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 “C-” — indicating many of their day-to-day practices may be inconsistent with federal regulations, potentially putting their organizations at risk. This could result in:
- Possible financial losses due to decreased productivity
- Investigations by the U.S. Department of Labor (DOL)
- Employee misuse
- Legal action
A challenge made more evident by the pandemic
After a period of unprecedented workplace disruption, it’s not surprising that four out of every five employers say the COVID pandemic raised absence management strategy and compliance as a priority for senior management.1 Family and medical leave (FML) management continues to be particularly challenging: Total new FML claims per 100 eligible employees as claim counts more than doubled in 2020 compared to 2019, from nearly 1.4 million to more than 2.8 million.2 Yet despite an increased sense of urgency, the pandemic actually hindered employer progress on managing workforce absence, as measured by the Guardian Absence Management Activity Index: After years of consistent growth, scores remained level from 2020 to 2021.3 This data highlights the difficulty companies have addressing the issue, despite the fact that the costs and risks of mismanagement are continuing to increase.
The cost of U.S. Department of Labor (DOL) investigations
In 2022, there were 780 Family and Medical Leave Act complaint cases submitted to the DOL, resulting in $870,077 in back wages for 339 workers.4
When an employee feels that their leave was unfairly managed, they 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 $204 per willful violation of FMLA notices requirements, can add up quickly.5
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, in fact the average cost to defend an FMLA lawsuit is $80,000.6
Guardian Absence SolutionsSM
The increasingly complex leave landscape has caused the percentage 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.7
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.
Frequently asked questions about FMLA management costs
What are the employer challenges of FMLA compliance?
Employers face several challenges when implementing this law. One of the most significant is the cost of managing FMLA leave. An employer has to ensure compliance with FMLA regulations, which can be complex and time-consuming. The regulations require up to 12 weeks of unpaid leave for employees with qualifying reasons. Employers must also maintain employee benefits during the leave period and guarantee job reinstatement after they return to work. Failure to comply with FMLA regulations can lead to legal consequences, further increasing management costs. Additionally, managing FMLA leave requests can be challenging, particularly for small businesses without a dedicated resource to help manage leave.
What are liquidated damages under FMLA?
Liquidated damages refer to a specific type of compensation that an employer may be required to pay if they violate an employee's FMLA rights. Damages are equal to the amount of wages and benefits that the employee would have received had they not been unlawfully denied FMLA leave.