Testimony of
Kimberley K. Hostetler, Director, Human Resources Services
Connecticut Hospital Association, Wallingford, CT
and Owner, Human Resources Management Services

Representing
The Connecticut Hospital Association and
the Society for Human Resource Management

Regarding
"Unemployment Compensation and the Family and Medical Leave Act"

On March 9, 2000
Before the
Human Resources Subcommittee of the House Ways and Means Committee
U.S. House of Representatives
Washington, DC

INTRODUCTION

Congresswoman Johnson and Members of the Subcommittee:

Good morning. My name is Kim Hostetler. I am Director, Human Resources Services, for the Connecticut Hospital Association (CHA), and in that capacity provide services and information to our member hospitals and other healthcare organizations on topics and issues relating to human resources. Founded in 1919, the Connecticut Hospital Association has been representing hospitals and health-related member organizations for over 80 years. CHA's diverse membership includes the 31 Connecticut acute-care hospitals and their related healthcare organizations, short-term specialty hospitals, long-term care facilities, nursing homes, hospices, home health agencies, ambulatory care centers, clinics, physician group practices and many other organizations. CHA provides legislative and regulatory advocacy on behalf of our members by supporting initiatives that are in the interests of our members and their patients. I also own a sole practitioner human resources consulting business, Human Resources Management Services, in Bristol CT, where I am an active member of the Greater Bristol Chamber of Commerce. The Greater Bristol Chamber has over 1,200 individual and business members from the city of Bristol and surrounding towns of Plymouth and Wolcott whose common goal is to advance the commercial, financial, industrial and civic interests of the community.

In my capacity as a Human Resources professional, I am an active member of several professional organizations, including the Society for Human Resource Management (SHRM) and its local chapter, the Human Resources Association of Central Connecticut (HRACC). SHRM is the leading voice of the human resource profession, providing education and information services, conferences and seminars, government and media representation, online services and publications to more than 130,000 professional and student members throughout the world. I very much appreciate having the opportunity to voice the objections that these organizations and their members have to the Department of Labor's Proposed Rule on Birth and Adoption Unemployment Compensation.

This past July, I had the privilege of representing CHA and the Greater Bristol Chamber at one of the four Congressional hearings that have been held to examine the impact and unintended problems with the Family and Medical Leave Act's implementing regulations and interpretations. Both these organizations, and their respective members, are firm supporters of the FMLA as it was conceived and passed. However the implementation of the law - through the Department of Labor's complex regulations and contradictory opinion letters - has moved it far from its original intent, resulting in substantial unintended consequences for employers and employees alike. As a result, I testified in July that we would like to see relatively modest, but very important revisions made to current FMLA provisions, especially before any further expansion is discussed.

Now that the Department of Labor's Proposed Rule on Birth and Adoption Unemployment Compensation (BAA-UC) has been published, our concern has deepened. Four separate congressional hearings have documented the substantial issues that exist with the Department of Labor's current FMLA regulations and interpretations. We feel strongly that no expansion of any sort, including this proposal to provide paid family leave, should be considered before these regulatory and administrative issues are addressed. We also feel strongly that tapping into the safety net for jobless workers to provide pay for an entirely different program -- employees on family leave -- will endanger the solvency of unemployment insurance trust funds, represents an inappropriate attempt to circumvent legislative authority, and violates both the original spirit of the Family and Medical Leave Act as well as current Unemployment Insurance law.

ISSUES WITH CURRENT FMLA REGULATIONS

In my work with CHA, with the Bristol Chamber, and with the Human Resources Association of Central Connecticut, I have found remarkable uniformity in reactions to FMLA administration. People repeatedly confirm that while they and their organizations have a deep and abiding commitment to meeting the concepts, the purpose and the provisions of the Act, they face substantial, burdensome administrative requirements as a result of the Act's regulations. While the intent of the FMLA seems simple and clear and is fully embraced by these professionals and their employers, the administration of the Act is far from simple and clear and has resulted in confusion, employer and coworker frustration, enormous time investment and lack of control over attendance policies.

[Note: The differences in eligibility parameters and leave amounts between the FMLA and our state Family and Medical Leave Act, passed in 1990, make administering FMLA programs particularly complex in Connecticut. However, given the state's tendency to follow federal guidelines in many key areas, we welcome positive and constructive modifications at the federal level.]

The purpose of the Family and Medical Leave Act, as defined by Congress in the text of the Act, is to balance the demands of the workplace with the needs of families in a manner that accommodates the legitimate business interests of employers [emphasis added]. The Department of Labor's implementing regulations and opinion letters have moved far from that instruction. There seems to be little accommodation for the truly legitimate business interests of employers, and there have clearly been unintended negative consequences for employers and employees alike.

When the FMLA passed Congress, it seemed straightforward and simple: employees are provided protected, secure time off from work to deal with serious medical or family issues. But, as I noted in my Senate Subcommittee testimony, the devil is in the details - or, more specifically, the devil is in the Labor Department's regulations! The primary issues in our experience, for organizations trying to administer leaves under the FMLA correctly, are:

•   the very broad definition of "serious health condition"
•   the uncontrolled use of intermittent leave
•   the 2-day notice requirement, and
•   the interference of FMLA with attendance control policies in questionable cases.

In addition, the inability of employers to count FMLA designated time for purposes of determining perfect attendance award eligibility is counterintuitive and perceived by employers and employees alike as unfair.

Definition of "Serious Health Condition"

The FMLA was intended to cover "serious health conditions" which implied that hospitalization, extended lengths of treatment or serious chronic conditions would be covered by the law, and that employees would be allowed time away from work to attend to their family's needs, a laudable goal. However, our experience demonstrates that some employees seek to use this time for conditions well beyond what a reasonable person would define as a serious health problem. Extremely broad Department of Labor regulations and guidance on the definition result in employers being required to certify all kinds of mild or minor conditions as FMLA-protected, including such things as bad colds, simple outpatient procedures not contemplated by the Congress which do not require extensive recovery times, and vague diagnoses of "depression", "stress", or "back pain". Despite an original opinion letter from the Department of Labor indicating that the cold, flu and non-migraine headaches were not serious health conditions, the Department issued a contradictory opinion letter the following year saying they could be. (These opinion letters are attached to my statement.) The conclusion of many employers is that the loose definition currently in use makes the Act a target for abuse. Many Connecticut employers have experienced the situation where an employee facing disciplinary action promptly brings in a doctor's form verifying an often-vague condition requiring immediate time off. This is extremely frustrating to employers, but it is equally disturbing to coworkers who are left with the work. One of the biggest frustrations I hear from supervisors is their inability to effectively address employee concerns about a coworker whose manipulation of well-intentioned leave provisions leaves them with extra work and additional stress.

Intermittent Leave

The FMLA legislation envisioned allowing employees to attend periodic, intermittent appointments for medical problems, physical therapy, or family member medical appointments, or take necessary time off intermittently for serious chronic conditions, and have this time protected as FMLA leave time. Unfortunately, instead of keeping records of this leave in one-half day increments - a reasonable approach - the Department of Labor has required employers to allow leave time (and account for it) in the shortest increments of time tracked by their payroll systems, which can be as little as single minutes. This has created a world of administrative problems which can be rectified by simply changing the law to specify that FMLA leave time can be taken in increments of as little as one-half days.

Here again, the opportunity for abuse is rampant. Many organizations can point to chronic attendance abusers being able to virtually always produce a doctor's statement to cover periodic absences. The lesson here is that there seems to always be a small group of employees who will attempt (and generally succeed) in taking advantage of the loose and vague provisions of FMLA as it is currently defined. While there will always be people who look for all the angles, misuse benefits and abuse privileges, we need not make it as inviting for them as we have.

Two Day Notice Requirement

The law provides employers two days to designate employee absences as FMLA time off once the employer knows the leave is needed for an FMLA required reason. However, in many organizations, determining if absence is FMLA time most frequently occurs when time records are submitted for payroll processing - generally once a week or once every other week; the result is that the employer representative responsible for providing FMLA notice doesn't learn of the situation until well after the two day notice period has expired, and the employer cannot correct these entries retroactively.

Perfect Attendance Awards

The time an employee takes away from work under the Family and Medical Leave Act may not be counted for the purpose of perfect attendance awards. An employee who has taken three months off under FMLA - or missed 38 days intermittently due to a chronic condition - may still be eligible for a perfect attendance award. Coworkers find this impossible to understand. Morale is affected when those rewarded for perfect attendance are recognized together with colleagues who no one has seen in months. The law states "the taking of leave shall not result in the loss of any employment benefit accrued prior to the date of the leave". Employment benefits are defined as "all benefits provided or made available to an employee by an employer", and the Department of Labor has interpreted that to mean attendance awards. But the benefits contemplated in the law are "group life insurance, health insurance, disability insurance, sick leave, annual leave, educational benefits, and pensions" - clearly Congress was concerned about the loss or reduction of significant health and welfare benefits. To include perfect attendance programs - when attendance is the essence of the program - seems to go beyond congressional intent. Not only is such an interpretation unfair to employees who do have perfect attendance, but it is also unfair to employees who may need to miss time for equally compelling reasons that may not qualify for FMLA (such as having to take time for the funeral of a family member). We are not suggesting that absences covered by FMLA be counted for attendance control purposes or for performance evaluation, but only in the single instance of attendance award programs where it would make so much sense to employees and employers alike.

EMPLOYER COMMENTS ON FMLA ADMINISTRATION

While additional examples and firsthand stories of FMLA administration issues were included and are available in my Senate testimony, I also asked for current feedback from a group of human resources executives who attended a CHA meeting with me last week to prepare for today's testimony. They reiterated their concerns and universally expressed opposition to the Department of Labor's Proposed Rule on Birth and Adoption Unemployment Compensation. Following that meeting, one participant sent me the following e-mail message: This past year was our first year of tracking FMLA leaves in a credible way. Prior to that it was happenstance. As a firm supporter of FMLA, I was astounded by the year end report. In 1999, as an organization of 2000 employees with about 1800 who would meet the hour requirements, we had 194 employees participate in FMLA. 56% were on medical leave, 25% maternity, 14% intermittent, and 5% family. That represents 1,234 weeks taken for FMLA and, is equivalent to 24 FTE's. At one point in the midst of high census where we were reaching to grab anyone who could come in, we had 54 employees out on FMLA. Staffing was a nightmare for our nurse managers. We had one specialty area which has 7 FTE's and it had 3 out on FMLA. So, while I remain an ardent supporter of FMLA, I also think it needs to be reviewed in a significant way prior to expansion.

The most prevalent comment and story "themes" that colleagues have shared include the following:

• The regulations, which go beyond Congressional intention, are complicated and difficult to understand, frequently resulting in costly consultation with an attorney to determine eligibility, etc.
• Intermittent leave is the hardest thing for managers (and coworkers!) to deal with.
• The two-day notice requirement for FMLA designation is very difficult for employers to meet.
• The opportunities for - and examples of - abuse are rampant.
• FMLA makes absence control virtually impossible; it has become essentially impossible to address many chronic attendance abuse situations. This is extremely upsetting to other employees.
• There is frequently a correlation between employees facing disciplinary action and the use of FMLA. FMLA documentation is often presented at the point when disciplinary action has been initiated with an employee.
• Employers have found a pattern of attendance abusers taking intermittent FMLA leave on Mondays and Fridays.
• Employers report seeing employees using FMLA as a way of getting time off to which they would not otherwise be entitled (time off at peak vacation times, for example).
• Employees have become increasingly savvy about the opportunities for abuse available under FMLA (for example, coming in late and making up the time at the end of the shift when shift differential is provided).
• The common difficult diagnoses include headaches, back pain, asthma, depression, anxiety, bronchitis, stress, and stomach problems.
• Employers - and coworkers - are hurt by employees with controllable conditions - like ulcers, for example - when the employees chose not to follow the treatment regimen and experience periods of incapacity as a result.
• Some employers have reduced benefits as a result of FMLA (previously open-ended or 6-months leaves are now limited to 12 or 16 weeks, for example). Some employers have eliminated perfect attendance awards.
• Many employers are finding that the highest usage of FMLA time used to be for maternity leaves, but it is now serious medical conditions.
• Planned and scheduled leaves, even intermittent or reduced hours leaves, can be accommodated; it's the surprises for vague or questionable reasons that are so problematic f or employers and coworkers alike.
• The amount of time employers spend on FMLA administration is growing, and in many cases is consuming large percentages of staff time.

These experiences and difficulties with FMLA administration are not unique to Connecticut organizations; similar experiences have been shared and documented in previous hearings.

ISSUES WITH THE LABOR DEPARTMENT'S PROPOSED RULE ON BIRTH AND ADOPTION UNEMPLOYMENT COMPENSATION

Our concerns with the Department of Labor's proposed rule are twofold:

• We are opposed to tapping into the resources of a critical safety net program to provide funding for family leave, leaving the Unemployment Compensation system vulnerable to insolvency due to its application to situations for which it was never intended.
• We are opposed to the process - the issuing of Department of Labor regulations rather than an open, thorough legislative review.

It is not just the business community that has grave concerns about this proposed bill. I have been an active member of the Board of Directors of Family Services of Central Connecticut (FSCC) for many years, serving as Board Chair for the past four years. Family Services is a 104-year old agency providing social and behavioral health services throughout thirteen (13) communities in central Connecticut by providing services and advocacy on behalf of families and their members. One of our most significant projects during the past two years has been the Employment Success Program, a welfare-to-work initiative operated collaboratively throughout the state under the auspices of the Connecticut Council of Family Service Agencies. Its purpose is to assist people who are leaving the welfare rolls to achieve economic independence by identifying barriers to employment, developing family plans and budgets, and providing referrals to specific services. This successful "safety net" program is now in its third year. This is third year that I have also served on the board of the Bristol Preschool Child Care Center (BPCCC), an organization that has provided quality, age-appropriate child care services to economically disadvantaged families in Bristol for almost thirty years. Currently the program serves one hundred twenty-three (123) three to five year olds. Both of these organizations provide services to a population that often faces unemployment. Both of these agencies oppose using unemployment insurance trust funds to pay for paid family leave. Their reasons are similar: let's not drain resources from one needy population to provide a new support service for another population. Both favor the concept of financial support for those who need it to take family leave, but not at the expense of jeopardizing the safety net for the out-of-work population.

My work with those two organizations has intersected in one other way. The Connecticut Council of Family Service Agencies (CCFSA) recently published Families Work: The 2000 Report on the State of the Family in Connecticut. CCSFA has worked with the Connecticut population transitioning off welfare through its Employment Success Program (ESP). In the report they have identified trends during 1998-99, all of which complicate attaining employment success. Almost half (44%) of the referrals into ESP's Safety Net program were families who were unable to comply with program rules: they were most commonly sanctioned for loss of jobs, often through lack of daycare. And hospital HR leaders have commented that one of the most common reasons employees ask to extend their planned leave period is not a desire to stay home rather than work, but a lack of adequate child care. Perhaps the goal of providing support for working families would be better served by first focusing on closing the harmful gap between the availability and the need for quality childcare.

People who are unemployed are also concerned about and opposed to the Department of Labor's proposal. The Human Resources Association of Central Connecticut sponsors a "HR Lead Group" - a networking and information-sharing group for HR professionals who have lost their jobs. During a meeting of this group on March 1st, the Department of Labor's proposed rule was discussed. The meeting was attended by 15 HR management level individuals, all in transition and seeking employment, and all seasoned professionals. The group was generally well informed on this issue, and all reacted very negatively to President Clinton's proposal. No one present supported using unemployment funds this way. Participants were particularly concerned about potential unemployment funds shortages or benefit cutbacks, especially if we head into a period of economic downturn. They also expressed concerns about increased record-keeping and cost burdens for employers, and the potential for paid leave to discourage attachment to the labor force.

In Connecticut, our unemployment insurance system was so overburdened in the early 1990's that we had to float a bond worth nearly a billion dollars to cover the deficit. Connecticut employers have been paying an annual special employer assessment every year since then, which is just now expected to end in August 2000. So Connecticut employers and unemployed individuals are understandably nervous about any changes that would jeopardize the solvency of the trust fund. Even the Connecticut Department of Labor is not supportive of the federal proposal. During a presentation to Bristol Chamber members in January, a department director said that the general sense of the Department is that after just coming off the problems with our program, this isn't the right direction... He said that most state administrators have not warmed to the idea and that whether paid leave is a good idea or not, state unemployment funds weren't set up to deal with this.

• We're a small business. As part of our benefit package, we provide short-term disability income insurance for our employees, which pays up to 13 weeks. Our employees have taken advantage of this benefit on four separate occasions - four new babies in our "family". If employees are allowed to collect unemployment benefits for maternity leave, should I then consider eliminating short-term disability income from our benefit package? The working environment in most small businesses is family-oriented. Flextime, part-time, work-at-home options are being implemented in small businesses more and more, particularly during this tight labor market. Small businesses want to accommodate dependable, loyal employees. Allowing employees to collect unemployment during family leave will erode the family-like relationship that exists in many small businesses. This is not just about an increase in the FUTA tax rate. It's as much about government forcing small employers to do things that they might well be doing on their own - because they want to!

• I own a small job shop. We fluctuate between 24 - 30 employees and are looking for good people now. Only once in our history have we had to have a lay off due to slow down in work and at that time I was proud to know we had unemployment benefits to offer our laid off workers as they looked for other employment. The burden of that benefit in this state has become an enormous weight especially on small business trying to control the cost but must pay for the interest assessment on the bond. Times are good now with unemployment low but history has proved that will change. If employees are allowed to collect unemployment benefits for FMLA and my small shop must pay for that with increased taxes and must also pay someone to replace the employee who is not here how will we survive? Insurance companies offer insurance to employees for long and short term disability and my employees gladly of their own free will offer to pay the premiums in full to make sure they are covered if they must be out of work. If we must pay to replace an employee with skilled labor to get the work out the door to please our customers and we must pay the increased unemployment insurance and then conceivably pay an assessment because we didn't pay enough and must borrow again, what incentive is there to employ people? We as owners take all the risk, borrow all the money to run a company, invest in new machinery, spend money on training, etc. just to be taxed out of business. Many of us have put up our homes, our savings, all that we consider investing in our future and our children's future and the future of our employees and their families. Family Leave is a wonderful idea...I would love to see us all be able to take more time off to spend with our families and not just when they are sick. But until we find a way to do that that doesn't put the burden on employers.... or until we have a society that is not concerned with OUTPUT and production to make our economy grow, employers cannot be stuck with this mandate.

• I have read that the Department of Labor's Proposed Rule to alter the existing Family and Medical Leave Act (FMLA) is under consideration. This change to allow funds from the existing unemployment funds to be allocated to the FMLA would be devastating to businesses throughout the United States. If enacted, it would increase our cost of doing business, a cost that cannot and should not be passed on to our customers. As Plant Manager of four facilities in four different states, I believe the current FMLA has served as a useful tool for employees to address personal or family situations. The current practice promotes the proper usage to the intention of the law. We have finally started to manage our current unemployment insurance system and have eliminated much of the abuse. By allowing unemployment funds to those who qualify for the FMLA, we would be opening the doors to potential abuse. In addition to the abuse, the cost of hiring back-up personnel to fill in would jeopardize our ability to effectively manage the business. THIS WOULD BE DISASTROUS TO THE BUSINESS CLIMATE!

• Using unemployment funds to subsidize FMLA is wrong. Furthermore the unemployment system is just now starting to regain its health. The FMLA gives employees a vehicle to use when they need to deal with specific family related issues. Let's not turn it into a vehicle that can be used to avoid work. The only way our economy grows and takes care of the people of Connecticut is when money is paid for a service. We do quite poorly when we pay money for nothing.

1. To address the FMLA's unintended consequences, we urge Congress to consider the following suggestions on a bipartisan basis:
   
   1. Restore the FMLA to original Congressional intent by clarifying and tightening the definition of "serious health condition". Perhaps for all conditions other than chronic health conditions, the current definition of serious health condition which includes a minimal period of incapacity (time away from work) of "more than three consecutive calendar days", could be changed to 14 days, or minimally, seven days. This would still protect any serious conditions, but would eliminate the need to designate and track questionable situations that may be addressed by a company's sick leave like minor injuries, earaches, headaches or flu.
   2. Given the difficulty in meeting the two-day notice requirement, change the law to allow employers three weeks, rather than two days, to retroactively designate absences as FMLA leave time and provide written notice. This change alone would simplify the administration of this program immensely.
   3. Require that intermittent leave be offered and tracked in increments of not less than one-half day as Congress originally intended.
   4. Because of the inherent unfairness of exempting FMLA time from attendance program consideration, clarify that employers may record FMLA leaves as absences for purposes of perfect attendance awards only (the only "employee benefit" that could be so affected by FMLA use).
   5. Address the intermittent leave certification process. The employee taking intermittent leave now has no responsibility in the process (e.g., to request FMLA) - the onus is completely on the employer to deal with the absence. There is virtually no system of checks or controls. Once an employee has an open-ended certification from a medical provider indicating that time off should be taken as required, the employee can come an go without providing notice and there is no incentive to minimize absences and avoid abuse.
   6. Clarify the eligibility parameters to say 12 continuous months of employment. Given the unusual and varied staffing arrangements used by healthcare providers (and now employers in other industries as well), including sporadic on-call work and summer/after-school jobs, it is difficult to determine whether an employee with a history of these kinds of short-term assignments has met the eligibility requirement.
   7. Remove the FMLA restriction that prohibits the use of certain providers for second opinions. In any case where employer has reason to doubt the validity of the medical certification, the employer may require a second opinion. But the health care provider used for that second opinion cannot be employed on a regular basis by the employer. That provision is in conflict with ADA, disability, and workers' compensation provisions. Use of regular company doctors for second opinions would be easier, quicker, more practical and reasonable.
   
   
2. To address the need for some employees for paid family leave:
   
   1. First and foremost, address current problems with the FMLA's regulations and interpretations that are actually serving as a disincentive for companies to offer or expand paid leave policies. We urge the speedy enactment of technical corrections, S. 1530 - The Family and Medical Leave Clarification Act, on a bipartisan basis to remove current disincentives that actually discourage employers from providing paid leave.
   2. Support the win-win proposition of compensatory time. Proposals such as H.R. 1, the Working Families Flexibility Act of 1997, or S. 4, the Family Friendly Workplace Act, would allow employers to offer and employees to receive overtime payment in the form of time-and-one-half paid compensatory time off in lieu of cash payment, enabling employees to bank paid time off for times when it is needed.
   3. Explore the use of employee pretax savings accounts (such as an IRA or dependent care flexible spending account) for funding leaves.
   4. Encourage flexible work arrangements such as job sharing, flextime, and telecommuting, perhaps with tax incentives and certainly by removing current obstacles or disincentives.
   5. For employers that do not provide paid family leave already, encourage the inclusion of such a benefit as an option in cafeteria-style benefit plans.
   6. Promote utilization of existing tax credits for adoption assistance which are available for employers to help adoptive parents.
   7. Thoroughly explore all alternative funding options. Tapping into the security program for jobless workers to provide pay for employees on family leave will endanger the solvency of unemployment insurance trust funds and represents an inappropriate attempt to circumvent Congressional legislative intent and authority.