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. Yet, according to a recent Guardian study, 65% of employers say tracking intermittent FMLA leaves is a top compliance challenge when managing employee absence. That, in part, has driven employer outsourcing of leave management to more than double in the past decade.

For employers trying to manage it all themselves, but dealing with knowledge gaps, 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

The cost of U.S. Department of Labor (DOL) investigations

In 2024, there were 349 Family and Medical Leave Act complaint cases submitted to the DOL, resulting in $1.4 million in back wages for 344 workers.¹

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. ²

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

2024 decision by the Second Circuit in Kemp v. Regeneron Pharmaceuticals, Inc. significantly expanded employer liability under the FMLA. The court ruled that an employer can be found in violation of the FMLA simply for discouraging an employee from taking leave, even if the leave was ultimately granted or never formally denied.

This means that subtle forms of interference, such as pressuring an employee to avoid taking leave or suggesting negative consequences, can be grounds for legal action.

If a claim becomes a lawsuit, there are fines, legal costs, and 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. Managers and supervisors may also be sued individually and held personally liable for paying damages. What’s more, lawsuits can be lengthy and time-consuming to resolve. Even if the employee loses, there are still costs involved in mounting a legal defense.

Guardian Absence Solutions℠

The increasingly complex leave landscape has caused the percentage of employers outsourcing and centralizing their short-term disability (STD) and FMLA administration to continually increase year over year.

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.

Learn more about absence management with Guardian.

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.

To learn more, sign up for our Absence Academy webinar series or follow our Absence Management Blog for a deeper dive.