Terminating an employee on medical leave? Tread carefully.

Date: May 21, 2018

Federal, state, and local laws provide assorted job protections for employees needing leave for a variety of issues.

Employees with health problems present many challenges for employers, given the extensive regulation and general sensitivities surrounding medical issues. While a company might manage without an absent employee for a short time, the longer the absence—or the more frequent intermittent absences become—the more problematic the issue.

Staff at the NFIB Small Business Legal Center is frequently asked: can I terminate an employee who is on leave or who has requested leave? The answer: it depends.

Consider the following commonplace examples:

  • A contracting company with 15 employees is in a bind because its only licensed electrician is having heart surgery and will not be able to work for 2-3 months.
  • A dental practice with 8 employees is unsure how to proceed because its office manager seeks extended leave during the third trimester of her pregnancy, saying that she also wants 6-7 weeks off once her child is born.
  • A mom-and-pop retail shop with 4 employees is unable to open at its regularly scheduled hour because its only morning shift worker frequently calls in “sick” because of migraines.
  • A farm with 1 employee is considering laying-off its farmhand because he is no longer able to do the hard physical labor that he had in the past.

So What Action, if Any, Can You Take Against an Employee Out on Leave?

In most states “employment at will” prevails—meaning that an employer can terminate an employee for virtually any reason so long as it’s not prohibited by public policy. But more and more often, public policy places protections on employees who need leave. Federal, state, and local laws provide various types of overlapping job-protected leave for employees with medical issues. So, employers who are considering terminating an employee who is out on medical leave, or who has requested medical leave, should keep reading to ensure a termination doesn’t result in a wrongful termination claim.

  1. Americans with Disabilities Act (15 or More Employees) and State Disability Laws

The Americans with Disabilities Act (ADA) requires that businesses with 15 or more employees provide reasonable accommodations for employees with disabilities. While employers are not required to create light duty assignments or new jobs to retain employees who are unable to perform essential job functions, unpaid leave for a short duration can be a reasonable accommodation. (We provide further guidance on the ADA’s workplace requirements here).

Many states’ disability laws apply to even smaller companies. For example, Oregon imposes disability accommodation requirements on employers with as few as six employees. Likewise, California imposes similar requirements on employers with five or more employees.

  1. Federal Family Medical Leave Act (50 or More Employees)

The Family Medical Leave Act (FMLA) applies to companies with 50 or more employees and contains very specific requirements for managing employees with medical issues. For covered employers, FMLA provides job-protected unpaid leave for employees working at least 1,250 hours over the preceding year who need to take leave when dealing with medical issues (including caring for children, spouses, or parents) and/or for parents to bond with a newborn or adopted child. FMLA does not require covered employers to pay employees during times of leave; however, employers may want to talk with their CPA or tax attorney about potential tax benefits if they should choose to pay employees while out on medical leave.

  1. Pregnancy Discrimination Act (15 or More Employees) and State Pregnancy Laws 

The Pregnancy Discrimination Act (PDA) covers employers with 15 or more employees, while corollary state anti-discrimination laws may cover smaller companies. The PDA prohibits discrimination against pregnant women. While the law does not impose a duty to provide leave, the Supreme Court has held that under certain circumstances employers may be required to provide accommodations for a pregnant employee to avoid an inference of discrimination—at least where the employer’s existing policies would provide leave (or other accommodations) for similarly situated employees. For instance, if an employer offers light duty to an employee injured on the job, the employer would likely need to offer light duty to a pregnant employee.

NOTE: Additionally, the Affordable Care Act requires employers to provide lactation breaks for nursing mothers in a private space (other than a bathroom) for at least a year after giving birth. State law may impose additional requirements.

Several states have separate enactments providing guaranteed leave for pregnant women. For example, Washington law allows for pregnancy disability leave for employees working at companies with 8 or more employees. Likewise, California’s Pregnancy Disability Leave law applies to employers with as few as 5 employees. But for companies subject to state Family Leave Act laws (i.e. with 50 or more employees), a pregnant employee may be entitled to take extended leave because pregnancy disability leave requirements may stack on top of and family leave requirements.

  1. State Family Leave and Sick Leave Laws

Employers in many jurisdictions must now comply with paid sick leave requirements. For example, paid sick leave requirements apply to all companies in California—meaning that even if a business is not covered by family leave or pregnancy disability leave, it must allow an employee to use paid sick leave time if going to the doctor, or if they should choose to stay at home to care for their child. Once paid sick leave is exhausted the employee may take further leave as deemed appropriate by their employer. Employers should abide by existing company policies and avoid treating similarly situated employees differently. We provide further guidance here.

States may also impose FMLA-like requirements on smaller companies. For example, Oregon law provides job-protected unpaid leave for employees taking medical leave for most companies with 25 or more employees—though there are differences between Oregon’s requirements and those of the FMLA.

States may impose more extensive paid leave rules for larger companies, while extending those protections—under certain circumstances—to employees working at smaller firms. For example, the California Family Rights Act provides FMLA-like protections only for companies with 50 or more employees. But the Legislature recently added amendments expanding protections for employees taking parental leave following birth or adoption of a child.  These new rules apply to companies with as few as 20 employees working within a 75-mile radius.

In New York nearly all private employers are now subject to New York State’s Paid Family Leave law, which provides for job-protected and paid leave for qualifying employees to bond with a new child, care for family members with serious health conditions, and/or to help with family issues when someone is called into active military service abroad.

Find out whether your state has imposed paid leave laws.

  1. Workers’ Compensation Laws

Another challenge arises when you consider terminating an employee who has filed a workers’ compensation claim.  Most states’ workers’ compensation laws impose penalties, either fines, jail time, or both, for wrongful termination. And while terminating an employee who has filed a workers’ compensation claim is not outright prohibited, employers must take great care to avoid a retaliation claim.

Employers can defend themselves by showing that the employee who has been absent from work due to workers’ compensation injury is not capable of returning to work. Unless the employee is covered under the FMLA or ADA, generally state law does not prohibit termination for an excessive absence. Employers should work closely with their insurance carrier to ensure there is no violation of state law or the insurance policy.

  1. Employer Paid-Time Off Policies

Employers must abide by any existing company policies on paid time off (PTO). Thus, even if an employee is ineligible for leave under federal, state or local laws, the employee must be allowed to use accrued paid leave time. Once PTO time is exhausted, the employee might be allowed to take unpaid leave at the discretion of the employer. In granting unpaid leave requests, employers must avoid treating similarly situated employees differently.

  1. Short-Term and Long-Term Disability Policies

Short-term and long-term disability insurance policies offer income protection (cash benefits) to people who are unable to work for medical reasons. Generally, these policies do not offer job protection. In many cases, an employer may fire an employee receiving disability benefits. But before taking any action, an employer should check with an attorney and/or the insurance carrier to avoid a wrongful termination claim.


Final Thoughts and Further Resources

Individuals unable to return to work after the expiration of legally-required or employer-offered leave may be terminated. But an employer must make sure that other forms of leave and/or statutory protections do not apply. In addition, the employer must evaluate whether an employee who requests leave because of his or her own serious health condition is not entitled to a reasonable accommodation – including a longer unpaid leave of absence – under the Americans with Disabilities Act (ADA), which would allow the employee to perform the essential functions of his or her job.

Examples of when employees cannot be fired:

  • They are on FMLA leave, or
  • They can perform the essential functions of the job with a reasonable accommodation, but the employer refuses to provide accommodation.

Examples of when employees can (possibly) be fired:

  • They do not return from leave after taking their 12 weeks of FMLA, or
  • They can perform the essential functions of the job with a reasonable accommodation, but they do not return to work after the employer-provided (offered) accommodation.

Even where there is no legal requirement to accommodate a request for unpaid time-off, employers should proceed with caution before terminating an employee. It’s always possible for a disgruntled employee to file complaints with state or federal agencies, which may prove a major headache even if you have your house in order. Accordingly, it’s always prudent to consult with an attorney when contemplating an employee termination. Employers who are concerned about the possibility of lawsuits might also consider discussing severance agreements with counsel and considering the wisdom of contesting an unemployment claim.

NFIB provides further guidance materials in our Legal Guide Series, which includes handbooks covering the essentials of federal employment law, wage and hour issues, and a model employee handbook.

*This article does not constitute legal advice. Employers should consult a trusted employment law attorney in their state when dealing with these issues.

Subscribe For Free News And Tips

Enter your email to get FREE small business insights. Learn more

Get to know NFIB

NFIB is a member-driven organization advocating on behalf of small and independent businesses nationwide.

Learn More

Or call us today

© 2001 - 2024 National Federation of Independent Business. All Rights Reserved. Terms and Conditions | Privacy