Does a public school system have to keep paying for an employee's health insurance during unpaid family or medical leave under FMLA?

Plain-English summary

The Family and Medical Leave Act of 1993 had just become law. The federal statute gives eligible employees of covered employers up to 12 weeks of unpaid leave per year for the birth or adoption of a child, the serious illness of an immediate family member, or the employee's own serious illness. At the end of FMLA leave, the employer must reinstate the employee to the same or an equivalent job. And, importantly for this opinion, the employer must keep paying for the employee's group health insurance during the leave at the same level and on the same terms as if the employee were still working.

The Superintendent of Greene County Public Schools asked the AG whether that group-health-coverage obligation applied to local education agencies, given a wrinkle in how FMLA defined "group health plan."

The wrinkle: FMLA § 104(c)(1) (29 U.S.C. § 2614(c)(1)) borrows the definition of "group health plan" from Internal Revenue Code § 5000(b)(1). IRC § 5000(b)(1) defines "group health plan" broadly to include plans of any employer. But IRC § 5000(d) then says that, "[f]or purposes of this section, the term 'employer' does not include a Federal or other governmental entity." Read literally, that exclusion would knock LEA health plans out of the IRC's "group health plan" definition, which would in turn knock them out of FMLA's group-health-plan obligation, which would mean LEAs do not have to keep paying premiums during FMLA leave.

Senior Deputy AG Edwin M. Speas, Jr. and Special Deputy AG Thomas J. Ziko rejected that reading. Their analysis:

• FMLA expressly defines covered employers to include public agencies. Congress did not exempt public employers from the leave entitlement; it exempted them only as to certain other operational details that do not include health-benefits maintenance.
• The legislative history and statutory text of FMLA show no intent to carve public-sector employees out of the health-benefits-maintenance protection. The provision is integral to the leave guarantee: if employers could drop coverage during leave, the "leave" would carry catastrophic insurance risk that would make it unusable for many employees.
• The U.S. Department of Labor's FMLA regulations directly address this exact issue. 29 C.F.R. § 825.209 (proposed at 58 Fed. Reg. 31803 (1993)) states: "FMLA includes public agencies within its definition of covered employers. There is no indication in either the Act or its legislative history supporting a view that public agencies are not required to maintain employees' health benefits during periods of FMLA leave, and they must do so."
• The cross-reference to IRC § 5000(b)(1) is best read as borrowing only the definition of what counts as a "group health plan," not the IRC's separate § 5000(d) governmental-entity carve-out, which has a specific tax purpose unrelated to FMLA.

So LEAs (and other state and local government employers covered by FMLA) must keep paying their share of group health plan premiums for eligible employees during FMLA leave, on the same terms as if the employee were still actively working. Like private-sector employers, LEAs can recover the contributions if the employee fails to return to work after the authorized leave (subject to FMLA's standards for that recovery, which include exceptions for circumstances beyond the employee's control).

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. FMLA has been amended (military caregiver leave was added in 2008, military exigency leave in 2008 and expanded in 2010), and the DOL regulations have been substantially revised. The core principle (public employers must maintain health benefits during FMLA leave) has not changed, but the operational details for tracking leave, calculating recovery of premiums, and coordinating with paid leave have evolved significantly.

Background and statutory framework

FMLA was signed into law by President Clinton on February 5, 1993, and took effect August 5, 1993. The statute applies to public agencies (including LEAs) regardless of the number of employees they have. For private employers, the threshold is 50 or more employees within a 75-mile radius. Eligible employees are those who have worked for the employer for at least 12 months and 1,250 hours in the previous 12 months.

The four qualifying reasons for FMLA leave (as originally enacted in 1993):

1. Birth of a child and to care for the newborn.
2. Placement of a child with the employee for adoption or foster care.
3. To care for a spouse, child, or parent with a serious health condition.
4. The employee's own serious health condition that makes the employee unable to perform job functions.

The leave is unpaid. But the employer must maintain the employee's group health coverage during the leave on the same terms (including the same employer share of premiums) as if the employee were still working. This is the issue addressed in the AG's opinion.

The IRC § 5000 wrinkle has a technical origin. IRC § 5000 imposes a tax on certain non-conforming group health plans. The governmental-entity exclusion in § 5000(d) means the federal government and state and local governments cannot be subjected to the IRC § 5000 tax penalty. That carve-out exists for sovereign-immunity and tax-policy reasons unrelated to FMLA. The FMLA drafters borrowed the definition of "group health plan" from § 5000(b)(1) because the definition is broad and well-developed, not because they wanted to import the § 5000(d) carve-out into FMLA.

Reading FMLA as the AG read it (and as DOL read it in 29 C.F.R. § 825.209) is consistent with FMLA's stated purpose of providing job-protected leave with health-benefits continuity to employees across the public and private sectors.

Common questions

What happens if the LEA cannot afford to keep paying premiums during a long FMLA leave?

The obligation is not waivable on hardship grounds. LEAs must budget for it. If the employee fails to return to work after the leave (and the failure is not due to a circumstance beyond the employee's control or due to FMLA-qualifying continuation of the condition), the LEA can recover its contributions from the employee.

Does the employee still have to pay their share of the premium?

Yes. FMLA requires the employer to continue paying its share. The employee must continue paying the employee share, and the LEA can establish a procedure for collecting that payment during the leave (e.g., post-dated checks, payroll deductions before the leave starts, or repayment on return).

What if the employee's health insurance was tied to active employment status under the plan documents?

FMLA preempts plan terms that would otherwise terminate coverage on the start of unpaid leave. The employer must maintain coverage on the FMLA terms regardless of what the plan documents say.

What about teachers covered by collective bargaining or state employee retirement plans?

The FMLA obligation runs independently of any other state or contractual benefits. Where state law or a collective bargaining agreement provides better benefits during leave, those continue to apply. FMLA is a floor, not a ceiling.

Are charter schools and community colleges in NC covered?

Charter schools are LEAs under NC law and are FMLA-covered public agencies. Community colleges are also public-agency employers covered by FMLA. The opinion's reasoning applies equally to them.

Source

• Landing page: https://ncdoj.gov/opinions/family-and-medical-leave-act/

Citations

• Family and Medical Leave Act of 1993, Pub. L. No. 103-3
• 29 U.S.C. § 2614(c)(1) (FMLA § 104(c)(1))
• Internal Revenue Code § 5000(b)(1)
• Internal Revenue Code § 5000(d)
• 29 C.F.R. § 825.209 (DOL FMLA regulation)
• 58 Fed. Reg. 31803 (1993)
• S. Rep. No. 103-3

Original opinion text

July 7, 1993

Dr. Paul K. Browning
Superintendent
Greene County Public Schools
301 Kingold Boulevard
Snow Hill, North Carolina 28580

Re: Advisory opinion; Family and Medical Leave Act; Pub. L. 103-3 (1993)

Dear Dr. Browning:

You recently wrote to Mr. Speas to ask whether the Family and Medical Leave Act of 1993, Pub. L. No. 103-3 (FMLA), obligates local education agencies (LEA's) to pay for employee health benefits during the time that the employee might be on unpaid family or medical leave authorized under the FMLA. It is our opinion that the FMLA does require LEA's to pay for health benefits for eligible employees while they are on leave authorized by the Act.

The Act is intended to promote a healthier balance between work and family responsibilities. Under the FMLA, eligible employees of covered employers, including LEA's, are entitled to up to 12 weeks of unpaid leave per year in the event of the birth or adoption of a child or a serious illness of the employee or an immediate family member of the employee. At the end of the leave, the employer must reinstate the employee to the same or an equivalent job.

During the period of leave, covered employers are required to maintain pre-existing health coverage. Section 104(c)(1) (29 U.S.C. § 2614(c)(1)) specifically provides:

[T]he employer shall maintain coverage under any "group health plan" (as defined in section 5000(b)(1) of the Internal Revenue Code of 1986) for the duration of such leave at the level and under the conditions coverage would have been provided if the employee had continued in employment continuously for the duration of such leave.

The Senate Report regarding this section of the FMLA states:

During the period of leave, the employer shall make contributions to the plan at the same rate and in the same amount as if the employee were continuously employed. Unless the contrary is clearly demonstrated by the employer, it shall be assumed that the employee would have continued working on the same schedule, at the same wage or salary, and otherwise under the same terms and conditions as he or she normally worked before going on leave.

S. Rep. No. 103-3.

Therefore, in general, covered employers must pay for eligible employees' "group health plan" while the employees are on leave authorized under the FMLA.

The obligation of LEA's to pay for their employees' health insurance, however, is not clear. Section 104 of the Act incorporates the definition of "group health plan" from section 5000(b)(1) of the Internal Revenue Code of 1986 into the FMLA. Section 5000(b)(1) of the Internal Revenue Code defines "group health plan" to mean:

[A]ny plan of, or contributed to by, an employer (including a self-insured plan to provide health care (directly or indirectly)) to the employers' employees, former employees, or the families of such employees or former employees.

That definition would include the LEA's health plans. However, section 5000(d) of the Internal Revenue Code of 1986 specifically states, "For purposes of this section, the term 'employer' does not include a Federal or other governmental entity." Thus, while the subsection which excludes Federal and other government entities is separate from the section (5000(b)(1)) which is referred to in the FMLA, it is clear that, when read in its entirety, section 5000 of the Internal Revenue Code excludes LEA's health plans from the definition of "group health plans." Therefore, one might argue that the FMLA also excludes those plans from the benefits which LEA's are obligated to maintain for employee on leave under the FMLA.

In our opinion, this argument is unlikely to prevail. Legislative intent is the primary principle of statutory construction. Based on previous sections of the Act and the stated purpose of the Act, it does not appear that Congress intended to exempt state agencies from the obligation to maintain the group health plan benefits of their eligible employees who take leave authorized under the FMLA. Moreover, the U.S. Department of Labor regulations for the Act indicate that LEA's are responsible for maintaining health care premiums during the leave period. The relevant regulation states:

FMLA includes public agencies within its definition of covered employers. There is no indication in either the Act or its legislative history supporting a view that public agencies are not required to maintain employees' health benefits during periods of FMLA leave, and they must do so.

58 Fed. Reg. 31803 (1993) (to be codified at 29 C.F.R. § 825.209).

Therefore, it is our opinion that Congress intended LEA's to maintain and pay for eligible employees' group health benefits during leave periods authorized under the FMLA. Like other covered employers, LEA's may recover any contributions to the group health plan if the employee fails to return to work after the expiration of authorized leave unless the failure to return is for FMLA-qualifying reasons or other reasons beyond the employee's control.