by Leo Corcoran
Entrepreneurs have a lot to think about, from funding to adequate office space. When it comes to employees, the main focus is on finding the right people for the right positions, those with the skills and attitude to fuel innovation and growth.
But the legal environment is rapidly changing, with more labor-related rules and regulatory requirements. This is especially the case in the area of employee leave. The federal Family and Medical Leave Act (FMLA) and state and even local laws have made leave the most pressing, complex —and possibly litigious—arena of employee relations.
In September, California Governor Jerry Brown signed a law that gives part-time and temporary workers up to three paid sick days a year. California is the second state to offer paid sick leave for part-time and temporary workers, after Connecticut passed a similar bill in 2011. The New Jersey Assembly will consider a paid sick leave bill this fall.
On top of these state laws are city laws.
In 2006, San Francisco became the first city in the country to require employers to give their employees time off. In subsequent years, the District of Columbia, Seattle, Portland, Ore., New York City and Jersey City, N.J., among others, passed their own laws.
The cost of complying with just the FMLA is already significant. According to the Employment Policy Foundation, compliance with FMLA costs employers more than $21 billion in lost productivity, continued health benefits and labor replacement. But the real FMLA-related risk is that of litigation.
Lawsuits filed under the statute jumped from 291 in 2012 to 877 in 2013, according to the Administrative Office of the U.S. Courts. The FMLA was the only employment law to generate a sharp increase in claims in that period. The statute requires a lower threshold of proof than most other employment laws. In a bias case, a worker typically has to show that his employer intended to discriminate. But in an FMLA case, he has to show only that the employer somehow deterred or interrupted a leave authorized under the act.
HR.com reports the average verdict for FMLA cases related to wrongful termination is nearly $335,000, a devastating amount for a small business, especially a newer enterprise investing for growth rather than immediate profitability. Almost as damaging as the direct costs of litigation are the indirect costs—diverted management time, recruitment impacts and reputational risk.
So what should employers do to deal with these laws, reduce leave absence costs and mitigate litigation risk?
First, employers should invest the time to learn the basics of leave laws and regulations. There are numerous associations that understand the reality of running a business and assist employers to tailor their leave-related programs. The Society for Human Resource Management, the Disability Management Employer Coalition and others provide low or even no cost overviews of FMLA, the Americans with Disabilities Act, and related laws. Opportunities range from online PowerPoints to local seminars designed for, and often presented by, professional leave and disability experts.
At the very least, such introductory training can outline the most important actions to avoid, and point companies to additional resources.
Second, employers should regularly communicate to employees the importance of FMLA and ADA, and owners and managers should embrace the laws’ goals and the need to comply with them. Communicating and documenting proper intent helps ensure compliance and has the added benefit of reducing fraudulent leave requests.
Finally, companies — especially those with locations in multiple jurisdictions — should consider automating their entire absence management process. There are numerous reasonably-priced solutions that enable managers to track and manage absence in compliance with FMLA, ADA and other state and local laws and regulations. Industry groups like Spring Consulting estimate that comprehensive absence management solutions can reduce direct, indirect and return-to-work costs by 11 percent. Perhaps most important, today’s absence management solutions nearly eliminate litigation risk.
Start-up owners have a lot to worry about. Lawsuits over leave need not be one of them. Easy and relatively low-costs steps can take the risk off the table.