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The Family and Medical Leave Act Meets the New Millennium

December 31, 2000

Brief Summary of the FMLA

The federal Family and Medical Leave Act (the "FMLA" or the "Act"), enacted in 1993, requires covered employers (i.e., those with 50 or more employees within a 75 mile radius) to provide eligible employees with up to 12 weeks of unpaid leave during any 12-month period for any of the following reasons: the employee's own serious health condition; the birth, adoption or foster care placement of a child; or the need to care for a spouse, parent or child who has a serious health condition. With limited exceptions, employees must be returned to their prior jobs or to equivalent jobs when they return to work following FMLA leave. Eligible employees are those who have worked for a covered employer for at least one year and who have worked at least 1,250 hours in the year immediately preceding any FMLA leave. An estimated 24 million Americans have exercised their right to take FMLA leave since the Act was passed.

New Regulations Pave the Way for Qualified Employees to Receive Unemployment Benefits While on FMLA Leave

The enactment of new federal regulations in 2000, initially proposed by President Clinton in May 1999, have broadened the scope of benefits available for qualified employees on FMLA leave. In particular, while all FMLA leave was previously unpaid, workers on FMLA leave for the birth or adoption of a child may soon be eligible to collect unemployment benefits while on leave.

In his January 1999 State of the Union Address, President Clinton first suggested that employees should be eligible to collect unemployment insurance benefits while on FMLA leave. This suggestion followed from a study released in April 1996 by the bipartisan Commission on Family and Medical Leave, which recommended that states "voluntarily consider extending unemployment compensation qualifications to employees on family and medical leave." The commission had found that, "by far, the major reason employees in FMLA-covered institutions do not take FMLA leave is that they cannot afford to do so."

In the aftermath of the President's suggestion, four states (Maryland, Massachusetts, Vermont and Washington) asked the Department of Labor to clarify where using unemployment insurance benefits for parental leave (birth and adoption unemployment compensation, or "BAA-UC") would be consistent with federal unemployment compensation law. Then, in May 1999, the President directed the Secretary of Labor to issue a regulation allowing unemployment funds to be used to provide partial wage replacement to parents on leave following the birth or adoption of a child. Consequently, in December 1999, the Department of Labor issued for public comment a "Notice of Proposed Rulemaking" to create an opportunity for states to pay, under a voluntary experimental program, unemployment compensation to parents who take time off from work after the birth or placement of a child. The experimental program is expected to be evaluated by the Department of Labor after at least four states have operated (for at least three years) a program permitting parents to receive unemployment compensation while on FMLA leave.

Nearly 4,000 public comments were submitted in response to the Department of Labor's controversial proposal. Some of the comments, including those submitted by the Center for Law and Social Policy and the Older Women's League, urged that the use of unemployment insurance system funds to provide partial wage replacement to new parents be expanded to cover workers who need time off to care for seriously ill parents, children or spouses. On the other hand, there were those who opposed any extension of unemployment insurance coverage to those on FMLA leave, among them the U.S. Chamber of Commerce, the Family Medical Leave Act Corrections Coalition and the Society for Human Resources Management. Some opponents of the proposal insisted that unemployment benefits are meant to be paid only to individuals who are "able and available" to work, not to those who are on leave of absence due to parental obligations and are thus unavailable for work; still others raised the concern that the proposed expansion of unemployment insurance coverage is simply a back-door tax increase for employers. Employers in the U.S. currently pay $30 billion a year in unemployment insurance taxes (during a period of relatively low unemployment), and, according to one estimate, the provision of BAA-UC benefits can be expected to increase average employer payroll taxes by 34%. Estimates for the cost of providing UC coverage for employees on parental leave vary widely, from $28 million or less per year, provided only one or two states enact BAA-UC programs, to more than $18 billion per year, assuming all states enact such programs.

Despite the opposition to the President's proposal, in June 2000, the Department of Labor finalized the regulation to allow states to use unemployment insurance funds to pay workers on FMLA leave, effective August 14, 2000. According to one public opinion poll taken in October 2000, the majority of Americans support the use of unemployment insurance to provide income to workers during periods of leave. To date, at least fifteen state legislatures have introduced bills to provide so-called "Baby Unemployment Compensation" to workers on parental leave.

Split of Authority Widens With Respect to Validity of Department of Labor Regulation on Designating FMLA Leave

Pursuant to the Department of Labor's regulations implementing the FMLA, "it is the employer's responsibility to designate leave, paid or unpaid, as FMLA-qualifying, and to give notice of the designation to the employee." 29 C.F.R. § 825.208(a). Employers who fail to do so are precluded from counting the employer's time off toward the 12-week maximum leave period. According to the Department of Labor, then, if an employer fails to designate an employee's time off from work as FMLA leave, that employee will be entitled to an additional 12 weeks of FMLA leave commencing on the date the employer first provides the requisite notice. 29 C.F.R. § 825.208(c).

Over the past several years, federal appellate courts have come to differing conclusions regarding the validity of this DOL regulation. In 2000, another two federal Circuit courts -- the Sixth Circuit and the Eighth Circuit -- weighed in on the issue and added to the rift. The Sixth Circuit has concluded that the regulation is valid (see Plant v. Morton Int'l, 212 F.3d 929 (6th Cir. 2000)), while the Eighth Circuit has refused to apply the regulation (see Ragsdale v. Wolverine Worldwide, Inc., 218 F.3d 933 (8th Cir. 2000)).

The employee in Plant took a medical leave of absence from work, but was never notified by his employer that this absence was being treated as FMLA leave. Because his employer had failed to give him timely notice that his leave of absence was being counted as FMLA leave (timely notice being that which is given to the employee within two days of learning of the employee's FMLA qualifying event, as required by DOL regulations), the Sixth Circuit ruled that his employer was prohibited from retroactively designating his absence as FMLA leave. Specifically with respect to the DOL regulation at issue, the court stated, "We see no reason why § 825.208(c) should not be considered valid and applicable to this case. … We believe that § 825.208(c) evinces a reasonable understanding of the FMLA…." Plant, 212 F.3d at 935.

By contrast, in Ragsdale, the Eighth Circuit has stated that this DOL regulation "must be struck down" because it "improperly convert[s] the FMLA into a statute which always provides an additional twelve weeks of leave unless the employer specifically notifies the employee prospectively that she is using her FMLA leave." Ragsdale, 218 F.3d at 939-40. On this basis, the court dismissed the plaintiff's FMLA claim. The court did note, however, that it was "not holding that any DOL regulations requiring employers to designate leave as FMLA leave would be invalid." Id. at 939. For example, it opined that notice could be necessary where an employee claims that she would have returned to work sooner had she known she was about to exhaust her leave entitlement.

Employee on FMLA Leave May Be Discharged in Legitimate Reduction in Force

In O'Connor v. P.C.A. Family Health Plan, Inc., 200 F.3d 1349 (11th Cir. 2000), the Eleventh Circuit Court of Appeals held that an employer does not violate the FMLA by failing to reinstate an employee following FMLA leave if the employer can demonstrate that it would have discharged the employer even had she not been on FMLA leave. In so holding, the court relied on a DOL regulation which provides that "[a]n employee has no greater right to reinstatement or to other benefits and conditions of employment than if the employee had been continuously employed during the FMLA leave period." 29 C.F.R. § 825.21(a).

The plaintiff in O'Connor took an approved FMLA leave of absence in connection with the birth of her child. While she was on leave, her employer implemented a reduction in force ("RIF") due to economic considerations, as a result of which 190 employees were laid off, including the plaintiff. The court rejected the plaintiff's argument that her employer was obligated under the FMLA to reinstate her at the conclusion of her FMLA leave, because she had not demonstrated that the RIF decision itself was anything but a legitimate business decision.

The Future of the FMLA

President Clinton has been a strong proponent of the FMLA, which was the first legislation he signed upon taking office. In addition to making unemployment compensation benefits available to those on FMLA leave, he has proposed to expand the scope of the law to cover smaller employers and to permit employees to use FMLA for broader purposes, such as to attend parent-teacher conferences. The prospects for these or other expansions of FMLA benefits are uncertain under a Bush administration.