Tuesday, February 07, 2012

Pregnancy Disability Leave/ Healthcare S&P warnings

Please see below for a really good piece on the new pregnancy law and the potential liabilities for employers. It is applicable if you have 5 employees or more.

Yesterday in Reuters, it was reported that Standard & Poors recently did a report warning of downgrades that may arise in a Group of 20 countries, including the US, if they didn’t deal with their steadily rising healthcare spending. This likely would start within three years and according to S&P, could happen by 2020, which may put a number of countries with ratings reflecting junk status.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116


Pregnancy Leave Law Creates Confusion

With the recent passage of Senate Bill 299, many employers are confused on how to continue coverage for an employee on a pregnancy disability leave (PDL) when the employee has a co-pay obligation but does not have any wages. Does the employer have to collect the co-pay? Does the employer pay for the full premium while the employee is out on leave and then ask for a reimbursement when the employee returns? And if so, is a written authorization necessary to withhold the past due co-pay from future paychecks?

SB 299 states:
It shall be an unlawful employment practice, unless based upon a bona fide occupational qualification:
(a) (1) For an employer to refuse to allow a female employee disabled by pregnancy, childbirth, or a related medical condition to take a leave for a reasonable period of time not to exceed four months and thereafter return to work, as set forth in the commission's regulations. The employee shall be entitled to utilize any accrued vacation leave during this period of time. Reasonable period of time means that period during which the female employee is disabled on account of pregnancy, childbirth, or a related medical condition. An employer may require an employee who plans to take a leave pursuant to this subdivision to give the employer reasonable notice of the date the leave shall commence and the estimated duration of the leave.

(2) (A) For an employer to refuse to maintain and pay for coverage for an eligible female employee who takes leave pursuant to paragraph (1) under a group health plan, as defined in Section 5000 (b)(1) of the Internal Revenue Code of 1986, for the duration of the leave, not to exceed four months over the course of a 12-month period, commencing on the date the leave taken under paragraph (1) begins, at the level and under the conditions that coverage would have been provided if the employee had continued in employment continuously for the duration of the leave. Nothing in this paragraph shall preclude an employer from maintaining and paying for coverage under a group health plan beyond four months.

CEA contacted our attorney’s and the senator’s office who wrote this bill and no one can clarify the original question: What do you do when an employee is out on PDL and they would normally have a co-pay for their health insurance deducted from their paycheck; however, since the employee is not working the deduction is unavailable?

Our attorneys are all of the same opinion: First give a written notice to the employee going out on PDL that the co-pay must be paid by a date certain (usually the first or fifteenth of the month). Nevertheless, many times the employee doesn’t pay, and even worse the employee does not return to work after the pregnancy leave, and has now gotten 4 months of free health coverage. The employer is left to pursue the employee in small claims court to collect the money it advanced for the insurance.

If you cancel the insurance the first time the employee fails to make a payment on the date set by the employer, the potential liability from such an act outweighs the few hundred dollars the employer might be out if the employee never returns.

If the employee fails to pay during her period of leave, but then returns to work, the employer can attempt to get a written authorization to make the additional deduction from pay, but if the employee refuses, the employer’s only alternative is to seek compensation in court.

This truly is an unfair burden on the employer and we will push the senators office (who wrote the bill) to get further clarification on this matter. For now, we recommend you pay and look for reimbursement.

CEA is a not-for-profit human resource employers association that serves over 9,000 businesses throughout California. CEA is committed to providing members with the information, clarity, and perspective they need to perform in today's business environment. For more information on membership go to www.employers.org or call 800.399.5331

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