The Family and Medical Leave Act (FMLA) took effect on August 5, 1993 requiring covered employers to provide job-protected leave to covered employees for their own medical reasons or to care for family. FMLA also requires a continuation of health plan coverage for the maximum 12 weeks of leave; however, the Act does not require the leave to be paid. Due to the lack of a federal paid leave law, some states began enacting paid leave laws as early as 2004.
While few states were on the progressive side, the last few years have seen a boom in state legislation that is designed to protect employees, and much of the legislation focuses on leaves of absence, continuation of coverage, and, in some cases, the requirement for such leave to be paid. Two interesting recent examples are California and New York.
California’s leave laws have been in place for decades, but have undergone various changes, including revisions in 1999, 2004, 2011, 2012, and most recently, 2017. California Senate Bill No. 63 implemented the New Parent Leave Act (NPLA) as of January 1, 2018. Affording protected leave to employees of employers with 20 or more employees, this marked a significant change from the state’s previous requirement laws that applied only to employers with 50 or more employees. Employers subject to California law must consider the interaction of all state and federal leave laws, including the NPLA, FMLA, California Family Rights Act (bonding leave), and Pregnancy Disability Leave (PDL).
Unlike California’s law, which expanded an existing law, New York passed a brand new leave law, and it happens to be the most generous paid leave law in the United States to date. Effective January 1, 2018, New York’s Paid Family Leave Benefits Law (PFLBL) is being phased in over four years with full implementation in 2021. The law requires privately owned employers to provide paid leave to employees in three situations: (1) for a father or mother to bond with a new child (birth, adoption, or foster); (2) to care for a close relative with a serious health condition; or (3) to care for a close relative when another close relative has been called to active military service.
The length of leave in 2018 has been limited to eight weeks, but will increase over time to become 12 weeks upon full implementation in 2021. Interestingly, in addition to creating the requirements, the law requires employee handbook modifications, conspicuous posting of specific information (similar to FMLA), the need to coordinate with paid time off and FMLA, and of course the tax treatment of the benefits.
Readers that are paying attention will note that while paid leave laws have a direct impact on employers, there may also be an impact on health plans—including self-funded plans. At a high level, ERISA protects a health plan from being subject to state insurance laws—but laws such as paid leave and continuation of coverage laws have been found to not actually be insurance laws, but employment laws, and therefore ERISA can’t shield anyone from compliance with such laws.
Following state and federal laws is crucial to the viability of a health plan and the employer’s business and compliance is generally not an easy feat. Laws that protect employees tend to have intricate details and nuances; California and New York have had a lot of attention because of the number of workers impacted, but a total of six states and the District of Columbia have now passed (or enacted) legislation to offer or expand leave laws. Those states include Washington, New Jersey, Rhode Island, and Massachusetts. The list of potential paid leave laws is growing rapidly as an additional 19 states have started making moves to develop such laws. Although most federal and state laws do not currently require a continuation of coverage, we may soon see an upheaval in the status quo.
Employers can choose whether to provide the benefit of continued coverage if the applicable law does not otherwise provide such a requirement. If an employer chooses to be generous, the employer’s generosity must be spelled out in the employee handbook as well as the plan document—this is particularly important for self-funded plans wishing to avoid stop-loss denials. Ultimately, the interaction of applicable state laws, FMLA, and any other type of employer-sponsored leave of absence will need to be assessed on case-by-case basis to determine the rights of an individual employee in any particular circumstance.
Like car insurance rates changing at age 25, now that FMLA has turned 25, is that the signal for change? The current administration has pushed paid family leave back to the forefront of conversations in the last few months. President Trump had previously referred to paid leave in the annual budget and renewed conversations with a mention in his most recent State of the Union address.
Both sides of the political spectrum have introduced legislation on paid leave law. The sticking points will likely be how broad the law would be in application and how a paid leave law is funded. While FMLA currently applies to new parents who have a child or adopt and extends to care for family members with medical conditions, current proposals for a paid leave law appear to be more limiting in only applying to new parents (by birth or adoption). As for the source of funding, ideas include establishing leave programs based on unemployment insurance, an increase in taxes, and borrowing against future Social Security payments.
While a federal paid leave law is still in the works, many states have seen proposals to adopt state paid leave laws. Employers need to do their homework on a regular basis to ensure they are up to speed with the rapidly changing laws. Employers will not only need to look at their employment policies, but also to their health plan documents to ensure leaves and applicable continuation of health coverage are appropriately addressed.
Paid leave law tides are changing and states are turning the heat up, but federal law has yet to boil.
Kelly E. Dempsey is an attorney with The Phia Group. She is the director of Independent Consultation and Evaluation (ICE) Services. She specializes in plan document drafting and review, as well as a myriad of compliance matters, notably including those related to the Affordable Care Act. Kelly is admitted to the Bar of the State of Ohio and the United States District Court, Northern District of Ohio.