Leaves of Absence are Risky, Complex for Unprepared Employers

One of the most common, complicated situations for employers is how to handle employee leaves of absence. An example that comes to mind….

A couple of years ago, a client called us about an employee who’d been out because of an injury unrelated to work.

At first, he’d said he’d be out a couple of weeks and the employer said, “OK, just come on back when you’re able. Keep in touch and let us know.”

But then two weeks became four weeks, and after four weeks, he had still not returned to work.  When the employer finally contacted us, the employee been out of work for three months, with no return date in sight. During this time, the employer allowed him to remain enrolled on the medical plan even though he was not paying his portion of the premium. He now owed the employer over $1000 in back premiums.

This employer had fewer than 50 employees and was not subject to FMLA. In the absence of a written leave policy, the employer wanted to terminate him as of the start of his absence, back to the last date he had paid for coverage. It’s a good thing they called us, because that could have been a costly violation.

If the employer had retroactively terminated his coverage, they would have failed to comply with the requirement to provide written notice of continuation of coverage rights within 30 days of a loss of coverage.

The solution was to consider this event as a reduction in hours (to zero!) as of today, and to send the required COBRA notice timely. The employer was out the unpaid $1,000 in employee contributions, but avoided a penalty of several times that.

And don’t forget how leave of absence can affect a Flex plan. If the employee had a flex plan with a debit card, the employer must be careful to consider that as well. While on leave of absence, that employee might spend his entire annual election, at the employer’s expense.

The best solution is to be sure you have a written policy in place, ahead of time, to cover such events. If you would like to adopt a written leave of absence policy for your employees, give us a call. We’re here to solve your problems – and to keep you from falling into these tricky situations!