The company’s handbook said that employees fired for “gross misconduct” would not receive pay for earned but unused vacation time. The term “gross misconduct” was not defined.

One employee was fired after he failed a mandatory drug test. He did not receive any vacation pay.

He sued, claiming a failed drug test didn’t reach the level of gross misconduct and demanded a payout for the leave he didn’t use.

The court agreed. Since the company didn’t explain what conduct it was referring to, the judge tipped the scales in the employee’s favor and said “gross misconduct” refers to actions that are “intentional, wanton, willful, deliberate, reckless or in deliberate indifference to an employer’s interest.”

And, according to the court, failing a drug test didn’t make the cut. The employee was awarded his payout.

The lesson: Be careful about using terms that are open to interpretation without clearly defining them. If the handbook had simply said, for example, that employees forfeit their paid leave if they’re fired for breaking company policy, the court battle could likely have been avoided.

Cite: Lang v. Quality Mold.

Earlier this month, the House of Representatives held a hearing on a bill that would make offering paid sick leave mandatory for employers.

If passed, the Healthy Families Act (HFA) would require any company with 15 or more employees to offer full-time workers seven paid sick days a year. Part-time employees would get a prorated amount based on how much they work.

Like the FMLA, the HFA would let employees take time to care for themselves or a family member. The leave would be legally protected — meaning employees could sue if they feel they’ve been retaliated against for using it.

The HFA is less strict than the FMLA, however. “Family member” includes any blood relative and anyone whose relationship with the employee is “the equivalent of a family relationship.” Any physical or mental illness, injury, or medical condition could result in a protected absence.

What about current paid leave policies?

The bill says employers won’t need to change anything if they already give employees sick leave that’s at least equivalent to what’s required by HFA. But employers would be prohibited from eliminating leave they already offer in an attempt to offset the mandatory sick days.

That means companies won’t be able to reduce vacation time to offset the costs of additional sick time. And some experts interpet the provision to mean companies offering a general PTO bank would need to add seven sick days in addition to what’s already available.

What to expect

Attorney Mike Aitken, speaking at a recent Society for Human Resources Management conference in Washington, D.C., said he expects Congress to take a vote on the bill this spring.

The HFA was introduced in the Senate a few years ago and failed to move. But that was before President Obama — a vocal supporter of the bill — and an increased Congressional Democrat majority arrived in Washington.

So far, no states have made sick leave mandatory — measures have failed in California, Ohio, New Jersey and Washington. Three cities — San Francisco, Milwaukee and Washington, D.C. — have passed mandatory sick leave laws.

We’ll keep you posted on the HFA.

Here’s what happened in this recent case:

A 60-year-old employee was told her job was being eliminated after 25 years of working for the employer. She started crying and got permission from her boss to take the rest of the day off.

At home, about an hour after getting the news, the woman suffered a permanently disabling heart attack. Her doctor said she’d been healthy and that the incident was caused by the stress of hearing she was losing her job.

She was awarded accidental disability benefits. The company appealed, arguing she wasn’t eligible because the injury didn’t occur as a result of her job duties.

But the court sided with the employee’s doctor.

It was undisputed that the heart attack was caused by the woman’s conversation with her boss. And since that conversation occurred “during the scope of her employment,” the heart attack was directly related to her job and the woman was eligible for disability benefits.

Cite: Retirement Board of Salem v. Contributory Retirement Appeal Board.

The answer depends on why they don’t return.

Under the FMLA, employers can’t recover premiums paid for health coverage if an employee fails to return to work because of their own or a family member’s serious health condition, or due to “other circumstances beyond the employee’s control.”

Those circumstances include:

• the employee’s spouse has been transferred to a job more 75 miles from your company’s location
• the employee is laid off while on leave, and
• a “key employee” is denied reinstatement by the company.

In other cases, employers can recoup the costs if employees fail to return to work. Under the law, “returning to work” means working for at least 30 days after taking leave.

So if an employee resigns or retires within 30 days of his or her return from leave, the company may be entitled to recover its share of the health benefit premiums.

That’s what two employees claimed in one recent court case.

The employer gave all full-time employees 120 hours of sick time a year. Employees who exceeded that allotment were disciplined.

Two employees had each taken close to 120 hours of sick leave — plus, they had both taken time off for FMLA. So by the end of the year, they’d used more sick time than they were allowed and were suspended without pay.

They sued, claiming they were disciplined because they took FMLA.

The company’s response: Employees had the choice of whether they wanted to use paid sick leave while they were on FMLA. In this case, the employees chose to take the paid time.

Then, when they tried to take more sick days after that, they were punished.

Who won the case?

Answer: The company.

The employees chose to use sick leave when they took FMLA and continued to use sick time when they knew they’d run out. “In other words,” the judge said, “they want more paid sick time than other [employees] got.”

The court didn’t buy their argument and the case was thrown out.

Cite: Tucker v. County of Monmouth

Legal experts are still trying to comb their way through the 1,079-page American Recovery and Reinvestment Act President Obama signed into law last month. And deep in the document, they’re finding several provisions that will have a big impact on HR.

1. Tax breaks

One change that could affect companies’ hiring plans: a tax incentive to boost the employment of certain disadvantaged groups.

Under the new law, businesses can claim a 40% credit on the first $6,000 of wages paid to:

• unemployed veterans (people discharged from military duty within the past five years who’ve received at least four weeks of unemployment benefits within the previous 12 months), and
• “disconnected youths” (individuals between the ages of 16 and 25 who haven’t worked or attended school in the past six months).

2. New HIPAA regs

The stimulus package expands the Health Insurance Portability and Accountability Act (HIPAA) to give businesses more responsibility in keeping health records confidential.

Under the new provision, in the event of a breach of health data, any business covered by HIPAA must notify affected individuals within 60 days after they discover the information has been compromised.

3. COBRA subsidy

Under the stimulus plan, the government will subsidize COBRA health insurance premiums for employees who have lost or will lose their jobs between Sept. 1, 2008, and Dec. 31, 2009. Here’s how it’ll work:

Employees are responsible for paying 35% of the premiums. Employers pay the rest, then claim their share as an offset against payroll tax liability.

Any workers who were terminated after Sept. 1 but didn’t take COBRA will get a second chance. Employers must send those employees a new notice before April 15.

4. Increased unemployment benefits

The plan gives states more money for unemployment benefits, extending a program that offers benefits for an additional seven weeks. Also, the law expands eligibility to employees who lose their jobs due to certain family reasons, such as a spouse’s relocation or the need for time to take care of a sick family member.

As a result, experts say, employers could end up paying higher unemployment insurance taxes.

Generally, employees on FMLA don’t need to continue earning those benefits. Benefits are accrued based on employers’ individual policies.

For example, if your company gives employees vacation time based on the hours they work, they don’t need to accrue any PTO while on medical leave (as long as other types of unpaid leave are treated the same way).

The same goes for calculating seniority. Hours on FMLA don’t need to be factored into the equation.

But there is one area to look out for: Many companies let employees earn PTO while they’re out on paid vacation. When FMLA runs concurrently with paid leave, employers should continue following that policy.

Otherwise, they could get in trouble for treating an employee using FMLA leave differently than employees who haven’t taken FMLA.

An employee asked for and was granted 12 weeks of FMLA leave. However, after about 10 weeks, she was told by her doctor that she would need extra time away from work.

When she informed her manager, the company terminated her. The employee wouldn’t have been able to return until almost a month after she ran out of leave.

However, the company did pay her health benefits for the full 12 weeks.

The employee sued, claiming she was fired after using only 10 weeks of FMLA leave.

The company argued that she wouldn’t have returned to work in time to keep her job anyway, and she wasn’t denied any benefit she would’ve received if it had waited 12 weeks to fire her.

Who won?

The court agreed with the company. It was undisputed that the employee’s doctor didn’t clear her to return to work until almost a month after she would’ve run out of leave. The company gave her all the benefits she was owed and had no reason to delay the termination.

Cite: Roberts v. The Health Association

Many employers choose to have leave policies that are more generous than what the FMLA requires. But as a recent case shows, that doesn’t mean those companies are immune to lawsuits.

An employee needed two months off work after complications during surgery. His boss told him he could take paid leave for whatever time he needed.

Though the employee was eligible for FMLA, neither he nor his boss ever mentioned it as a possibility. Instead, he took time off and was paid his full salary until he was able to come back to work.

The manager told him his job would be open for him when he returned.

The problem: The supervisor couldn’t live up to his promise. Once he went back to work, the employee was put in a different position and given a pay cut.

He sued under FMLA, claiming he was unfairly denied reinstatement to his former position.

The company tried to have the case thrown out, arguing the employee had no right to reinstatement because he never took FMLA leave.

But the judge didn’t buy it. As the court ruled, most likely, the only reason he didn’t take FMLA is that his manager never offered it — and he was obligated to after he learned the reason the employee needed time off.

The company may have acted generously by giving the employee seemingly indefinite paid leave, but that didn’t mean he wasn’t entitled to the FMLA’s job protection.

Generosity’s not enough

The lesson for managers: It’s easy to think employees don’t need FMLA because the company’s offering a more generous leave policy and plans to keep the employee in the same job no matter what.

But as this case shows, those plans don’t always work out. And that makes employers an easy target for lawsuits.

Managers need to notify HR whenever they think an employee qualifies for FMLA so leave can be offered — no matter what the employer’s individual leave policy.

Cite: Smith v. Primecare Medical, Inc.

Last month, Philadelphia passed a citywide ordinance requiring companies to accommodate employees who need time off due to sexual assault and domestic violence.

The law applies to all employers. At companies with 50 or more workers, employees can take up to eight weeks of unpaid leave in a 12-month period. Companies with fewer than 50 employees must provide four weeks of unpaid leave.

Victims can take leave to:

• seek medical attention
• attend counseling
• take actions to prevent future abuse (such as changing residence), and
• seek legal assistance.

When victims take leave for a reason that also allows them to take FMLA, both leaves can run concurrently.

A growing number of cities and states have similar laws on the books, including Washington, Florida, Kansas, and Washington, D.C.

A federal bill granting domestic and sexual abuse victims 30 days of leave was introduced in the Senate last year.