Employer Recovery of Benefit Costs

Under certain circumstances, the employer may recover its share of health plan premiums paid during the period of unpaid FMLA leave from an employee. The employer may recover its share of health plan premiums if the employee fails to return to work after his or her unpaid FMLA leave entitlement has been exhausted or expires, unless the reason the employee does not return is due to:

• 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 such 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.

Under some circumstances, an employer may elect to maintain other benefits (for example, life insurance, disability insurance, etc.) by paying the employee's share of premiums during periods of unpaid FMLA leave. (See Employee Reinstatement requirements.) If the employer elects to maintain such benefits during the leave, at the conclusion of leave, the employer is entitled to recover only the costs incurred for paying the employee's share of any premiums, regardless of whether the employee returns to work.

When paid leave is substituted for FMLA leave, the employer may not recover its share of health insurance or other non-health benefit premiums for the period covered by paid leave. Additionally, recovery of health insurance premiums does not apply to paid leave provided under a plan covering temporary disabilities, including workers' compensation.

The amount that self-insured employers may recover is limited to only the employer's share of allowable "premiums" as would be calculated under COBRA, excluding the 2 percent fee for administrative costs.

When an employee fails to return to work, any health and non-health benefit premiums that the FMLA permits an employer to recover are a debt owed by the non-returning employee to the employer. The existence of this debt does not alter the employer's responsibilities for health benefit coverage and, under a self-insurance plan, payment of claims incurred during the period of FMLA leave.

To the extent recovery is allowed, the employer may recover the costs through deduction from any sums 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.

An employee who returns to work for at least 30 calendar days is considered to have "returned" to work for the purposes of the FMLA. Furthermore, an employee who transfers directly from taking FMLA leave to retirement, or who retires during the first 30 days after returning to work, is considered to have returned to work.

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For more information on this aspect of the FMLA, see the FMLA regulations: § 825.213