Benefit News

Burnham Benefits Bulletin - March 2016

Recent Court Rulings Raise Questions About FMLA

The Family and Medical Leave Act (FMLA) clearly states that when an employer knows that a worker taking leave qualifies for FMLA, it must designate the worker's absence as FMLA leave.

Despite this requirement, some employers let employees choose whether to designate their leave as FMLA leave. Two recent court cases have highlighted why this approach could cause problems for your company.

Both cases - Escriba v. Foster Poultry Farms and Amstutz v. Liberty Center Board of Education - involved workers who were terminated from their jobs. These employees later brought FMLA lawsuits against their former employers, claiming FMLA interference and retaliation, respectively.

In these cases, both employees requested not to use FMLA leave for medical-related absences and instead elected to take another type of paid time off-and both employers allowed them to do so.

In both cases, the courts ruled in favor of the employers because the workers had previously used FMLA leave on several occasions and understood their companies' FMLA processes. So when they declined to use FMLA leave, they knew what they were doing. Not having the leave designated as FMLA leave was their own choice, not a result of their employers' interference or retaliation.

While these employers were successful in defending against the FMLA claims, HR professionals should be wary of similar situations. Letting employees decide whether or not to apply FMLA could be dangerous for your company.

This approach could be seen by an employee, and a court, as the employer attempting to prevent employees from exercising their FMLA rights. Trying to make leave-designation decisions based on which employees understand FMLA procedures could expose your company to administrative and legal issues.

The easiest way to avoid an FMLA lawsuit is to always apply FMLA leave when an employee qualifies for it. Even if a worker chooses to use another type of leave, FMLA leave should run concurrently.

Applying FMLA right away avoids giving employees the option to decline FMLA leave, and can help protect you against future lawsuits while safeguarding your bottom line.

Revised SBC Template Proposed

The Department of Labor has issued proposed revisions to the template and related materials for the summary of benefits and coverage (SBC), and has requested comments on these proposed revisions. The proposed template, as well as the current template and other related materials is available here.

Question of the Month (source: EBIA)

QUESTION: This year, our company has scheduled a voluntary compliance self-audit of the company's ERISA welfare plan. What issues should we consider in planning and carrying out our compliance audit?

ANSWER: Every plan sponsor should periodically perform a voluntary compliance audit of its employee benefit plans for compliance with ERISA and other legal requirements. Generally, the primary goal of a voluntary compliance audit is to identify and promptly correct compliance failures before they are discovered during a governmental audit.. A compliance audit can also help the plan sponsor avoid unnecessary participant claims and potential lawsuits. There is no "standard" review format or procedure for a voluntary compliance audit, but here are some key issues to consider:

  • What will be the scope and focus of the audit? The scope and focus of the audit should be clearly identified in advance. A compliance audit might include all of the plan sponsor's welfare plans or a specific plan-for example, the health plan. For a health plan, it might be a comprehensive review of all legal requirements under ERISA or group health plan mandates, it might focus on a narrower issue such as claims procedures or COBRA compliance, or it might focus only on issues that the DOL or other governmental agencies have identified as enforcement priorities. The DOL's Compliance Assistance webpage here includes specific resources for a variety of plans and issues.
  • Is it important for the results to have the protection of the attorney-client privilege? If your company wants the protection of the attorney-client privilege for the audit's results, you will need to engage an attorney before beginning the audit process. The attorney, in turn, would engage consultants or other service providers to assist with the process, and communicate the audit results back to your company. There should be a written service agreement or engagement letter with any consultants or other service providers engaged to assist with the self-audit.
  • How will results be communicated? The audit's conclusions can be provided to management as part of an oral presentation or in written form. Generally, it is advisable to limit the group to whom the results are reported and, as noted above, to adhere to requirements for maintaining attorney-client privilege (if that protection is desired). This is especially important if your company might be unable or unwilling to correct all errors quickly (for example, there might be too many issues to address at once or the cost to correct might significantly outweigh the potential exposure). Keep in mind that, in a DOL audit, the investigator may ask to see the results of any compliance self-audits.
  • Is the employer prepared to address errors it might find? Problems identified in a compliance audit should be addressed promptly. Continuing the same practices after they are discovered could be considered a "knowing" violation for purposes of criminal penalties and might form the basis for breach of fiduciary duty claims. If the audit reveals numerous issues, it is advisable to develop a compliance plan that focuses on the most important issues first and permits administrative staff sufficient time to make corrections accurately.

Did You Know?

On Groundhog Day, House Republicans voted to repeal the Affordable Care Act (ACA) for the 63rd time.

The 241-186 vote fell short of the two-thirds majority needed to override President Obama's veto of the Restoring Americans' Healthcare Freedom Reconciliation Act of 2015 (H.R. 3762). If passed, this bill would have repealed major parts of the ACA and cut federal funding for Planned Parenthood.

The vote was largely seen as a political message intended to help rally Republicans in the upcoming 2016 election.


Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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