The Cost of FMLA Mismanagement
Passed nearly three decades ago, the Family and Medical Leave Act (FMLA) requires employers to provide employees with job-protected, unpaid leave for qualifying medical and family reasons. Most employers using in-house resources to administer FMLA say they are comfortable with their approach; however, a recent Guardian Study revealed many employers have significant knowledge gaps related to this nuanced law. In fact, of the employers who participated in Guardian’s FMLA Fundamentals quiz, the average score was a “D” — indicating many of their day-to-day practices may be inconsistent with federal regulations, and may be putting their organizations at risk. This could result in:
- Possible financial losses due to decreased productivity
- Investigations by the US Department of Labor (DOL)
- Employee misuse
- Legal action
The cost of lost productivity
Family and medical leaves reportedly contributed to over 1.4 billion days of absence and illness-related lost productivity, costing employers $178 billion in wages and benefits based on incidental absences due to illness, Workers’ Compensation and FMLA.1
FMLA absences can cause workplace disruptions, from training existing team members, to hiring temporary help.
The cost of U.S. Department of Labor (DOL) investigations
In 2019, 51.64% of investigations were initiated independently by the DOL, resulting in over $334 million in back wages for more than 313,941 workers.2
When an employee feels that his/her leave was unfairly managed, he/she may initiate a formal complaint with the DOL. The DOL will investigate and may file suit to ensure compliance and recover damages if a complaint cannot be resolved administratively. Actions can include:
- Conducting general onsite visits to scrutinize employment practices beyond the initial complaint.
- Examining past and current employment paperwork and files.
- Imposing fines, which can range from hundreds to thousands of dollars ― and even smaller fines, such as $110 per violation for noncompliance with general FMLA notices requirements, can add up quickly.3
But, the DOL doesn’t need employee complaints to investigate — they may prioritize resources to businesses and companies with previous complaints, where emerging business models lead to violations, and where workers are least likely to exercise their rights.
The cost of employee misuse
To avoid conflicts and liability risk, employers may adopt a rubber‐stamp approach to approving FMLA leaves. While this can reduce potential liability, it may encourage employee misuse of FMLA, and may also backfire on an employer if an employee has a legitimate FMLA claim after taking leave for a reason that did not qualify for FMLA protection.
The cost of legal action
In 2019, an employee brought action against his former employer for violation of the FMLA, the Americans with Disabilities Act (ADA), and a state law discrimination statute arising from his termination for vacationing in Mexico while on leave. The court awarded the employee over $1.3 million in liquidated damages and $605,690 in attorney fees and costs.
DaPrato v. Mass. Water Res. Auth., 482 Mass. 375, 377, 123 N.E.3d 754 (2019)
If a claim becomes a lawsuit, there are fines, legal costs, business resources that may need to be allocated to the investigation and resolution of the complaint, as well as the impact to the overall work environment and employment relationships. Plus, managers and supervisors may potentially be sued individually and held personally liable for paying damages. What’s more, lawsuits can be lengthy and time-consuming to resolve, and even if the employee loses, there are costs involved for legal defense, etc.
Guardian Absence SolutionsSM
The increasingly complex leave landscape has caused the percent of employers centralizing their short-term disability (STD) and FMLA administration to almost double since 2012. Today, more than half of all organizations with at least 50 employees use the same resource (in-house or external) to administer their STD and FMLA.
Organizations that outsource STD and FMLA administration to the same vendor are making more progress on their key goals than those that manage employee leave using in-house resources. In fact, those organizations that outsource are more likely to report positive outcomes on employee experience, direct cost reduction, and return-to-work rates.
Guardian offers a variety of absence management solutions for companies with 50 to 5,000 employees or more, helping employers of all sizes take advantage of high quality, integrated services that can help keep companies compliant while helping to get employees back to work in a safe and timely manner.
