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Harken back to 1993. Grunge rock ruled the radio, Internet was in its infancy, and Congress enacted the Family and Medical Leave Act (FMLA). Yet, 15 years later, many businesses still do not understand how this act works. What does it require businesses to do? Does it apply to every business? What kinds of liability do businesses face for violating it? Many a grandmother has uttered the phrase "an ounce of prevention equals a pound of cure." This adage applies particularly well to businesses understanding the FMLA; a little bit of knowledge can go a long way toward preventing a lawsuit.
One of the guiding tenants of the United States legal system is that "ignorance of the law is no excuse," which really means that judges, Department of Labor investigators, civil rights attorneys, etc., do not want to hear "Well, I just didn't know." With that fact in mind, it behooves businesses to learn about the FMLA.
Which Businesses are Subject to the Requirements?
There's good news and there's bad news—no one likes to hear that phrase from a doctor, an accountant and especially an attorney. The act applies to private employers with more than 50 employees and all public employers regardless of the number of employees. Taken by itself, such a requirement would likely exclude many readers of this article, but like most things government, it's not quite that cut and dry; there are several provisions to determining this employee count.
First, the 50 employees does include part-time employees. These employees need only work 20 calendar weeks in the year, and the weeks need not be consecutive. Any employee who appears on the employer's payroll counts, even if that person receives no compensation for that week. An employee on paid or unpaid leave for disciplinary reasons counts as long as the employer reasonably expects that person to return to employment at a later time. Employees jointly employed by two employers, such as from a temporary placement service, also count.
Second, the 50-employee requirement extends to the entire previous calendar year. For example, if an employer employs 50 people for more than 20 weeks in 2008 but does not do so in 2009, that employer is still subject to the FMLA for all of 2009. Third, branches of larger companies may be subject to the FMLA if the company has more than 50 employees within 75 miles of the branch. For example, a small satellite office of a larger employer would be subject to the FMLA if it were located less than 75 miles from the main office, or if there were several satellite offices within a 75-mile radius, and the total number of employees of all these offices were 50 people or more. Franchises of larger parent companies would also be subject to coverage under this provision of the FMLA. Once an employee is deemed eligible, a change in the number of employees does not affect that eligibility. Fourth, employees on layoff do not count toward the total.
Which Employees are Eligible for FMLA Leave?
In order to be eligible, an employee must have worked for the employer for the previous 12 months. The employee need not have worked full time during this period, but must have logged 1,250 hours during that year (slightly more than 30 full work weeks). Paid sick time, vacation time or approved leave time of any sort does not count toward this total. For example, an employee who takes two weeks' paid vacation cannot count the full number of hours for which compensation was paid for those two weeks toward the FMLA requirements. Employers of union workers should also be aware that if an employee gets awarded back hours in a labor arbitration, those hours do count toward the 1,250.
If an employer only keeps an estimated record of the number of hours worked by a particular employee, the burden will fall on the employer to prove he or she worked insufficient hours should that employee request FMLA leave. In other words, employers who meet the eligibility requirements would do well to keep an accurate count of each employee's hours. So-called "key employees" do not qualify. Regulations define such employees as those whose earnings are within the top 10 percent of all employees of the company.
What Rights do Employers Have Under FMLA?
An eligible employee working for a covered employer has the right to 12 weeks of unpaid leave during any 12-month period. This leave can be used for the following purposes:
1) The birth of a child or placement of a child in the employee's home through adoption or foster care
2) Care of a child, spouse or parent with a serious health condition
3) The employee's own serious health condition and, added just this year:
4) Support of a spouse, child or parent on active duty.
Another new provision allows for an employee to take up to 26 weeks of unpaid leave to care for a spouse, child, parent or closest living relative suffering from a serious injury or illness incurred in the line of duty while on active military duty.
An employer can require an employee to use his or her paid vacation time or sick leave and include that time in the 12-week total. For example, an employee with four weeks of paid sick or vacation time can be required to use that time toward the FMLA leave and then receive only eight more weeks of unpaid leave. An employer and employee can agree to a light-duty reassignment, but the employee cannot be required to agree to it. The employee has a right to continued health benefits during this time.
The most litigated issue regarding the FMLA, however, is that the employee has the right to return to the same position or an equivalent position with equivalent pay and working conditions. The equivalent pay is easy to calculate, but employers and employees often fight about what constitutes equivalent working conditions. Also, what is and is not a serious health condition has been the subject of much litigation. Generally speaking, courts and the Department of Labor have determined that the condition must require some form of continued medical treatment and not be voluntary. In short, chemotherapy qualifies, but getting a nose job does not. Obviously, quite a lot of ground exists between those two extremes, and employers would do well to consult an attorney if any questions arise. An employer also has the right to receive documentation from a health-care provider to prove the existence of the condition.
What Penalties Can Employers Face?
As mentioned, ignorance is no excuse, but an employer's good-faith belief that it was following the act can go a long way toward mitigating, but not eliminating, damages. An employee must file a complaint either with a court or the Department of Labor within two years of the violation if the employer did not knowingly deny benefits, or within three years if the employee can prove an intentional violation. An employee may receive wages, benefits or liquidated damages if the employer's intent can be proven. The employer may also be required to reinstate the employee. Finally, and perhaps most financially damaging to the employer, the employee may be awarded attorney fees in the event a violation is found. With most employment lawyers billing between $150 and $500 per hour (some charge even more), this penalty can be quite severe. With a little bit of knowledge, though, most employers can easily avoid potential pitfalls of the FMLA.
Once a business understands the fundamentals of FMLA, compliance is easy. Most compliance issues arise due to a lack of knowledge regarding the act. Because the FMLA has been around for 15 years, its parameters have been well established through court decisions. But, remember to stay abreast of FMLA changes, as new provisions and amendments are always being discussed.
To Buy, or Not to Buy?
Q: Why would a business choose to lease equipment rather than purchase outright through financing?
A: Here are the three prominent reasons businesses lease equipment and technology instead of purchasing outright with financing: 1. The total cash required over the life of a lease is typically lower than when purchasing with a conventional loan.
2. The company gets the use of the equipment without booking the debt on the balance sheet, which can be helpful when seeking bank debt to acquire other assets that can't be leased.
3. Due to the ever-increasing technological innovations, a short-term lease (3 years or less) of equipment can be a better practice, because it allows a business to acquire, use and return equipment, instead of capitalizing and owning outright what ultimately becomes obsolete technology.
Jim Blasingame is the creator and award-winning host of the nationally syndicated radio/Internet talk show, "The Small Business Advocate," and author of Small Business is Like a Bunch of Bananas and Three Minutes to Success. Find Jim's show and more at www.SmallBusinessAdvocate.com, plus instant answers to your questions at his small business knowledgebase, www.AskJim.biz