The Proposed FMLA Regulations and Their Effect On You
Part II: Coverage, Eligibility and Treatment of Benefits

In last week's Informed Employer Briefing FMLA article, we notified you that the Department of Labor (DOL) had issued proposed revisions to the regulations implementing the Family and Medical Leave Act of 1993 (FMLA). We also provided summaries of a few of the proposed revisions and clarifications contained in the DOL's proposal, focusing on provisions related to notice requirements. This week, we continue the series by focusing on revisions and clarifications related to coverage, eligibility issues and the treatment of benefits such as paid time off, holidays and bonuses.

Joint employment relationships-Coverage

The current regulations provide that "joint employment will ordinarily be found to exist when a temporary or leasing agency supplies employees to a second employer." This language left some confusion on the proper treatment of Professional Employment Organizations (PEOs). The proposal makes it clear that PEOs or HR Outsourcing Vendors do not enter into a joint employment relationship with the employees of their client companies, provided that they merely perform administrative functions for client employers, such as payroll, benefits, regulatory paperwork and updating employment policies. The proposal also clarifies that, if a PEO has the right to hire, fire, assign or direct and control the client's employees or benefits from the work that the client's employees perform, the PEO would be considered a joint employer along with the client employer.

Effect on you

If the proposal is adopted, PEOs and HR Outsourcing Vendors will have clearer guidance on the issue of when they are considered joint employers for purposes of the FMLA and when they are covered under the FMLA. Employers with less than 50 employees using PEOs or HR Outsourcing Vendors will not necessarily be covered under the FMLA due to the number of employees "employed" by the PEO.

Joint employment relationships-Eligibility

The proposal clarifies how to determine whether an employee who is jointly employed by two or more employers is employed at a worksite where 50 or more employees are employed by the employer within 75 miles and, thus, eligible for FMLA leave. Under the current regulations, the worksite of such an employee is the primary employer's office from which the employee is assigned or reports. However, a federal appellate court determined that this provision could not be applied to an employee with a long-term fixed worksite at the facility of a secondary employer. The proposal responds to this holding and provides that the employee's worksite is the primary employer's office from which the employee is assigned or reports, unless the employee has physically worked for at least one year at a facility of a secondary employer, in which case the physical place of work is the relevant worksite.

Effect on you

If the proposal is adopted, the method for determining whether a joint employee is employed at a worksite where 50 or more employees are employed by the employer within 75 miles and, thus, eligible for FMLA leave, will change for employees who have physically worked for at least one year at a facility of a secondary employer.

Treatment of leave commenced before becoming FMLA eligible

The current regulations are unclear with respect to the issue of how to handle the case of an employee who begins a leave of absence before becoming eligible for FMLA leave but becomes FMLA-eligible during the leave. The proposal clarifies that, if an employee starts a leave before becoming FMLA eligible (perhaps because he or she has not yet been employed for 12 months, although he or she has already worked more than 1,250 hours in the last 12 months) but then becomes eligible (because he or she reaches 12 months of employment during the leave), the leave prior to becoming eligible is non-FMLA leave. However, any leave taken for an FMLA-qualifying reason after the employee meets the eligibility requirements may be considered as FMLA leave.

Effect on you

If the proposal is adopted, you will have clear guidance on how to handle the situation of an employee who is not eligible for FMLA leave when beginning a leave of absence, but later becomes eligible for FMLA leave.

Holidays

The current regulations provide, "For purposes of determining the amount of leave used by an employee, the fact that a holiday may occur within the week taken as FMLA leave has no effect; the week is counted as a week of FMLA leave." The proposal changes this provision. The proposed language provides that, if an employee is using FMLA leave in increments of less than one week and a holiday occurs during the employee's leave, then the holiday will not count against the employee's FMLA entitlement unless that employee was otherwise scheduled and expected to report during the holiday. If an employee has taken a full week of FMLA leave, however, the fact that a holiday occurs during the week has no effect, and the week is counted as a week of FMLA leave.

Effect on you

If the proposal is adopted, you will not be able to count holidays against the FMLA entitlement of an employee who is taking leave in increments of less than one week. Your treatment of employees who have taken a full week of FMLA leave will, however, remain the same.

Substitution of paid leave-Eligibility

Under the current regulations, employers may enforce their normal rules regarding the use of paid medical and sick leave when such leave is substituted for unpaid FMLA leave. They may not, however, enforce their normal rules regarding the use of other kinds of paid leave (such as paid vacation leave or paid personal leave) when such leave is substituted for unpaid FMLA leave, if they are more stringent than the FMLA. In addition, the current regulations provide that, if an employer's procedural requirements for taking paid leave are less stringent than the requirements of the FMLA, employees cannot be required to comply with the higher FMLA standards. The proposal, however, treats all forms of paid leave the same and provides that the terms and conditions of an employer's paid leave policies apply and must be followed by an employee to substitute any form of accrued paid leave including paid vacation, personal leave, family leave, PTO, or sick leave for unpaid FMLA time. The proposal also contains language clarifying that employers may voluntarily waive the application of any restrictions associated with their paid leave policies, but are not required to do so. In addition, the proposal deletes the language which prohibits employers from requiring that employees comply with the higher FMLA standards when their own requirements for taking paid leave are less stringent than those of the FMLA.

Effect on you

If the proposal is adopted, you will be able to require employees to comply with your normal rules regarding the use of paid time off before substituting such paid time off for unpaid FMLA leave time. For example, if your normal rules require two weeks notice before using paid vacation time, you will not be required to allow an employee who does not provide you with two weeks notice of the need for FMLA leave to substitute paid vacation time for unpaid FMLA leave time, although you still may choose to do so.

Bonuses for employees on FMLA leave

The current regulations distinguish between bonuses which require performance by an employee (such as those based on production goals) and bonuses that, according to the DOL, do not require performance by an employee (such as bonuses for perfect attendance). This distinction has led to confusion about when an employee who has been absent on FMLA leave can be denied a bonus. The proposal seeks to clarify this issue with new language that provides that, if a bonus or other payment is based on the achievement of a specified goal such as hours worked, products sold, or perfect attendance and the employee has not met the goal due to FMLA leave, then the payment of the bonus may be denied, unless the employer pays such a bonus to employees on an equivalent non-FMLA leave status. For example, if an employer allows employees who use vacation leave to qualify for a "perfect attendance" bonus, then the employer must also give the "perfect attendance" bonus to an employee who has been absent from work in connection with FMLA leave.

Effect on you

If the proposal is adopted, you will be able to deny perfect attendance bonuses (or other goal-based bonuses) to employees who have taken FMLA leave, unless you pay the perfect attendance bonus to employees who have taken equivalent non-FMLA leave (such as paid vacation).

If you have questions related to these proposed regulations, please contact a member of Ice Miller's Labor and Employment Practice Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.