounded in the belief that the law should not allow an employee to be dismissed for engaging in an activity that is beneficial to the public welfare. As mandatory quarantine protocols have been implemented to protect the public at large from the coronavirus, a court could reasonably conclude that the quarantine of individuals during a pandemic serves the public good and that the termination of individuals who are isolated or quarantined violates public policy.
It is important to keep in mind that quarantine protocols are not voluntary for Americans exposed to the coronavirus, but rather mandated by public policy. Therefore, employers should exercise caution when deciding how to handle employee absences that result from these necessary measures implemented to protect the public at large. As some state laws and public policy exceptions to the employment-at-will doctrine could potentially expose employers to liability for wrongful discharge, we would recommend against terminating employees who have no choice but to comply with government efforts to isolate the deadly virus. It is important to keep in mind that since the coronavirus can be spread before an individual demonstrates symptoms, the quarantine measures that have been put in place have likely already saved countless of lives, and should not be discouraged by employers.
On March 14, 2019, the U.S. Department of Labor (“DOL”) released an Opinion Letter advising that an employer may not delay designating a leave of absence, paid or unpaid, as a leave under the Family and Medical Leave Act ("FMLA”) (if the leave qualifies as an FMLA leave). In addition, this Opinion Letter details that an employer may not permit employees to extend FMLA leave beyond the 12-weeks (or 26 weeks for military caregiver leave) granted under the FMLA.
Under the FMLA, employees of covered employers are entitled to up to 12 weeks of unpaid leave with job protection benefits in the event of certain family and medical situations. The FMLA also permits eligible employees to take up to 26 weeks of leave to care for a covered service member with a serious illness or injury. It is the employer’s responsibility under the FMLA to designate leave as qualifying leave for FMLA purposes.
Prior to the release of the Opinion, many employers permitted employees to delay FMLA designation in specific situations. For example, in order to allow for a full 12-week FMLA leave for a new mother and her newborn to bond, employers would usually allow expectant mothers who needed to commence leave prior to the delivery date the ability to use accrued Personal Time Off (“PTO”) or sick pay until the delivery date. For example, the FMLA designation would begin onthe date of birth instead of the date the mother went on leave prior to delivery. Many employers were under the impression FMLA designation was a matter of mutual agreement between an employer and employee as opposed to a matter of law.
The Opinion Letter specifically provides that employers are prohibited from delaying the designation of FMLA-qualifying leave as FMLA leave. The Opinion Letter also notes that neither the employee nor employer can decline FMLA protection for FMLA qualifying leave once the employee has communicated a need to take leave for an FMLA-qualifying reason. Thus, once the employer determines that the leave request is for a FMLA-qualifying leave, the leave is FMLA-protected and is counted towards the employee’s 12-week (or 26-week) FMLA leave entitlement. The Opinion Letter advises that once the employer determines the leave is FMLA-qualifying leave, the employer must provide notice of the determination to the employee within five business days. The employer does not have the option to delay this determination once the employer has the information to make such a determination.
The Opinion letter further noted that an employer is prohibited from designating more than 12 weeks of leave (26 weeks in the case of military caregiver leave) as FMLA leave. The DOL notes that an employer can still honor any family and medical leave program it offers outside of the FMLA requirements, even if the offered leave program provides greater leave benefits than that offered under the FMLA. However, any employer-provided leave is separate from the FMLA leave and cannot expand an employee’s FMLA-designated leave beyond 12 (or 26) weeks. If the employer wishes to be generous and extend leave for an employee after FMLA leave exhausts, it should specify in its plan document and employee handbook that any employer-provided leave will not run concurrently with FMLA and therefore once FMLA exhausts, an employer-provided leave can be offered thereafter. An employer should be careful when it comes to continuation of coverage during an employer-provided leave, and if coverage is offered during such a leave, it should be outlined in the plan document.
Employers subject to the FMLA should review their practices, policies, and employee communications regarding FMLA-leave designation and to ensure they are consistent with the guidance provided by the DOL in the Opinion Letter. Specifically, employers should be providing notice of determination within five days of making a FMLA-leave designation, and should not designate more than 12 (or 26) weeks as FMLA-qualifying leave, even if the employee requests to have more than 12 (or 26) weeks designated as FMLA leave or to have an FMLA-qualifying leave treated as non-FMLA leave. Compliance with FMLA and the Opinion Letter is especially important employers who sponsor self-funded health plans as incorrectly designating or extending FMLA for employees could run afoul of the plan document’s continuation of coverage provisions and create issues with stop-loss reimbursement.
By: Erin Hussey, Esq.
The Complications Surrounding Intermittent FMLA Leave
The Family Medical Leave Act (“FMLA”) is a federal law requiring certain employers (employers who employ 50 or more employees, for at least 20 workweeks in the current or preceding calendar year, in a 75 mile radius), to provide eligible employees an unpaid, job-protected leave of absence that continues the employee’s health benefits. It is offered for family and medical reasons and an eligible employee may take up to 12 workweeks of leave in a 12 month period. This timeline appears straightforward, but complications arise when employees take this leave in separate blocks of time, even an hour at a time (when it is medically necessary and for the same serious health condition). This is called intermittent FMLA leave.
Employers should ensure they are administering intermittent FMLA leave properly given the complications it can present:
1. Recordkeeping: Complications can occur with tracking intermittent FMLA leave because an employee’s schedule could vary from week to week and the employer may have to measure FMLA in hourly increments or less. When these intermittent FMLA leaves occur, an employer must be diligent in tracking the leave to avoid liability of non-compliance with FMLA. For example, in Tillman v. Ohio Bell Tel. Co., 545 F. App'x 340 (6th Cir. 2013), an employee was out on intermittent FMLA leave and the employee did not provide information when asked by the employer for recertification of that leave. The employer subsequently terminated the employee. Since the employer kept thorough records of this, the court upheld the employee’s termination and the employer won the lawsuit.
2. Communication: It is important for an employer to maintain communication with the employee who is out on intermittent FMLA leave. For example, in Walpool v. Frymaster, L.L.C., No. CV 17-0558, 2017 WL 5505396 (W.D. La. Nov. 16, 2017), the employee was terminated and he brought suit claiming interference with his intermittent FMLA leave and that his discharge was in retaliation of his right to take FMLA leave. The employer claimed that the employee did not follow normal policies and procedures for giving notice of an absence. However, the employee won the case. The bottom line here is that if the employer believes the employee has provided inadequate notice, the employer should maintain communication with the employee before taking any immediate adverse action.
3. Paid v. Unpaid: In a recent Opinion Letter dated April 12, 2018, the Department of Labor’s Wage and Hour Division addressed a situation where an employee requested 15 minute breaks every hour under FMLA. This creates complications for employers because FMLA is unpaid and determining which 15 minute breaks are unpaid under FMLA, and which ones are paid, can be difficult for employers to track. This issue is discussed in the Opinion Letter.
The takeaway here is that employers should determine what their best practices will be for administering intermittent FMLA properly. Once the employer determines what their best practices are, the employer should implement them and administer their employees’ intermittent FMLA leaves accordingly.