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Introduction to FMLA and FMLA Outsourcing FX-3182 (7-13)

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1 Introduction to FMLA and FMLA Outsourcing FX-3182 (7-13)

2 2 Presentation Content FMLA History FMLA 101 Legal Considerations Employer Challenges FMLA Administrative Options Impact of Lost Time: What are the Costs?

3 FMLA History

4 4 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, 2009, these amendments included active duty and military caregiver leave. Additional revisions 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 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).

5 FMLA 101

6 6 Employer Obligations An employer must, within predetermined 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 -Applicable state leave laws Confirm in writing within 5 business days of notice for leave: - Eligibility -Rights and responsibilities Confirm in writing within 5 business days of receipt of information: - Designation of leave

7 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

8 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. 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 of larger site Has worked at least 1,250 hours during the 12 months prior to the leave request (consecutive) –Only actual work time counted –Leaves of absence, paid or unpaid, including FMLA leave, 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. What about Temporary employees? Time worked counts toward employee’s hours and tenure requirements Note: Flight Crew members have different requirements based on airline industry scheduling equivalents

9 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

10 10 Birth of a Child Both mothers and fathers are eligible –But if they work for the same employer, they are only entitled to 12 weeks jointly They can split up the leave however they want 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

11 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

12 12 Care for Loved Ones Spouse –Husband or wife as defined by state law. –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 !

13 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

14 14 Serious Health Condition: Examples Allergies Asthma Alzheimer’s disease Diabetes Epilepsy Mental illness Restorative/plastic surgery after an injury Removal of cancerous tumors Stroke Substance abuse * Remember: applies to employee or loved one

15 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.

16 16 Military Amendments Active Duty Leave Up to 12 weeks of unpaid leave to address a qualifying exigency arising out of 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 includes members of both the regular and reserve components of the Armed Forces. Covered active duty must involve deployment to a foreign country. Qualifying Exigency is specifically defined by the regulations.

17 17 To address any issue that arises as a result of short notice deployment of 7 or less calendar days. (7-day limit on this leave) To attend military events and activities related to the active duty or call to active duty, includes family support or assistance programs and informational briefings. Child care and school activities –To arrange for alternate child care –To provide child care on an urgent immediate need basis –To enroll in or transfer to a new school or daycare –To attend disciplinary meeting with school or daycare (arises out of active duty or call to active duty). Qualifying Exigency

18 18 Financial and legal arrangements –Make or update financial or legal arrangements to address absence. –To act as covered military member’s representative before an agency regarding military benefits. Counseling –To attend counseling (other than by healthcare provider) for oneself, the covered military member or the child, provided need for counseling as a result of active duty or call to active duty. R&R leave (15-day limit) –To spend time with covered military member during periods of deployment Post-deployment –To attend ceremonies, briefings, etc. for a period of 90 days following the termination of active duty status. Qualifying Exigency (continued)

19 19 Qualifying Exigency (continued) Parental Care –Must be parent of servicemember who is incapable of self-care –To arrange for alternate care when the active duty or call to active duty status necessitates a change in existing arrangements –To provide care on an urgent immediate need basis when the need to provide care arises from the active duty or call to active duty –To admit or transfer to a care facility when admittance or transfer is necessitated by the active duty or call to active duty –To attend meetings with staff at a care facility (e.g. hospice or social service providers) when meetings are necessary due to circumstances arising out of active duty or call to active duty “Catch-all” –To address other events provided employer and employee agree it is a qualifying exigency and agree to timing and duration.

20 20 Leave to provide care for covered service member who is employee’s injured spouse, son, daughter, parent, “next of kin.” Covered servicemember - current member or veteran of either the Armed Forces, National Guard, or 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. Military Caregiver Leave

21 21 An eligible employee is entitled to 26 work weeks 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 “per-service member, 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 service member or same service member 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 FMLA qualifying. Military Caregiver Leave

22 22 Types of Leave Single 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.) 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 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 under their leave policies An employee cannot be forced to take off more time than he needs

23 23 How Do You Deduct Leave for Intermittent or Reduced Schedule Absences? FMLA leave is based on the employee’s normal workweek. –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.

24 24 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 Intermittent and Reduced Schedule Leave

25 25 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 recertification as allowed by the regulations Require foreseeable leave to be scheduled so as to be least disruptive to your operations

26 26 Tips for Managing Intermittent Leave 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

27 Legal Considerations

28 28 FMLA/Leave Management Services Key: colored areas indicate states with additional leave regulations Scope and complexity of the law

29 29 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

30 30 Top 10 Mistakes 1.Improperly determining eligibility 2.“Deeming” employees FMLA eligible 3.Failure to provide required notices 4.Using a calendar year 12 month period 5.Failure to calculate leave entitlement appropriately 6.Failure to properly designate FMLA time 7.Inappropriate use of medical certifications 8.Failure to request a new certification and redetermine eligibility in a new leave year 9.Improper use of recertifications 10. Failure to monitor intermittent leaves closely

31 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: 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.

32 32 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 Plaintiffs 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, 2006

33 33 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 required supporting his claim leave. The Result: The jury rejected the employers claim and found that the employer had violated the FMLA and awarded 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

34 34 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)

35 35 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)

36 36 What Can You Do About Abuse of FMLA? Strictly follow certification requirements Don’t be afraid to seek clarification or ask for second or third opinions, particularly when dealing with employees with a history of attendance problems Be consistent – don’t selectively enforce Put everything in writing, it gives employees less “wiggle room” Stay in touch with absent employees – there is no prohibition against contacting them, asking about their status Keep your eyes and ears open – if circumstances have changed, request recertification –But your documentation must be solid

37 Employer Challenges

38 38 Key FMLA Findings From Employers The most frequently cited HR organizational challenges with FMLA*: Source: DMEC/Spring Consulting, 2012 Employer Leave Management Survey (2013).

39 39 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)

40 FMLA Administrative Options

41 41 FMLA Administrative Options In-source-Decentralized model In-source-Centralized model Outsource-TPA Outsource-Carrier/TPA Outsource-Carrier with dedicated capabilities

42 Lost Time Costs

43 43 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).

44 44 FMLA Administrative Options In-Source versus Out-Sourcing-Factors to consider: Employer Size Demographics Industry Location and number of operational sites Absence Management Philosophy Company Culture Current Capabilities

45 45 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 Outsourcing Evaluation - Look for Robust Leave Management Services Capabilities

46 46 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.

47 47 Absence Management Specialist STD Specialist Absence Management Specialist Intake new leave/Claim and inform employee Set expectations and next steps Record intermittent hours Answer questions related to leave and disability claim FMLA Specialist Employer or Employee Toll-free call Clients benefit from our Centers of Excellence FMLA Specialist ►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 STD Specialist ►Quarterback of the overall process ►Determine 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 Knowledgeable about customer’s unique needs

48 48 Lost Time Costs The Total Financial Impact of Employee Absences Survey Highlights October 2008 Mercer Guy Carpenter, Oliver Wyman

49 49 Lost Time Costs The Total Financial Impact of Employee Absences Survey Highlights October 2008 Mercer Guy Carpenter, Oliver Wyman

50 50 The Big Picture! The Total Financial Impact of Employee Absences Survey Highlights October 2008 Mercer Guy Carpenter, Oliver Wyman

51 51 Case Study-Intermittent Leave Management* Company-Outdoor Clothing and Gear Retailer # US Employees 4,500 year round 11,500 at peak (December) Products & Services – Retail Sales Offering clothing and outdoor gear for customers to enjoy the outdoors. Contact Centers provide world class legendary service to customers 4 year round centers & 1 seasonal center in Northern New England Handle inbound order & customer service calls 24 hrs/day, 7 days/week days a year Daily Call Volume: 35,250 calls off peak; 133,500 calls during peak Call Center Operations are supported by centralized planning functions (Finance, Systems/Technology, Quality, Training, Workforce Planning) *This case study is true, although the employer name and other identifying characteristics have been removed or changed to preserve confidentiality.

52 52 Case Study-Intermittent Leave Management 1,170 call center staff year round increasing to over 4,340 employees at Peak Annual Turnover: 7-8% Short term disability Absence in ‘05 – 2,850 days (est. equivalent of 11 FTE’s) Workers’ Compensation Lost Time in ‘05 – 53 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

53 53 Questions

54 54 Unum 1 Fountain Square Chattanooga, TN unum.com © 2013 Unum Group. All rights reserved. Unum is a registered trademark and marketing brand of Unum Group and its insuring subsidiaries. Insurance products underwritten and services offered by the subsidiaries of Unum Group. For broker and employer information. FX-3182 (7-13) Introduction to FMLA and FMLA Outsourcing


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