Ask Rita: Health Benefits for Employees on FMLA Leave?

Question and answer about how an employee’s share of premium payments should be handled, since there are no paychecks on FMLA.

Ask Rita: Health Benefits for Employees on FMLA Leave?
9 mins read

You want your employees to have peace of mind while they are on leave.

Dear Rita,

With our last series of hires, our growing nonprofit topped 50 staff and became a Family and Medical Leave Act (“FMLA”)-covered employer. We think we know how to properly designate leave as FMLA and navigate the required procedures when an employee requests leave.

We know we need to maintain employees on our group health benefits plan while they’re out of office, but we’re confused how the employee’s share of premium payments should be handled.

Normally, their share is deducted from their paycheck, but since FMLA is unpaid, there are no paychecks.

What’s the right way to handle this?


Where is the Money?

Dear Where,

While you clearly have a solid understanding of FMLA leave, let me share a quick introduction for those less familiar with the law before I answer your question.

What is FMLA?

The Family and Medical Leave Act is a federal law that requires employers with 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave to employees facing medical or family issues. The employee has to specify the reason and must have worked for you for at least 12 months, including at least 1,250 hours over the past year prior to requesting time off.

Employees can request this leave for care and treatment of a serious health condition, whether it is their own or related to certain family members, including children, spouses, and parents. Leave can also be taken for the birth of a child or within one year of birth or placement of an adopted or foster care child. There are also similar provisions for the care of a military service member with a serious illness or injury for up to 26 weeks.

As I mentioned, FMLA leave is “protected,” meaning that when the employee’s leave is over, they are entitled to the same or equivalent position they had when the leave began.

Another aspect of this “protection” deals with group health benefits. If an employee is provided group health insurance, they’re entitled to continued coverage during FMLA leave on the same terms as if they’d continued working. However, the employee must continue to make their usual contributions to the cost of the health insurance premiums while on their leave.

As you see, your obligation is to maintain the employee’s coverage in the plan; the employee’s obligation is to pay their usual share of their premium, as if they were still working.

And this is where your challenge begins.

Arranging Payment

In many cases, if the employee chooses to use any available paid personal leave or vacation during the typically unpaid FMLA, deductions can be taken from their paid time off “bank” as the premiums are paid during the leave.

However, if the employee does not have or use available paid leave, the employer and the employee should work out arrangements for the payment of the employee’s usual portion of the insurance premiums in order to maintain insurance coverage. This can be accomplished in a number of ways:

  • The employee can agree to make a single payment for their entire share of premiums required for the duration of their leave.
  • The employee can write you a check each pay period during the leave to cover their share of the premium.
  • You can negotiate a payment plan that works for both you and the employee; whatever you mutually agree to is fine.
  • You may choose to pay the employee’s portion of the premium. If you do this, you may require the employee repays you upon returning to work.

Of course, the primary risk you face with all of these options is the employee not paying or repaying their share of premium. Under FMLA regulations, if the employee’s premium payment is more than 30 days late, you may cancel their coverage, unless you have a policy of allowing a longer grace period.

It is important to remember that you must provide written notice to the employee that the payment has not been received and allow at least 15 days after the date of the letter before coverage stops.

This is obviously a very serious consequence, so be sure to alert your employee to this eventuality early in the process of them taking FMLA leave.

Finally, if FMLA leave is unpaid, as is typical, if an employee chooses not to return to work or fails to work for 30 days after their FMLA leave, employers may require the employee repay the employer’s share of premium payments made on behalf of the employee during their leave.

There are limitations to this right of recovery and caution should be exercised when considering taking this action. The employer’s share of premiums cannot be recovered from the employee if the employee’s illness or injury prevented their return to work or if they had to continue to provide care for a family member. Moreover, there can be no recovery of the employer’s share if the employee was unable to return to work for reasons “beyond the employee’s control.”

The best way to approach any payment arrangement during FMLA leave is through clear and detailed discussions with the employee so they fully understand their rights and obligations, as well as yours as their employer. Any understandings and agreements about payment or reimbursement should be in writing and signed by the employee, including disclosing your right to recover their payment if they don’t return to work. In general, all discussions with the employee on all aspects of the FMLA process should be documented and shared with the employee to ensure everyone is on the same page as the process unfolds.

One final thought on this subject. Remember that whenever an employee requests FMLA leave, they’re going through a really tough time, so any discussions about health insurance premiums should be conducted with empathy, understanding, and compassion. This is especially likely if the health condition they or their family member have is critical or life threatening. Their attention may not be focused on financial obligations or anything other than recovery.

On the plus side, if your organization is looking to create a family-based culture, being really supportive and flexible during these difficult times can strengthen an employee’s connection to your nonprofit like almost nothing else.

FMLA is a very complicated and detailed law. And it’s even more challenging than just understanding its guidelines, since many states have comparable, complicated laws providing family leave that apply and interact with FMLA. Any issue about these laws and their application should be carefully evaluated, and if any doubts exist as to how to handle any specific situation, experienced counsel should be consulted.

With this information, hopefully you can create a compassionate understanding with your employees, allowing you to be covered legally and financially, while your employees have the peace of mind needed to take care of themselves and their families while on leave.

This article does not provide legal representation or legal advice. Nothing provided in this column should be used as a substitute for advice or legal counsel.

About the Author

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Mike Bishop is a member of the State Bar of California and has been admitted to practice in a number of federal district courts in both California and Ohio. During his legal career, Mike worked for 32 years with a Sacramento law firm, where he focused on employment litigation in both state and federal courts. During that time, he defended employers in litigation.

In 2016, he began his work as an Employment Risk Manager for the Nonprofits Insurance Alliance, assisting nonprofits in evaluating employment risks. Mike lives in Lakewood, Ohio, and is a graduate of the University of California, Davis, with a bachelor’s degree in political science, and a 1982 graduate of the University of the Pacific, McGeorge School of Law.

Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. Views represented in Blue Avocado do not necessarily express the opinion of the publication or its publisher.

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