This post was authored by Stefanie K. Vaudreuil.
With all the possible leaves of absence that may be available to employees, ensuring consistent and accurate application of the applicable laws relating to leaves can be one of the more daunting tasks for employers. In a recent survey conducted by the Disability Management Employer Coalition (DMEC), 1203 employers responded to 75 questions related to employee leaves. The top challenges in leave management were identified as “relying on managers for leave enforcement . . . training supervisors and managers on the FMLA, and managing intermittent leave.” Other areas of particular difficulty for employers include the crossover between FMLA, the Americans with Disabilities Act (ADA) and workers’ compensation leaves and situations where employee abuse leaves of absence.
As a result of these challenges, many employers have turned to third-party administrators (TPA) to manage their employee leaves. While this may alleviate the guesswork and burden from the employer, the TPA does not always get it right. Employers who have chosen to use a TPA should be aware of both the benefits and risks.
When a TPA takes over the employer’s leave management responsibilities, the employer is not involved in the day-to-day decision-making process. The benefit for the employer is that it alleviates the burden of tracking the leaves and takes the personal aspect out of the process. This is a relief not only for the employer but also for the employee who may be wary of revealing his or her health condition directly to the employer.
Using a TPA, however, does not absolve employers of potential liability arising out of incorrect administration of employee leaves. In a case handled and settled by the California Department of Fair Employment and Housing (DFEH) in January 2019, an employer was required to pay a former employee $112,500 in lost wages and damages after she was denied an extension of disability leave and then terminated. In that case, the employer’s TPA denied the employee’s request for an extension of disability leave. The employer, relying on the TPA’s decision, terminated the employee because she was unable to return to work. DFEH Director Kevin Kish noted, “Employers cannot shield themselves from liability for disability discrimination by outsourcing decisions concerning employees’ requests for reasonable accommodation” and “[t]hird party leave administrators are agents of employers; thus, employers are ultimately responsible for decisions on employee requests for reasonable accommodation.”
Employers should be aware of what leaves the TPA is administering. In the recent DFEH case, the TPA did not consider the reasonable accommodation leave requirements under the ADA, and neither did the employer, which resulted in the employee’s termination and disability discrimination claim. Employers can minimize the risk of liability by ensuring the TPA considers all types of potential leaves available to employees when making decisions to grant or deny time off from work. When a TPA denies an employee leave, the employer should have a procedure in place to ensure that no other leave or accommodation is available under the law or employer policy. Good communication between the employer and the TPA is key.
For employers already using a TPA, an assessment of the TPA’s procedures for reviewing, granting and denying leave allows the employer to attain a clear understanding of what types of leaves the TPA manages and determine whether the employer has adequate control over the leave management process. Employers contemplating retention of a TPA should consider the resources, needs, and culture of agency when weighing the benefits and risks of relinquishing control of leave management.