By Christina Santillo, SHRM-CP, Senior Human Resources Consultant
Managing employee benefits during extended leaves of absence is an important responsibility for employers. Both FMLA (Family and Medical Leave Act) and ADA (Americans with Disabilities Act) leaves have different rules and requirements, so understanding the distinctions is crucial for compliance.
Family and Medical Leave Act (FMLA)
FMLA requires employers to continue group health benefits as if the employee were actively working during their leave. The employee is still responsible for paying their portion of the premium. If the employee fails to pay their share, the employer may cancel coverage. However, the employer must follow a specific process.
Before their leave begins, employees should be informed of the cost of their portion of benefits, as well as when and how payments should be made. Employers are encouraged to provide this information in writing, by letter or email to ensure proper documentation. The Department of Labor’s Notice of Rights and Responsibilities under the Family and Medical Leave Act form includes a section which gives employers the opportunity to document expectations regarding premium payments while on leave. We recommend using that form as it also includes many other details that should be communicated to employees prior to their leave.
Americans with Disabilities Act (ADA)
The ADA does not require employers to continue an employee’s medical benefits while they are on ADA leave. Instead, the continuation of benefits is determined by the company’s Summary Plan Documents (SPDs). It is critical to review your plan documents carefully as each plan has its own requirements. Providing benefits when the plan would consider the employee ineligible for coverage could result in the employer being financially responsible for claims that should not have been covered. In addition, where the Consolidated Omnibus Budget Reconciliation Act (COBRA) or a related state law applies, employers may face hefty fines if proper notifications are not sent to the employee in a timely manner.
Note: Always check state and local regulations. Some states have laws that expand employee protections or require benefit continuation beyond what federal law requires.
Other Employee Benefits
Paid Time Off During Leave: Clearly outline whether employees must use all accrued vacation, sick time, or PTO before becoming eligible for unpaid leave. Defining this process upfront helps set expectations, ensures consistency, and prevents confusion when employees transition from paid to unpaid leave. One caveat for all FMLA-covered employers: If the Company becomes aware of any qualifying reason for FMLA leave, the Company must designate the leave as FMLA leave for any employee who is eligible. The employee may not refuse FMLA designation or delay it by choosing to use available paid time off first. If paid time off is used, it must run concurrently with the designated leave.
Bonus Eligibility during Leave: If the company offers non-discretionary bonuses tied to attendance or performance, related policies should clarify how the bonus is earned and whether employees are eligible to receive bonuses while on a leave of absence.
Commission Pay during Leave: In most cases, commission must be paid as it is part of compensation. However, when a commissioned employees is on a leave of absence, and a renewal or other work is completed by another employee, the company must determine who is owed that commission. Your commission policies or plans should clearly state whether the employee must complete the work to receive the commission.
Keys to Success
- Communication: Clear communication is essential when an employee requests a leave of absence. As an employer it is important to explain policies and procedures so the employee can make informed decisions. Well-written handbooks and policies will establish clear expectations regarding benefits during a leave and will assist managers throughout the leave administration process.
- Consistency: When administering any leave of absence, consistency is key. Employers should ensure that all employees are treated the same in similar situations to avoid claims of discrimination or unfair treatment and to avoid setting a precedent that could become difficult to manage later.
- Compliance: Leaves of absence are covered by many federal and state laws, some of which are complex. To avoid costly mistakes, be sure the person your company has tasked with leave administration understands your company policies and knows what is required regarding benefits continuation during various leaves.
Need Help?
If you are an employer with questions about leaves of absences, or if you have questions about any HR issue, contact our Risk Management Division by phone at 855-873-0374 or by email at . We will be happy to help!
Disclaimer: This information is for informational purposes only and not for the purpose of providing legal advice. This article does not create an attorney-client relationship between Keystone’s Risk Management Division and the reader.