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April showers bring….guidance about leave of absence? It’s not the most well-known axiom, but it seems to be true this month. Today we consider three important developments in leave of absence: a new Department of Labor Opinion Letter, IRS guidance regarding the Paid Family and Medical Leave Tax Credit, and a decision – or lack thereof – from the U.S. Supreme Court in the Severson case affecting leave as an accommodation.

DOL Opinion Letter: On April 12, the Department of Labor Wage and Hour Division issued Opinion Letter FLSA2018-19 addressing whether a non-exempt employee’s 15-minute breaks for an approved Family and Medical Leave Act (FMLA) serious health condition are compensable under the Fair Labor Standards Act (FLSA). The Opinion Letter addressed a situation where the clients’ nonexempt employees provided certifications from their health care providers stating that the employees required 15-minute breaks every hour due to serious health conditions. Taking the breaks meant that in an 8-hour shift, the employees were performing only 6 hours of work.

The Opinion Letter noted that the U.S. Supreme Court has concluded that the compensability of an employee’s time depends on whether it is spent predominantly for the employer’s benefit or for the employee’s.  According to the Opinion Letter, short rest breaks up to 20 minutes in length primarily benefit the employer since they give the company a re-energized employee, and therefore are compensable. However, in some circumstances, short rest breaks primarily benefit the employee and therefore are not compensable. The Opinion Letter concluded that the FMLA-protected breaks differ significantly from ordinary rest breaks since they are required eight times per day and are solely due to the needs of the employee’s serious health condition. Because the breaks are given to accommodate the employee’s serious health condition, they predominantly benefit the employee and are therefore non-compensable.

  • But keep in mind: Employees who take FMLA-protected breaks must receive as many compensable rest breaks as their coworkers receive. If an employer generally allows all of its employees to take two paid 15-minute rest breaks during an 8-hour shift, an employee needing 15-minute rest breaks every hour due to a serious health condition should receive compensation for two 15-minute rest breaks during his or her 8-hour shift.

Federal Family and Medical Leave Tax Credit: We’ve told you about the passage of the Tax Cuts and Jobs Act, which contained a tax credit for employers providing paid FMLA leave.  We noted some nuances of the law, including the exclusion of amounts paid pursuant to state-mandated paid family leave laws in the calculation of creditable payments. The IRS has issued FAQ’s to help employers navigate the new tax credit. While the FAQ’s do not fully resolve the questions surrounding the new tax credit, it provides some guidance for employers. In addition to reiterating the key aspects of the tax credit, the FAQ provides the following helpful tips:

  • The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year. The minimum percentage is 12.5% and is increased by 0.25% for each percentage point by which the amount paid to a qualifying employee exceeds 50% of the employee’s wages, with a maximum of 25%. 
  • For an employer who claims a deduction for wages paid to an employee while on family and medical leave, the employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Also, any wages taken into account in determining any other general business credit cannot be used in determining the new credit.
  • Maybe most helpful, the IRS has indicated that it expects additional guidance will be issued to address:
    • when the written policy must be in place;
    • how paid “family and medical leave” relates to an employer’s other paid leave;
    • how to determine whether an employee has been employed for “one year or more”;
    • the impact of State and local leave requirements; and
    • whether members of a controlled group of corporations and businesses under common control are treated as a single taxpayer in determining the credit.

The Supreme Court Lets Severson Decision Stand: Back in September, we told you about the 7th Circuit case of Severson v. Heartland Woodcraft, Inc., No. 15-3754 (September 20, 2017) that discussed extended leaves of absence as an accommodation under the Americans with Disabilities Act. The Severson court curtailed such leaves, limiting them to those that are considered “short” – potentially maxing out at 2 weeks. Previously, neither the EEOC nor other federal courts had taken such a narrow view of leave as an accommodation.

In the Petition for a Writ of Certiorari, the Petitioner (the employee), asked the high court to consider whether there was a per se rule that a finite leave of absence of more than one month cannot be a reasonable accommodation, or whether the question of whether such a leave is a reasonable accommodation depends on the facts of the case. The Petition acknowledged that the issue of what constitutes a reasonable and appropriate leave of absence as an accommodation has resulted in a split in the circuits, with Seventh Circuit’s decision (Severson) in conflict with decisions from the First, Sixth, Ninth, and Tenth Circuits.

The Supreme Court’s decision not to take up the case leaves in place the circuit split, and leaves employers scratching their heads when it comes to employees who seek an extended leave beyond their FMLA entitlement, or in the case where an employee is ineligible for FMLA protections. For employers in the 7th circuit, this decision not to take the case under review leaves in place the holding that long-term medical leaves of absence beyond the FMLA are likely not required under the ADA.

As always, we caution all employers, regardless of circuit court jurisdiction, to carefully review requests for leaves of absence as an accommodation. The interactive process remains a critical step when an employee requests an accommodation for a disability, including a leave of absence. Engaging in this process will allow the employer to evaluate the employee’s abilities and job duties, and make a holistic assessment as to whether or not the employer is able to provide the accommodation – including, potentially, a leave of absence – that will enable the employee to get back to work.

Lori Welty

Lori Welty

Lori Welty, Esq., Senior Compliance Counsel at ReedGroup. Ms. Welty provides expertise in all areas of state and federal leave law, including Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and their state law equivalents as well as disability and family leave benefits. Ms. Welty is an ongoing author of ReedGroup’s LeaveAdvisor online reference tool, as well as many other white papers and articles.

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