Archive for March, 2019

Substitution of paid leave

This is the last one from Malania. If I want to keep doing this I’m actually going to have to start writing these things again. Bummer.

Back again, for yet another thrilling discussion of FMLA-related leave. Are you sick of me yet? I’m sick of me. But stay tuned for a topic I think you’ll find quite useful. You see, some of you may be so lucky to work at a company that allows employees to accrue paid leave benefits, sometimes referred to as sick leave. But when, if ever, does the employee have to use this paid leave they’ve worked to save up? Turns out:

If an employee does not choose to substitute accrued paid leave, the employer may require the employee to substitute accrued paid leave for unpaid FMLA leave.

29 CFR §825.207(a) (emphasis added).

So there you have it: a seemingly straightforward answer (for once). But let’s break this down just a little bit more before we throw in the towel, starting with the definition of “substitute.” Substitute here means that an employee’s paid leave will run concurrently with their unpaid FMLA leave: i.e. the employee will get paid for a portion of their FMLA leave, with the exact portion dependent on how many accrued paid leave days the employee has socked away.

Alright, that doesn’t sound so difficult. But you may now be wondering, when, if ever, can the employee choose not to take their paid leave? Because by this point, you’re certainly smart enough to know that there’s a legal hurdle, caveat, exception, etcetera, just waiting around the corner . . . .

So let’s look at that next. The first hurdle in determining when the employee can or must substitute paid leave for FMLA leave is figuring out whether the employee qualifies to take the paid leave in the first place:

An employee’s ability to substitute accrued paid leave is determined by the terms and conditions of the employer’s normal leave policy.

29 CFR §825.207(a).

This means that if the employee doesn’t meet the company’s criteria for using their paid accrued leave, the employee does not need to take it. But, in order to determine whether or not the employee can take it in the first place, you, as the employer, are required to:

[I]nform the employee that the employee must satisfy any procedural requirements of the paid leave policy only in connection with the receipt of such payment. If an employee does not comply with the additional requirements in an employer’s paid leave policy, the employee is not entitled to substitute accrued paid leave, but the employee remains entitled to take unpaid FMLA leave.

29 CFR §825.207(a).

Slightly convoluted, but the takeaway here is this: if the employee is told that they need to do something additional in order to use their paid leave and they don’t do it, the employee can still choose to take FMLA leave (assuming that the employee qualifies for it). Additionally:

If neither the employee nor the employer elects to substitute paid leave for unpaid FMLA leave under the above conditions and circumstances, the employee will remain entitled to all the paid leave which is earned or accrued under the terms of the employer’s plan.

29 CFR §825.207(b).

Essentially, if your employee has accrued paid leave, you cannot take that leave away from your employee merely because they could have used it and chose not to. Conversely, if your employee did not qualify for FMLA leave and took paid time off instead, that wouldn’t count against the employee’s future entitlement to FMLA. I think for most of you know that will logically make sense: how could you take away someone’s FMLA leave entitlement if they didn’t qualify for it in the first place? But I digress.

Let’s end this discussion by examining two other scenarios that might come into play and make this calculus a bit more daunting: disability leave and worker’s compensation.

We’ll tackle the disability leave first. The biggest takeaway here is that leave taken due to a disability may be designated by the employer as FMLA leave if it meets all of the necessary criteria. However,

(d) Because leave pursuant to a disability benefit plan is not unpaid, the provision for  substitution of the employee’s accrued paid leave is inapplicable, and neither the employee nor the employer may require the substitution of paid leave.

29 CFR §825.207(d).

Basically, the employee and the employer can agree to use some of the employee’s paid leave during this time if, for instance, the disability benefits do not fully cover the employee’s salary. But neither the employee nor the employer can require the use of the paid leave. Lucky for you (since I suspect you’re pretty tired of reading this by now), it’s more or less the same story with worker’s compensation: neither the employee nor the employer can require the use of paid leave, but the parties can agree to have the employee use the paid leave if the worker’s compensation doesn’t cover the employee’s full salary.

Interaction with the FLSA

Here is another one from Malaina.

Fair warning: this post will likely not be thrilling. I mean, c’mon, as lawyers, we’re paid to be boring and accurate, not to write you the latest page-turner! And while I really do try to spice things up for you every once in a while, this regulation in particular is just one of those most of us would rather not look at. Ever. However, as an employer, it should hopefully offer you some valuable guidance for handling intermittent or reduced schedule leave all while maintaining compliance with the Fair Labor Standards Act. This act, also known as the FLSA for short, interacts with and at times bumps up against FMLA policy. And as boring as it may be, what we’re about to cover is something you should be aware of.

Today, the interaction we’re going to focus on in particular is an employee’s exempt status under the FLSA, and we’re going to discuss how to ensure that an employee retains his or her exempt status even during FMLA intermittent or reduced schedule leave. But before we can get to that point, we have to first understand what it means to be “exempt” under the FLSA.

Being exempt under the FLSA means that you are exempt from minimum wage and overtime pay requirements. The most typical exemptions would be for executive, administrative, or other professional positions. These exempt individuals, rather than receiving hourly wages, receive a salary. Now, there are other hoops to jump through to qualify for one of these exemptions, but that is largely outside of the scope of this blog post. You simply need to know that some employees are exempt under the FLSA and that the goal for you as the employer is to keep them that way, even during FMLA leave.

So, how to make that happen? We start with this first premise:

(a) Leave taken under the FMLA may be unpaid. If an employee is otherwise exempt from minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA) . . . providing unpaid FMLA-qualifying leave to such an employee will not cause the employee to lose the FLSA exemption.

29 CFR §825.206(a).

Simple enough. Now, to understand this next part, we need to briefly discuss one of those FLSA hoops I (conveniently) skipped over earlier. The FLSA requires exempt employees to receive at least a fixed salary each week, with only certain very limited deductions to qualify as exempt. Yet, if someone is going on FMLA leave that is unpaid they are not getting their salary. Rather than lose their exempt status, however, the regulations provide that:

(a) [T]he employer may make deductions from the employee’s salary for any hours taken as intermittent or reduced FMLA leave within a workweek, without affecting the exempt status of the employee.

29 CFR §825.206(a).

Awesome and practical: the law for once makes some sense! FMLA reduced schedule or intermittent leave is by its nature, temporary. So we allow temporary adjustments to an employee’s pay without permanent repercussions to an employee’s exempt status under the FLSA.

But there is, of course, more. Sometimes, employees may be paid according to the “fluctuating workweek method of payment for overtime.” As a refresher, that is a provision that essentially allows the employee to take home a fixed salary each week (even though actual hours worked in the week might vary), and then to receive overtime pay at one half their hourly rate for any extra hours worked.

How does this interact with the FMLA differently? Basically, the answer is this:

(b) For an employee paid in accordance with the fluctuating workweek method of payment for overtime, the employer, during the period in which intermittent or reduced schedule FMLA leave is scheduled to be taken, may compensate an employee on an hourly basis and pay only for the hours the employee works, including time and one-half the employee’s regular rate for overtime hours.

29 CFR §825.206(b).

Let’s break that down just a little bit. Essentially, the employer can, rather than paying the employee a salary, start to instead pay the employee on an hourly basis during their FMLA reduced schedule or intermittent leave. The employer must do this during the entire time in which the employee is taking the leave, and the provisions also indicate that the employer must, if he chooses to follow this policy, use it uniformly for all employees paid according to the fluctuating workweek method. Essentially, this means that as the employer, you can’t just pick and choose when to apply this and when not to; you must be consistent. But an important thing to note:

(b) If an employer does not elect to convert the employee’s compensation to hourly pay, no deduction may be taken for FMLA leave absences.

29 CFR §825.206(b).

If this sounds like the ultimate legal “gotcha” you’re probably right. On the one hand you don’t have to convert to paying the fluctuating workweek employee on an hourly basis . . . but if you don’t, you have to continue to pay the employee their full salary without taking any deductions for the leave. I think we can all guess what most employers will choose to do on that one.

Last but not least, this portion of the Code of Federal Regulations ends with the reminder that all of these provisions only apply to FMLA-eligible leave and FMLA-eligible workplaces. If you need help, just remember: if the leave doesn’t qualify as FMLA leave, you can’t do any of this fancy finagling we’ve just discussed. If you do that, you risk forfeiting the exempt status of your employees under the FLSA or the employee’s eligibility for the fluctuating workweek method of payment.

Increments of FMLA leave for intermittent or reduced schedule

In our last blog post, we talked about intermittent leave or reduced schedule leave, and how as an employer, you may ask an employee to transfer roles during such a leave in order to better accommodate a changed work schedule. But let’s back up: once an employee has been granted the intermittent or reduced schedule leave, how, as the employer, can you account for it?

           (a)(1)  When an employee takes FMLA leave on an intermittent or reduced leave schedule basis, the employer must account for the leave using an increment no greater than the shortest period of time that the employer uses to account for use of other forms of leave provided that it is not greater than one hour and  provided further that an employee’s FMLA leave entitlement may not be reduced  by more than the amount of leave actually taken.

29 CFR §825.205(a)(1).

Let’s break that down. First, no matter how you calculate other types of leave, FMLA leave cannot be calculated in increments greater than one hour. Easy enough. But if the company calculates say, sick leave, in half hour increments, for instance, that means that an employee’s FMLA leave must also be calculated in at least half hour increments. FMLA leave can always be calculated in shorter increments, but never longer than the shortest increment the company uses for other types of leaves, and notwithstanding that, never longer than one hour increments.

Okay, you may be thinking, why does this matter to me? Truth is, it certainly won’t impact how you run your business on a day to day basis, but how leave is calculated does matter for both the employer and the employee on the margins. Additionally, as with any legal rule, there are some exceptions to these calculations that you should be aware of:

           (a)(2)  Where it is physically impossible for an employee using intermittent leave or working a reduced leave schedule to commence or end work mid-way though a shift . . . the entire period that the employee is forced to be absent is designated as FMLA leave and counts against the employee’s FMLA entitlement.

29 CFR §825.205(a)(2).

The examples of when it would be “physically impossible” for someone to leave or arrive to work mid-shift include that of a train conductor or an airplane pilot. So long as your work is more flexible than that, you can more or less ignore this exception as an employer. Even a nurse, who typically would work a twelve hour shift, for example, likely does not fall into this “physical impossibility” category, because while it may be inconvenient for a nurse to work just half a shift, it’s not, by definition, physically impossible.

Yet the exception that is more likely relevant to you as the employer and one that you should definitely be aware of, concerns overtime hours:

           (c)       If an employee would normally be required to work overtime, but is unable to do so because of a FMLA-qualifying reason that limits the employee’s ability to work overtime, the hours which the employee would have been required to work may be counted against the employee’s FMLA entitlement.

29 CFR §825.205(c).

The key to understanding this provision is differentiating between required versus voluntary overtime hours. Voluntary overtime hours are not included when calculating the amount of hours an employee’s leave will cover. For example, if the employee has voluntarily picked up overtime in the past but is only required to work a 40 hour week, the employee’s leave will be calculated based on the 40 hours. The fact that the employee does not want to volunteer to pick up overtime hours during their leave will not, then, count against their leave entitlement. If, however, the employee is normally required to work 50 hours a week including required overtime, then the employee’s leave will be calculated based on a 50 hour week. This means that if the employee cannot work the required overtime or chooses not to work it, it will count against the employee’s leave entitlement.

In effect, required overtime means that the employee is entitled to more leave (since leave is calculated based on the hours the employee works each week multiplied by the number of weeks), but it also means that if the employee chooses not to pick up overtime during their leave, it counts against their FMLA leave entitlement. On the flip side, voluntary overtime means the employee is entitled to less leave, but failure to pick up overtime will not count against their leave hours.

As you can see, how FMLA intermittent or reduced schedule leave is calculated and tracked does make a difference at the margins. How your employee’s leave will be calculated is certainly worth a discussion