NASE News


What Small Business Owners and Employees Need to Know about Leave of Absences

Tuesday, November 21, 2017

Once a person leaves the corporate world and enters the realm of small business, either as a small business owner or as an employee, he/she encounters new sets of regulations or lack of. This is certainly true when examining laws and guidelines pertaining to taking leave of absences. This article will address this topic from three perspectives: 1) the owner’s perspective of his own leave of absence, whether that be temporary or of indeterminate length 2) the owner’s perspective when a key employee requests a leave of absence, and 3) the employee’s perspective when considering their right to take a leave of absence.

Owner Takes Leave—Temporary
A business owner has always faced challenges when it comes to deciding when and how to take a vacation, get married, or attend a birth.

In an article entitled “It Takes a Little Work to Take a Vacation” by Anna Field, the author offers four useful tips for the owner to be well situated when taking a leave.
1. Prepare Your Staff—Have staff take the lead on important assignments before the owner departs.
2. Manage Client Expectations—Assure the client that the same quality of work will be performed in their absence and give them the name of at least one contact person.
3. Take Leave Around Slow Periods—Plan the trip when business is light.
4. Set A Schedule—Set aside a particular time each day to make calls or check e-mail.

Owner Takes Leave—Indeterminant
What happens when a family business owner becomes ill or disabled and how is the company protected if cash reserves cannot cover day-to-day expenses? An entrepreneur, including one who is starting a business or growing a business, in looking to protect themselves, family members, and the business, may think of life insurance as primary protection when he becomes ill or disabled. He should also be considering disability insurance.

Donita Leeson, in her article “What You Need to Know to Protect Your Small Business if You Get Seriously Sick or Injured”, recommends considering these disability insurance options.

- Short and Long-Term Disability Policies—A disability policy usually pays between 50 and 70 percent of a salary for a pre-determined time period. Disability plans vary significantly based on health condition, age, income, occupation and desired length of term.

- Business Overhead Insurance—This insurance covers items like rent, payroll, and inventory purchases.

- Buy-Out Insurance—This agreement is between the business owner and a second party/purchaser in which proceeds from a disability insurance policy fund a buy-sell agreement. This enables the purchaser to buy out the owner’s share of the business.

Affordable rates for disability insurance can be attained if the owner is a member of an association or has access to group coverage. Examples of associations include:

- National Association for the Self-Employed
- Freelancers Union
- National Association for Female Executives
- Small Business Service Bureau
- Writers Guild of America
- AARP Health
- Freelancers Union

Tips to lessen premiums include shortening the benefit period, increasing the waiting period before benefits commence, and omitting any unneeded coverage. Other strategies in locating the right policy involve comparison shopping, knowing one’s average monthly income, applying when healthy, reviewing existing life and mortgage policies to check on the cost of adding a disability rider, and adding a cost of living (COLA) option to account for inflation.

Business owners having questions can always refer to the National Association for the Self-Employed or NASE who provide a broad range of benefits to assist entrepreneurs.

Employee Requests Leave of Absence
Discussions about employees taking leave of absences need to reference the Family Leave and Medical Act (FMLA). FMLA requires the employer to grant employees up to 12 weeks of unpaid leave for family and health reasons such as the birth of a child, care of an employee or relative if ill, and situations involving military deployment. Regarding who qualifies for FMLA, the parameter most pertaining to small businesses is the requirement that any business with at least 50 employees within a 75-mile radius of the business must follow the FMLA. This begs the question, “Are small businesses with fewer than 50 employees required to follow the FMLA?” What about a micro business? How does a micro business owner handle employees taking leave with such a small staff?

There is no one pat answer to these questions. According to an article entitled “FMLA Rules: What Small Businesses Should Know” by Mike Kappel, the following contingencies need to be considered. If the business has less than 50 employees, it still may be required to follow FMLA if these conditions apply:
- Fluctuating Worker Base—if the business had at least 50 employees for 20 workweeks in the current or previous year.
- Joint Employer—if two employers share an employee’s services or interchange employees or one employer acts in the interest of another employer in relation to an employee.
- Integrated Employer—if the employer has two or more businesses with common management, interrelated operations, centralized control of labor relations, and a degree of common ownership or financial control.

A business owner with less than 50 employees, although not required to offer FMLA leave, can still offer it to its employees. Although FMLA is a federal law, some states have laws that expand coverage. Certain states also have paid sick leave legislation.

Paid Leave Statistics
It is interesting to note that there is data indicating small business employers (in this case, fewer than 100 employees) offer paid leave. The U.S. Department of Labor Bureau of Labor Statistics article “Paid Leave in Private Industry over the Past 20 Years” by Robert W. Van Giezen contributes the following chart. It offers breakdowns by type of paid leave for the years 1992 and 2012. (See the following page).

Small Business Maternity Leave Policy
When it comes to maternity leave policy, small business owners run up against even more regulations. Christy Hopkins, in her article “Small Business Maternity Leave Policy and Laws—With Examples”, outlines parameters affecting maternity leave.

The two primary factors determining whether a business is required by law to provide maternity leave are 1) the size of the company and 2) the location of the business.

Characteristic

Paid holidays

Paid vacations

Paid sick leave1

Paid personal leave

Paid funeral leave

Paid jury duty leave

Paid military leave

Paid family leave2

All workers

1992–1993

77

82

50

15

57

64

30

2

2012

77

77

61

37

60

63

33

11

Full-time workers

1992–1993

86

92

58

16

65

73

36

2

2012

90

91

75

44

71

73

39

13

Part-time workers

1992–1993

36

40

16

7

24

27

8

1

2012

40

35

23

16

29

32

15

4

Establishments with fewer than 100 workers

1992

70

75

44

10

42

48

17

2

2012

69

69

52

27

47

51

21

8

Establishments with 100 workers or more

1993

84

90

59

20

77

83

47

3

2012

87

86

73

49

76

77

47

15

 

Business Size
There is no federal law requiring a company to provide maternity leave if the business has fewer than 50 employees. However, if a business has 15 or more employees, it is required to adhere to the federal Pregnancy Discrimination Act (PDA). This Act “prohibits discrimination against employees and applicants on the basis of pregnancy, childbirth, and related medical conditions.” In businesses with fewer than 15 employees, although there is no federal law directed at discrimination, a pregnant employee could still sue the owner if she is treated differently from other employees in similar situations—and courts have usually ruled in favor of employees in lawsuits involving discrimination regardless of the size of the company.

Business Location
Companies with fewer than 50 employees may still be required by state law to provide maternity leave. Twenty-one states plus Washington D.C. have state-specific maternity law requirements. Four states, California, New Jersey, Rhode Island, and New York (set to join January 2018) offer publicly-funded maternity leave via temporary disability programs, paid for by payroll taxes.

Employee Perspective
If a small business employee has questions regarding whether they can take a leave of absence, they should consider the following.

- The employer has employee notification requirements.
- The employee must submit proper medical certification if that is the operating factor.
- Even if FMLA does not apply, the answer could be found in the employee handbook.
- If the employee still has questions, they can consult an attorney.

Conclusion
As described in the first part of the paper, the small business owner is not without options when it comes to taking a leave, whether that leave is temporary or of an unknown duration. Although there is no silver bullet answer to whether an employee can take leave if the company has less than 50 employees, there are certain protections in specified situations.

In building a business, a small business owner can benefit by offering FMLA leave even if not required for these reasons: 1) reduced employee turnover which carries with it reduced recruitment and retraining costs 2) millennials, being the largest generation in the U.S. workforce, are very likely to expand their families and will need leave 3) good leave practices will engender improved worker productivity and commitment to their work and 4) these practices will distinguish the company when it comes to attracting new talent.

Bibliography
Field, A. It takes a little work to take a vacation. The New York Times. 2012. Retrieved from www.nytimes.com/2012/07/05/business/smallbusiness/how-to-take-a-real-vacation-while-running-a-business.html

FMLA (Family and medical leave). United States Department of Labor. n.d. Retrieved from https://www.dol.gov/general/topic/benefits-leave/fmla

Hopkins, C. Small business maternity leave policy & laws – with examples. Fit Small Business. 2016. Retrieved from fitsmallbusiness.com/maternity-leave-policy/

Kappel, M. FMLA rules: what small businesses should know. Patriot Software. 2016. Retrieved from http://www.patriotsoftware.com/payroll/training/blog/what-small-businesses-should-know-about-fmla-rules/

Leeson, D. What you need to know to protect your small business if you get seriously sick or injured. Kabbage. 2015. Retrieved from https://www.kabbage.com/blog/what-you-need-to-know-to-protect-your-small-business-if-you-get-sick-or-injured

State family and medical leave laws. National Conference of State Legislatures. 2016. Retrieved from www.ncsl.org/research/labor-and-employment/state-family-and-medical-leave-laws.aspx

The pregnancy discrimination act of 1978. The United States Equal Employment Opportunity Commission. App 10/31/1978. Retrieved from http://www.eeoc.gov/laws/statutes/pregnancy.cfm

Van Giezen, R.W. Paid leave in private industry over the past 20 years. United States Department of Labor Bureau of Labor Statistics. 2013 2(18). Retrieved from https://www.bls.gov/opub/btn/volume-2/paid-leave-in-private-industry-over-the-past-20-years.htm

Comment

  1. RadEditor - HTML WYSIWYG Editor. MS Word-like content editing experience thanks to a rich set of formatting tools, dropdowns, dialogs, system modules and built-in spell-check.
    RadEditor's components - toolbar, content area, modes and modules
       
    Toolbar's wrapper 
     
    Content area wrapper
    RadEditor's bottom area: Design, Html and Preview modes, Statistics module and resize handle.
    It contains RadEditor's Modes/views (HTML, Design and Preview), Statistics and Resizer
    Editor Mode buttonsStatistics moduleEditor resizer
      
    RadEditor's Modules - special tools used to provide extra information such as Tag Inspector, Real Time HTML Viewer, Tag Properties and other.