Family and medical leave bill becomes law.

Every year since the mid-1980s, legislation mandating that employers provide family and medical leave for their employees has been introduced into Congress but never signed into law. This year, however, things are different. On February 5, President Clinton signed the Family and Medical Leave Act of 1993, proclaiming that "now millions of our people will no longer have to choose between their jobs and their families." While thousands of employers will have to upgrade or add to their medical and family leave programs, the impact on most of them is not expected to be substantial.

The changes many employers - especially larger companies and CPA firms - will have to make will be little more than slight modifications of programs already in place, according to John Hickey, a partner with benefit consultants Kwasha Lipton in Fort Lee, New Jersey. In fact, according to the Wall Street Journal, the General Accounting Office has estimated the legislation will add about $9.90 per employee per year to the cost of an employer's typical benefit package - or about 3/10 of 1%.

The act, which for most employers goes into effect August 5 (for collective bargaining agreements, it goes into effect at the expiration of the agreement or February 5, 1994, whichever is sooner), carefully exempts companies that have fewer than 50 employees. However, it stipulates that if an employer has several work sites within a 75-mile radius, the combined number of employees at all locations governs whether the exemption applies.

What the law provides

The act's basic provisions allow most workers to take up to 12 weeks of unpaid leave during any 12-month period for the birth or adoption of a child; for the care of a child, spouse or parent who has a serious health condition; or for the treatment of their own serious health condition that prevents them from performing their job. When employees return from leave, employers must reinstate them in their old job or offer them a comparable position. Under certain circumstances, leave may be taken intemittently or on a "reduced leave schedule."

The law lets employers require workers to take any paid sick leave or annual leave as part of the 12-week absence. Federal civil service and state and local government employees are covered, along with private sector workers.

Some employees are exempt

Even though a company may not be exempt from the law, certain groups of employees may be. For example, it may not be necessary to offer "key" employees, or the highest paid 10%, the same guarantees as lower compensated workers. To exempt these key employees, a company or firm must demonstrate that a leave would cause "substantial and grievous economic injury to the employer's operations."

Employers should check with knowledgeable legal counsel before denying any worker leave to be sure they aren't violating any state or local laws that might preempt the act. Also, the act covers only employees who have worked for a business for at least one year and for 1,250 or more hours (25 hours a week, in other words) within the previous 12 months.

What about benefits?

Although employers do not have to pay wages to employees on family or medical leave, they must provide health care benefits on the same basis as if the employee were still at work. For example, if an employer paid 70% of the health care premium before an employee took a leave, then the company must continue to pay 70% while the employee is on leave.

Another benefit question that is generating much interest, according to Business Insurance, is whether returning employees can make retroactive contributions to their 401(k) plans. While the law does not directly address this, many benefit consultants believe Internal Revenue Service 401(k) regulations bar retroactive contributions. If the plan allowed for it, though, a returning employee could increase his or her contributions for the remaining weeks of the year to make up some of the difference.

Rights for employers

Employers may require that workers seeking family or medical leave obtain a doctor's verification of a serious illness for themselves, their spouses, parents or children. The verification may include the date the illness began and the condition's probable duration. If the validity of the doctor's opinion is in doubt, the employer can request a second opinion (at the employer's expense) from a medical provider it chooses.

If the two medical opinions differ, the employer may request a third - and governing - medical opinion from a health care provider chosen jointly by employer and employee.

The employee must provide 30 days' notice for foreseeable leaves for birth, adoption or planned medical treatment.

Preemption 

As a general precept, the Family and Medical Leave Act preempts state medical or family leave laws that offer fewer or less stringent benefits. For example, if a state law allows 6 weeks' family leave, employers must offer the 12 weeks mandated by the federal act. However, if a state law is more generous - allowing, say, 16 weeks of leave - then the state law takes precedence.

What actions to take

As a first step, CPA firms or the clients they advise should examine their existing leave policies and programs to see if they meet the new federal standards. While many companies have leave programs, only a small percentage, according to Carol Sladek, a consultant with Hewitt Associates in Lincolnshire, Illinois, have programs that meet all the act's requirements.

A next step should be to examine the law in each state in which the firm or client operates. Employers will have to figure out how "to deal with a patchwork" of different state or local requirements, some of which may preempt the federal statute, says Diane Lotti, a consultant with Buck Consultants Inc. in New York. For some multistate employers, this means writing a corporate leave policy that meets the highest common denominator of a number of states or creating a multitude of policies, which could prove unwieldy at best.

Employers also will need new administrative and recordkeeping procedures to control paperwork. As with employees who elect to continue their health insurance under the Coordination of Benefits Reconciliation Act, employers now also will have to collect health insurance premiums from employees on leave.

Communication is important

Employers need to communicate to employees the details of their new company medical and family leave policies and ensure supervisors understand not only the company policies but also the law.

Penalties under the law

Enforcement and compliance under the law fall to the Department of Labor (DOL) and will be modeled after an approach used to enforce the Fair Labor Standards Act. Employees may bring civil suits against their employers and the Secretary of Labor may sue for damages on behalf of employees whose employers violate the act. Final regulations are due to be issued by the DOL in early June.

A complex act

Like most pieces of modern legislation, the Family and Medical Leave Act of 1993 is complex and the DOL will have to refine a number of definitions. In the meantime, CPA firms and their clients should familiarize themselves with state and federal requirements to understand how they will affect them.

JOHN LEWISON is director of human resources at the American Institute of CPAs.

Mr. Lewison is an employee of the American Institute of CPAs and his views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due process and deliberation.