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Earlier this year, the U.S. Department of Labor (DOL) issued an opinion letter that addressed the Family and Medical Leave Act’s (FMLA) provision regarding the “substitution” of accrued paid leave and its application to state and local paid leave programs.
The opinion letter opened by reminding employers of the FMLA’s basic premise when it comes to the substitution of accrued paid leave (paid time off (PTO), for this article’s purposes) during FMLA leave: When an employee is taking FMLA leave, the employee can choose — or the employer can require the employee — to use PTO concurrent with the FMLA leave so long as the leave to be taken is truly unpaid. For example, if an employee is taking leave and receiving payments pursuant to a workers’ compensation or disability program — and assuming, which is likely, that the leave also qualifies as FMLA leave — neither the employee nor the employer can require that PTO also be used during this time, because the leave is not unpaid. Where state law permits, however, the employer and the employee can agree for the PTO to supplement, or top off, workers’ compensation or disability benefits where those benefits do not replace the employee’s entire salary.
Complicating this framework is the consideration of how newly imposed state and local paid leave programs fit into it, as an increasing number of states and local governments are passing legislation that provides paid leave for personal medical reasons, family care, and parental leave. Adding to this complexity is the fact that state and local programs vary widely in their coverage, scope, and duration — sometimes overlapping with FMLA-qualifying reasons and sometimes operating independently. As the list of states and cities with paid leave programs is likely to grow, employers must understand how to apply these programs alongside the FMLA where the two programs coexist. To that end, the DOL has stepped in to provide handy guidance and “rules of thumb” to help employers with this puzzle.
- Determine whether the state or local leave program is also FMLA-qualifying.
- The DOL reminds employers that whenever an employee takes leave pursuant to a workers’ compensation or disability program, if the reason is also FMLA-qualifying, the leave must be designated as FMLA leave. The same rule applies to leave taken in accordance with state or local leave laws. If the leave is covered by both the state or local program and the FMLA, the employer must designate the leave as FMLA leave and provide notice to the employee of that designation.
- However, when an employee uses state or local leave for a reason that does not qualify as FMLA leave, that time may not be counted against the employee’s FMLA entitlement. For example, if a state leave program allows for paid leave to care for a family member not covered by the FMLA (i.e., a grandparent or an in-law), leave taken under those circumstances may not count against the employee’s FMLA leave entitlement. Therefore, determining whether the employee’s leave pursuant to a state or local program is truly FMLA-qualifying is a crucial first step for employers.
- Determine whether the state or local leave program provides compensation to the employee.
- This is where employers must remember and apply the FMLA’s substitution principles above. Where the employee’s leave is covered by the FMLA and where the employee receives compensation from a state or local leave program, the substitution of PTO is not permissible for the portion of the leave that is compensated.
- For example, an employee who takes 12 weeks of FMLA leave for a serious health condition also qualifies for her state family leave program, which replaces two-thirds of her normal income each week that she is on leave, for up to six weeks. During the six weeks that the employee is receiving paid benefits under the state program, neither the employee nor the employer can require the use of PTO during the portion of the leave that is compensated by the state or local program. However, the employer and employee can agree, where state law permits, to use PTO to supplement the payments made under the state or local leave program.
- Determine whether the FMLA’s substitution provision kicks in after the state or local paid leave is exhausted.
- Finally, employers should pay attention to when paid leave under a state or local program ends, reverting to the standard protections provided by the FMLA if such leave has not been exhausted. Returning to the example above, during the final six weeks of the employee’s 12-week FMLA leave, she will have exhausted her state program’s paid leave. At that point, the leave is unpaid, and the FMLA’s substitution provision applies — enabling the employee to use her accrued PTO for the remaining six weeks of FMLA leave.
Takeaways
As state and local paid leave programs become more prevalent, employers should take care to familiarize themselves with the substitution provision of the FMLA and carefully apply those principles to employees taking leave under state and local programs that are also FMLA-qualifying.
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