FMLA Q&A – Recovery of Premiums

In our practice, we regularly receive questions regarding the Family Medical Leave Act (FMLA).  Here is the first in a series of FMLA Q&A based on our clients questions and concerns regarding the FMLA.

An employee went out on leave, never came back, and now owes us money for the benefits.  Looking for guidance on next steps as the employee is not responding to letters.  Can you let us know your thoughts?

Under the FMLA, an employee who is provided group health insurance is entitled to continue coverage during FMLA leave on the same terms as if he or she had continued to work. This also extends to dependent coverage.  The employee is responsible to continue making his or her normal contribution to the cost of the health insurance premiums. If paid leave is substituted for FMLA leave, the employee’s share should be paid in the manner normally required during paid leave (e.g. payroll deduction).

An employee on unpaid FMLA leave must make arrangements to pay the normal employee portion of the insurance premiums. The method of payment should be communicated in your company’s FMLA policy, and there are a number of options including requiring the employee to submit payment on the date the premium is due, or collecting all of the premiums when the employee returns from leave.  It is important to carefully document when these payment are expected because if the employee’s premium payment is more than 30 days late, health insurance coverage may be dropped unless the employer has a policy of allowing a longer grace period.

Under certain circumstances, the FMLA also allows employers to recover the employer’s share of any health plan premiums paid during the period of unpaid FMLA leave, although this is more limited.

Dropping Coverage

As stated above, an employer’s obligation to maintain health insurance coverage under the FMLA ceases if an employee’s premium payment is more than 30 days late, unless the employer has established a policy providing a longer grace period. In order to drop the coverage for an employee whose premium payment is late, the employer must provide written notice to the employee that the payment has not been received. The written notice must be provided to the employee at least 15 days before coverage is to cease, and must clearly notify the employee that coverage will be dropped on a specified date at least 15 days after the date of the written notice unless the payment has been received by that date.

In limited circumstances, and only after the 15 days notice has been given, the FMLA also allows employers to drop employee coverage retroactively, but this is limited only to circumstances where the employer has established policies regarding other forms of unpaid leave that provide for the employer to cease coverage retroactively to the date the unpaid premium payment was due.


Recovery of Employer’s Share of the Premium

In limited circumstances the employer also has the option of recovering from the employee its share of health plan premiums paid during the period of unpaid FMLA leave. However, this can only happen if the employee fails to return to work after his or her unpaid FMLA leave entitlement has been exhausted, and only if the employee’s failure to return is not for one of the following reasons:

  • Circumstances beyond the employee’s control; or
  • The continuation, recurrence or onset of a serious health condition of the employee or the employee’s family member, or a serious injury or illness of a covered servicemember, that would otherwise entitle the employee to leave under FMLA.

If the employee’s failure to return to work is based on the continuation, recurrence or onset of a serious health condition of the employee or the employee’s family member, or a serious injury or illness of a covered servicemember, the employer may require supporting medical certification of the condition. If the employee does not provide the certification in a timely manner (within 30 days), or the reason for not returning to work is due to other circumstances beyond the employee’s control, the employer may recover all of the health benefit premiums it paid during the period of unpaid FMLA leave.

Recovery of Employee’s Share of Premiums

Finally, when an employee fails to return to work, any health and non-health benefit premiums that the FMLA permits an employer to recover are considered a debt owed by the employee to the employer.

Methods of Recovery

To the extent recovery is allowed, the employer may recover the costs through deduction from any money due to the employee, provided such deductions do not otherwise violate applicable Federal or state wage payment or other laws. Alternatively, the employer may initiate legal action against the employee to recover such costs.

Any employer debating attempting to recover health insurance plan premiums from employees should carefully weigh the pros and cons before doing so.  The FMLA does not operate in a vacuum, and employees will likely be protected by other state and federal laws.  As a general rule, the law that provides an employee with the most protection applies, so a deduction seemingly allowed by the FMLA may still be unlawful if it violates a state wage and hour law. Employers must be thoughtful of the intersection of these laws. To avoid a situation where you are trying to collect the employee share of the premiums from an employee who fails to return from FMLA, along with the notice of FMLA eligibility, consider sending a notification to employees alerting them of the date their premiums are due, and requiring employees to pay their share of the premiums on that date, rather than paying the premiums and attempting to collect when the employee returns.

As always, this blog is by necessity very general and cannot replace targeted legal advice.  If you have specific questions, please reach out to us.  We are here to help.


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