APRIL 2016

Meeting the Challenges of Absence and Disability Management Understanding FMLA and ADA legal requirements

Absences can be costly for employers. Direct costs1

15.4%

Lost productivity costs1

of payroll

6.2%

of payroll

Managing absence and disabilities for today’s workforce Managing employee leaves is one of the most challenging personnel issues for employers. A complex array of statutory and regulatory requirements provides employees with the right to take leaves from work for a variety of reasons. These laws overlap and sometimes conflict with each other, imposing heavy burdens on employers in their effort to track and provide notice to employees. Employers can also be required to pay penalties and damages if they are found to not administer these laws properly. Having a plan in place can help a company: Control the absence management process  omply with complex legal requirements including employer obligations C under the Americans with Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA)

Absenteeism vs. presenteeism “Absenteeism” refers to unscheduled employee absences. “Presenteeism” is a term that describes employees coming to work even though they can’t perform at their usual level of productivity due to illness or physical/ emotional issues that distract them. Presenteeism costs are about

Why has absence management become so important? The workforce is shrinking: As the Baby Boom generation retires and, consequently, the American workforce shrinks, employers need to manage the size and skill of their workforces. Helping employees remain at work (or return to work if they’ve been absent) is crucial for retaining a substantial workforce.2 Employers must comply with regulations: Effectively managing absences is a growing concern. Companies that don’t manage absences in accordance with applicable laws and regulations are vulnerable to government investigations and lawsuits.

Costs need to be addressed: Direct costs for absences (wages/salaries, overtime, and replacement workers) are 15.4% of payroll according to a research report on the financial impact of employee absences on U.S. employers.1 Lost productivity costs are 6.2% of payroll, with a replacement worker 31.1% less productive than the replaced employee.1 Other costs include defending government investigations and/ or lawsuits arising from an employer’s failure to comply with legal requirements, which can result in devastating financial and reputational costs, as well as costs associated with the time that litigation demands. Additionally, the cost to morale can be high for staff members bearing the extra workload as a result of absences.

60%

of worker illness costs and range from $150 to $250 billion annually.3

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Overview of the FMLA and ADA Employees may be eligible for leave from work under a variety of laws. In this white paper, we’ll provide an overview of two key laws that regulate leaves and absences: the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA).4

to the FMLA, Congress approved (among other things) 12 weeks of “qualifying exigency” leave necessitated by the fact that the employee’s spouse, child, or parent is a covered military member on active duty. Congress also approved 26 weeks of leave during a single 12-month period to care for a family member who is a covered service member with a serious injury or illness.

Family and Medical Leave Act (FMLA)

Requests for leaves

In 1993, Congress passed the FMLA, which requires covered employers to provide 12 weeks of jobprotected unpaid leave to eligible employees for several reasons. The FMLA authorizes a leave for the following reasons:

Tracking and evaluating the requests for FMLA leave pose challenges for employers because, among other reasons, this leave can be taken as continuous, intermittent, or reduced-schedule leave. Under the FMLA, employers can be held liable for:

•

•

•

 he birth, adoption, or foster care placement T of a child  o care for a spouse, child, or parent with T a serious health condition

•

Interfering with an employee’s request for FMLA leave

•

P enalizing an employee for absences covered by the FMLA

•

 etaliating against employees for having R taken FMLA leave

For one’s own serious health condition

During FMLA leave, employees can continue to participate in employer-offered health insurance benefits.

Leave for employees with family members in the military Since 1993, Congress expanded the reach of the FMLA to include leave for employees who have family members in the military. In amendments

Employers also have obligations to provide notice to employees of their right to take FMLA leave when they know, or reasonably should have known, that the employee might be eligible. Employers can be held liable for failing to do so.

Surveyed employers rank these actions as “extremely challenging”5

44% 41% 37% 24% 2

training supervisors and managers on FMLA managing intermittent leave controlling employee abuse ensuring consistency

Americans with Disabilities Act (ADA) In 1990, Congress passed the ADA, which prohibits discrimination against employees on the basis of a disability and requires employers to provide reasonable accommodations to qualified individuals with disabilities. The ADA defines an individual with a disability as a person who has a physical or mental impairment that substantially limits one or more major life activities. Over the years, the ADA has been expanded, most notably by the ADA Amendments Act of 2008 (the ADAAA). The ADAAA was adopted to clarify that many additional types of impairments should also be considered protected disabilities.

The EEOC and the good faith interactive process The Equal Employment Opportunity Commission (EEOC) is charged with enforcing the ADA, and EEOC regulations address ADA employer obligations to provide reasonable accommodations and to participate in a good faith interactive process with disabled employees. The EEOC indicates that this process is key to determining whether a reasonable accommodation would assist employees in performing the essential functions of their job. The EEOC and courts have also concluded that a leave of absence can be considered a reasonable accommodation under the ADA. Therefore, even employees who may not be FMLA eligible (including those who have exhausted their annual FMLA leave entitlement) may be entitled to a leave of absence as a reasonable accommodation.

Employers have a basic obligation to engage in the good faith interactive process

Challenging issues under the ADA and FMLA Employers face many obstacles in administering the ADA and FMLA. For example, employers do not always realize that they have an obligation to engage in the good faith interactive process about whether an additional leave of absence (or other accommodation) is appropriate after the jobprotected FMLA leave has expired.

Inflexible leave/100%-healed policies Some employers have policies where they terminate an individual’s employment at the expiration of the 12-week job-protected FMLA leave (or at some other point, such as six months after transitioning to LTD). Others require that employees demonstrate that they are “100%” or “fully” healed without restrictions before allowing them to return to work after an FMLA leave or other leave. The courts and the EEOC have concluded that both of these types of “blanket” policies violate the ADA and that employers must engage in a good faith interactive dialogue and in an individualized analysis to determine whether or not a reasonable accommodation is appropriate. In that regard, the law is clear that an extended leave beyond the FMLA’s 12-week allotment can be a reasonable accommodation. While courts have generally ruled that a request for an indefinite leave of absence is probably not a reasonable accommodation, many courts require employers to examine each situation based on facts such as: •

 he length of time for which a leave is T requested

•

 he essential functions of the employee’s T particular job

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Addressing intermittent FMLA leave Under the FMLA, when an employee is eligible for intermittent leave or for leave because of a serious health condition (either his or her own or that of a covered family member), employers are legally obligated to provide it—even if regular and reliable attendance is an essential function of the employee’s job. Employers can temporarily reassign the employee to a position that better accommodates the need for intermittent leave, but they still must allow the employee to take FMLA intermittent leave. Once the FMLA leave expires (or if the employee is not otherwise eligible), the ADA also may require an employer to provide a flexible schedule. Many courts have concluded that regular and reliable attendance is an essential function of most jobs and that employers do not have to accommodate a “come as you want” schedule. There are courts, however, that have concluded that employers must perform an individualized assessment to determine whether or not a regular schedule is an essential function of an employee’s particular job. It is essential to properly track and monitor intermittent FMLA leave to prevent abuse. In that regard, while employees are legally entitled to take intermittent leave, they are required to comply with employers’ call-in procedures.

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Not complying with the FMLA or ADA can be costly The consequences of failing to comply with either the FMLA or the ADA can be severe. Employers can be subject to government investigations by the Department of Labor (for violations of the FMLA) and the EEOC (for violations of the ADA). They can also

be sued by individual employees. Outcomes can include, among other things, fines, penalties, and damage awards for back and front pay as well as for emotional distress (in the case of the ADA). Furthermore, employees are sometimes entitled to have their attorneys’ fees paid for by their employer. Listed below are just a few of the awards and/or settlements involving claims under the ADA and/or the FMLA.

Employers lack:6

? Comfort regarding their ADA responsibilities

Settlements related to the ADA/FMLA

$5.0 million

$6.2 million

$1.35 million

$300 thousand

 trucking company paid nearly $5 million to settle an EEOC charge arising A out of 1) an inflexible leave policy that terminated employment after 12 weeks of leave and 2) having a “no restrictions” policy that prohibited employees from returning to work unless they were released with no restrictions.

to identify ADA leaves

 major retailer paid $6.2 million to settle an EEOC charge arising out A of an inflexible workers’-compensation leave-exhaustion policy in which employees on leave were terminated from employment after a specified period of time.  health care employer paid $1.35 million to settle disability claims A arising out of its inflexible leave policy where employees were terminated at the end of FMLA leave rather than given additional accommodations.  transportation company paid $300,000 to settle EEOC charges arising out A of a policy that prohibited employees who had medical restrictions from working (i.e., a “100%-healed” policy).

$11.65 million

 n $11.65 million jury award was granted to an employee of a health care A employer that was found to have violated the FMLA by penalizing the employee, who had taken time off to care for his aging parents.

$1.48

 $1.48 million jury award was granted to an employee of a chemical A company that retaliated against the employee after he took intermittent FMLA leave.

million

Processes

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How can employers manage workplace absences? Successful FMLA and ADA administration There are a number of ways that employers can help ensure compliance with both the FMLA and the ADA. We encourage you to partner with your legal counsel or advisor to conduct an audit of your FMLA and ADA practices and procedures. This audit, at the very least, should include the following:

Enhancing your absence management efforts Integrating your leave of absence and disability management processes, along with your wellness programs, can help ensure compliance and provide other workplace benefits. Some employers are beginning to incorporate health and wellness components into their disability and absence management processes, an effort that often brings together elements such as employee assistance programs (EAPs), wellness initiatives, and important tools and information sources.7

 eview your FMLA and ADA policies R for compliance. E nsure that you have complied with federal and state notice-posting requirements.  eview your FMLA forms for legal R compliance. P repare employee communications that are legally compliant with the FMLA and the ADA and that protect your interests as the employer.

Employers are turning to proactive solutions like program integration for healthier and more productive employees.7

 rain HR and managers about FMLA and T ADA issues.

Did you know? On integrating leave of absence, disability management, and wellness programs...

52%

61% 1 2 3

Employers who have integrated programs in place7

6

Those who haven’t integrated their programs and are planning to do so7

“Wellness” seems to be working “Employers that make the investment in wellness are experiencing the increased productivity it takes to move their bottom line.”8

87%

87%

Percentage of employees who say wellness programs positively impact company culture.8

96%

Percentage of employees participating in wellness programs to improve their own health.8

Workplace solutions With greater resources and expertise available in the marketplace, employers have increasing support in making sure they are complying with FMLA and ADA/ADAAA regulations as well as in managing absences. Wellness programs can help with absenteeism—and presenteeism Wellness programs and employee assistance programs (EAPs) that offer employees the opportunity to conquer emotional and physical challenges can help improve employees’ lives and subsequently improve business outcomes by helping employees be more productive at work.

Return-to-work programs In addition to reducing costs, programs that effectively return employees to work from a disability leave can help employers comply with the ADA “reasonable accommodations” process. Employers can find help with engaging in the legally required good faith, interactive process and evaluating and finding legally compliant reasonable accommodations through returnto-work programs often offered with disability insurance products. Helpful programs include the following: •

•

 tailored approach—Identifies an employee’s A needs and sets appropriate course of action throughout the life of the claim.  egular communication—Engages employees R in positive, interactive dialogue about issues related to their progress, recovery, and return to work.

•

 eturn-to-work plans—Facilitate clear R understanding between employers and employees about an employee’s return to work and implement creative ways to help an employee return to a productive life.

An effective return-to-work program offers many benefits: Creates a positive experience for employees and employers Stops the cycle of dependence Influences health care costs by helping employees return to wellness Increases productivity and reduces costs by retaining talent Helps employers meet legal obligations regarding the good faith, interactive process and reasonable accommodations

Return-to-work programs can lower STD and LTD costs by about

30%

9

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Employers are admittedly struggling10 According to a recent study by the Society for Human Resource Management, employers admitted that they still: Have trouble interpreting federal and state leave laws. Find it difficult to ensure that employees will be able to perform their essential duties effectively when they return to work. Lack the staff resources to manage leaves of absence without causing potential disruption to their everyday business.

Where to go from here

Steps you can take now

The rising cost of employee absence is a growing concern for U.S. companies. Costs for unscheduled absences and disability benefits directly impact payroll. Indirect costs include decreased productivity, hiring of temporary staff, overtime pay, retraining, and diminished customer service. It is extremely difficult for an employer to be familiar with all aspects of the law as well as stay on top of continual changes and interpretations. And the consequences of not fully understanding these could severely impact an employer’s business.

A solid plan will give you a measure of control with the challenges that absences and disabilities present as well as help you comply with FMLA and ADA regulations. Your broker can help you with next steps for evaluating your current absence and disability management program to determine where to augment your resources with some outside expert support. An absence management services solution can: •

S implify disability and absence administration to reduce the workload and relieve the burden on your staff

•

Reduce the total cost of absence

•

E nsure compliance with increasingly complex regulatory and legal requirements

Contact your broker or Sun Life Financial representative to discuss an integrated plan for absence and disability management.

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Sun Life’s Work is Healthy philosophy and Absence Management and Disability Solutions can help employers comply with the complex requirements of FMLA leave and the ADA reasonable accommodations process.

Notes 1. Society for Human Resource Management (SHRM), “Total Financial Impact of Employee Absences Across the United States, China, Australia, Europe, India and Mexico,” 2014, https://www.shrm.org/Research/ SurveyFindings/Documents/Total%20Financial%20Impact%20of%20Employee%20Absences%20Report.pdf. According to SHRM, employee absences were defined in this report as “paid days off offered per full-time employee in 2013, including vacation and personal time off, sick time off, paid time off (U.S. only), and other paid time off, such as bereavement, parental, and civic needs. Costs associated with unpaid time off, including those associated with the Family and Medical Leave Act, are not included in the calculations.” 2. Andrew Soergel, “Where Are All the Workers?” U.S. News & World Report, July 2015, http://www.usnews.com/news/the-report/articles/2015/07/16/unemployment-is-low-but-more-workers-areleaving-the-workforce. 3. Patricia Schaefer, “The Hidden Costs of Presenteeism: Causes and Solutions,” Business Know-How, 2014, http://www.businessknowhow.com/manage/presenteeism.htm. 4. This paper does not provide a comprehensive discussion of all statutory leave requirements and is not intended to constitute legal advice. In addition to the federal FMLA and ADA, there are a variety of federal and state leave laws, including the federal Uniformed Services Employment and Reemployment Rights Act (USERRA), state FMLA laws, and state disability discrimination laws. State laws can sometimes provide greater employee protection than their federal counterparts. For example, the Connecticut FMLA provides for 16 weeks of job-protected leave that can be used over a two-year period, unlike the federal FMLA, which provides 12 weeks accrued annually. State leave laws cover a variety of circumstances, including, for example, Domestic Violence Leave, Jury Duty Leave, Family Military Leave, Bone Marrow/Organ Donor Leave, and Civic Volunteer Leave. Further, more and more states and localities are adopting paid Sick Leave laws. These laws are beyond the scope of this article. 5. Disability Management Employer Coalition/Spring Consulting, “2014 Employer Leave Management Survey,” January 2015, exhibits 9 and 18. 6. ComPsych® Corporation, “Employers Miss Half of FMLA Health Cases that Need ADA Review,” June 24, 2014, press release, http://www.compsych.com/press-room/press-releases-2014/804-jun-24-2014. 7. International Risk Management Institute, Expert Commentary, “Benefits Integration: Future Pathway to Controlling Costs and Increasing Productivity,” January 2014, https://www.irmi.com/articles/expert-commentary/wccontrolling-costs-and-increasing-productivity. 8. Virgin Pulse, “Virgin Pulse Survey Reveals Investing in Employees’ Well-Being Drives Engagement, Company Culture and Recruitment,” press release, June 2, 2014, http://www.virginpulse.com/press/virgin-pulse-survey-revealsinvesting-in-employees-well-being-drives-engagement-company-culture-and-recruitment. 9. National Business Group on Health®, Disability and Absence Management web page, https://www.businessgrouphealth.org/resources/topics/disability.cfm, accessed March 2016. 10. Total HR Management, “Leave of Absence Management and the Ongoing Success of Your Company,” September 3, 2015, http://www.totalhrmanagement.com/leave-of-absence-management. Sources 1. U.S. Department of Labor, http://www.dol.gov. 2. U.S. Equal Employment Opportunity Commission, “Fact Sheet on the EEOC’s Final Regulations Implementing the ADAAA,” http://www.eeoc.gov/laws/regulations/adaaa_fact_sheet.cfm, accessed February 2016.

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