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Families and Employers in a Changing Economy

In 1993, Congress passed the Family and Medical Leave Act (FMLA or the Act) to provide a national policy that supports families in their efforts to strike a workable balance between the competing demands of the workplace and the home. These demands have intensified over the last 25 years, as the nation has experienced dramatic social and economic changes affecting businesses, employees and families alike. American businesses have confronted a changing world economy marked by increasing competition, technological innovation and instability. Many more women have entered the labor force. Many families care giving needs are now being met by family members who also are holding down jobs. This, in turn, has fueled the rising need among employees for workplace policies that enable them to meet the often competing demands of job and home.

In almost every family a time comes when some family member has a serious medical problem or a care giving need that requires time off from work. Without the availability of job protected family and medical leave, employees often face the difficult choice of returning to work prematurely, of giving up their jobs or of not providing their families the care and support they need.

Prior to the Family and Medical Leave Act, employees had access to family and medical leave in two ways:

  • Voluntary or collectively bargained employer policies
  • Policies required by state leave statutes.

A quarter to a third of formal employer policies matched FMLA requirements in the protections they offered. Many voluntary policies did not provide leave for all the reasons offered by FMLA  especially to care for a seriously ill parent, child or spouse, or to care for a newborn, newly adopted or foster child. Leave was often handled on a case by case basis, for a shorter duration, and health insurance and other benefits were not necessarily maintained. In addition, the discretionary nature of many leave policies meant that leave taking employees often did so at some risk to their job security.

State statutes, enacted in 34 states, Puerto Rico and Washington, D.C., expanded unpaid, job guaranteed leave options for some employees, especially in the area of maternity leave, but very few were as comprehensive as the FMLA. The amount of job guaranteed leave that a worker could take varied widely in state law  from 16 hours to one year. Eligibility requirements also varied, and many of the laws applied only to state employees. Most of the laws exempted certain small businesses. Five states and Puerto Rico also have Temporary Disability Insurance laws (TDI) which predate FMLA and provide partial wage replacement during maternity disability leave as well as other temporary disabilities.

Today, many more employers are providing family and medical leave policies through their compliance with the new law, which requires employers with 50 employees or more to provide up to 12 weeks of unpaid, job protected leave a year to eligible employees to care for a newborn, newly adopted or foster child, a child, spouse or parent with a serious health condition, or for the serious health condition of the employee, including maternity related disability. Employees are eligible to take leave if they have worked for a covered employer for at least one year, and for 1,250 hours over the previous 12 months, and if there are at least 50 employees working for their employer within a 75mile radius of their worksite.

This report provides an initial assessment of family and medical leave policies in general, and of FMLA in particular: are we approaching the workable balance envisioned by this nations lawmakers?

How the Commission Went About its Work

The Commission on Leave, which commenced in November 1993, was composed of members who possessed the expertise and practical experience needed to evaluate family and medical leave issues. They included Congressional leaders, representatives of women and families, labor and the business community, including small businesses and ex-officio Cabinet members from Federal agencies with direct interest in family and medical leave issues. Following its formation, the Commission set about to meet a broad and ambitious legislative mandate by coordinating a variety of research and information gathering efforts that together help to provide comprehensive answers to all the questions posed by Congress.

The FMLA charges the Commission to study the following points: existing and proposed mandatory and voluntary family and medical leave policies of both covered and no covered employers; their costs, benefits and impact on productivity; the possible differences to employers in costs, benefits and impact on productivity, job creation and business growth based on size; the impact of family and medical leave policies on the availability of benefits provided by covered and no covered employers; state enforcement of the FMLA with regard to special provisions pertaining to teachers; methods used by employers to reduce administrative costs of policies; the ability of employers to recover health insurance costs from employees who do not return to work; and the impact on employers and employees of temporary wage replacement policies.

The Commission, placing a high priority on hearing directly from businesses, employees and their families, held three public hearings in different sites across the country. A broad cross-section of people testified and provided important insights on a wide variety of topics related to family and medical leave.

In FY '95, the Commission, through the Bureau of Labor Statistics, contracted with two research organizations, Westat, Inc. and the Institute for Social Research, Survey Research Center at the University of Michigan, to conduct two major studies  an Employer Survey and an Employee Survey. The Employer Survey, a national, random sample survey, provides the first post FMLA statistically valid data on private sector employers of diverse sizes assessing their experience with the Family and Medical Leave Act, as well as with family and medical leave policies in general. The Employee Survey is the first ever national, random sample survey on employee leave-taking. The data, collected in 1995 and based on an 18month period commencing in January, 1994, provide important national estimates on the need for and occurrence of taking leave from work for family and medical reasons. In addition, the Commission requested several smaller studies to assist in answering the questions posed by Congress (see Chapter II).

Major Research Findings

The following data are based on results of the two nationally representative, random sample surveys described above.

A. Family and Medical Leave Policies Today

Coverage under FMLA

  • Approximately two thirds (66.1 percent) of the U.S. labor force, including private and public sector employees, work for employers covered by the FMLA. Slightly more than half (54.9 percent) of U.S. workers (and 46.5 percent of private sector workers) also meet the FMLA's length of service and hours related eligibility requirements.
  • Only one tenth (10.8 percent) of private sector U.S. worksites are covered by the FMLA, but this relatively small proportion actually employs over half (59.5 percent) of the nations private sector employees. Industries with the largest worksites, such as manufacturing, also have a large number of eligible employees working in a relatively small percentage of worksites. All public sector employers are covered by the FMLA without regard to the number of employees at a given worksite.

Overview of Employer Leave Practices

  • The FMLA has had a significant impact on covered employers' leave practices and especially on formal leave policies. Two thirds of covered worksites have changed some aspect of their policies in order to comply with the Act. The most common change was to increase the reasons for which employees can take leave. For example, 69.3 percent of covered worksites changed their policies to provide leave for fathers to care for seriously ill or newborn children.
  • There is a significant difference between the family and medical leave policies provided by worksites that are and are not covered by the FMLA. Over 90 percent of covered worksites now provide up to 12 weeks of leave for family and medical reasons, whereas among no covered worksites only 32.3 percent offer parental leave and only 41.7 percent offer leave to care for a seriously ill child, spouse or parent. Between 95 and 99 percent of covered worksites provide the different types of leave provided by the FMLA with a job guarantee, while 84 to 87 percent of no covered worksites which offer leave provide a job guarantee with family and medical leave.

Knowledge of the FMLA

  • The great majority of covered employers (86.5 percent) know they are covered by the FMLA. However, only 58.2 percent of employees working at covered worksites have heard of the Act. Some groups of employees  salaried, union members and those with higher educations  are more likely to know about the FMLA than are others. Employees from all demographic groups are most likely to hear about the FMLA through the media, but those in higher paying jobs are comparatively more likely to learn about the Act from their employers.

B. Employer Impact: Costs and Benefits of the FMLA

Ease of Administration

  • Most covered employers find it relatively easy to administer the FMLA. The vast majority of worksites (over 90 percent) find it "very" or "somewhat easy" to determine whether the Act applies to them and to determine employee eligibility. A significant majority also find other administrative responsibilities  additional recordkeeping, coordination with state and federal leave laws and other federal laws  to be no trouble. Larger worksites find it somewhat more difficult to administer the FMLA than do smaller covered worksites. Unlike other administrative activities, management of intermittent leave presents an administrative difficulty for a significant minority of worksites (39.2 percent), but it represents a small proportion of leave-taking overall (11.5 percent).

Costs and Cost savings

  • For the great majority of worksites, compliance with the FMLA entails no costs or only small costs. Between 89.2 and 98.5 percent of covered worksites report no costs or small costs in each of four broad areas: general administrative costs; the cost of continuing health benefits; costs associated with hiring and training replacements for leave-taking employees; and other costs. Again, larger employers are most likely to experience an increase in costs. This, in part, is due to the fact that they are more likely to have leave takers and to have larger numbers of leave takers. One large employer cited increased costs as the "unintended adverse consequences" resulting from implementation of the Act. However, only 1.3 percent of employers report that they reduced benefits to offset costs associated with the FMLA, giving further evidence that costs overall are minimal.
  • Very few covered worksites report cost savings resulting from the FMLA (2.5 percent). Interestingly though, the larger worksites (250 employees or more) that are more likely to incur costs from the Act, also report slightly more cost savings (7.5 percent) than covered worksites as a whole. Some employers who testified at the Commissions public hearings report cost savings, particularly from reduced employee turnover. They also paint an overall picture of enhanced employee productivity, goodwill and willingness to "go the extra mile" resulting from employees' ability to take leave.

The FMLA's Effects on Business and Employee Performance

  • Most worksites report that the FMLA has no noticeable effect on business performance. Between 86.4 and 95.8 percent report no noticeable effect on productivity, profitability and growth. To the extent that employers do report an effect, it is as likely to be positive as negative on business productivity and growth, and more likely to be negative regarding profitability.
  • Most employers also find that the FMLA has no noticeable effect on employee performance. There are significant positive effects in the areas of employee career advancement and employee productivity. And it is noteworthy, in light of the Acts goals, that a third of employers note a positive effect on employees' ability to care for family members, and this number doubles for larger worksites.

Expectations of the No Covered

  • Small covered worksites 1 have relatively benign experiences with the FMLA, reporting low costs and minimal effects on business and employee performance. Their positive experiences contrast sharply with the negative expectations voiced by many small no covered sites. For example, between 8.2 percent and 15 percent of no covered sites expect negative effects on employees' ability to care for family members, career advancement and turnover, while less than one percent of covered sites experience negative effects in these areas. The expectations of no covered employers are far more pessimistic than the experiences of covered sites in general, and of the small covered sites in particular.

C. The Employee Experience

Employees' Need for Leave and Utilization of the FMLA

  • About one fifth of U.S. workers have a need for some form of leave covered under the FMLA. The Employee Survey found that 16.8 percent of employees took leave for a reason covered by the FMLA, and 3.4 percent of employees needed but did not take leave. In addition, about 40 percent of all employees think they will need to take leave for an FMLA reason at some time within the next five years. The reason most frequently cited for future leave is care of a seriously ill parent. More than two thirds (70.9 percent) of employees agree that "every employee should be able to have up to 12 weeks of unpaid leave in a year from work for family and medical problems."
  • Thus far, the rate of leave use designated by employees as FMLA leave is fairly low. As reported in the Employee Survey, among the 16.8 percent of employees who have taken some type of family and medical leave, about seven percent of that group designate their leave as FMLA leave (about 1.2 percent of all employees). Given that 55 of every 100 employed persons both work at a covered worksite and are eligible to take leave under the Act, the FMLA utilization rate among these employees is about two percent.2 The Employer Survey of private sector covered worksites found a slightly higher estimate of FMLA utilization (3.6 percent). Given the statistical variability in these two estimates, the number of employees who took FMLA leave in the period of both surveys ranges between one and a half million to just over three million.
  • A significant minority of employees (3.4 percent)  "leaveneeders"  have expressed a need for leave that as yet remains unmet. Among employees who need but do not take leave, fully 63.9 percent cannot afford the accompanying loss of wages, underscoring the importance of wage replacement. Hourly workers, African Americans and employees with some college education are most likely to be among those employees who need, but do not take leave.

Employees' Experiences with Leave

  • Employees described in this section include all leave takers, both those working at covered and no covered worksites, who take leave for a reason covered under the FMLA. Only a portion of these employees (seven percent) designated the leave that they took as "FMLA leave."

  • a. The leave takers
    • Leave takers are as diverse as the American workforce. The demographic profile of leave takers generally resembles that of the overall employee population, with some noteworthy distinctions. Employees aged 25 to 34 years are proportionately more likely than younger or older employees to take leave. Employees between 35 and 49 years of age (the "sandwich generation"), are numerically the largest group of leave takers. Employees with one or more children, hourly employees and employees with family incomes of $20,000 to $30,000 per year are more likely to take leave than are employees with higher family incomes.
    b. Employees' reasons for leave
    • Family leave to care for a seriously ill child, spouse or parent and medical leave for ones own health together account for almost 80 percent of all leave. About 59 percent of employees of all ages take leave because of their own serious health problems (exclusive of women who take maternity disability leave). About a quarter of leave is taken by relatively young parents to care for their children at birth, adoption or during a serious illness. A further ten percent of leave is taken by somewhat older employees to care for ill parents or spouses.
    • In general, men take more leave for their own serious health condition. Women (who alone take maternity leave) are somewhat more likely than men to need leave, to take leave and to take longer periods of leave. Men, however, take comparable amounts of parental leave and are slightly more likely to take leave to care for an ill spouse than women (some of this may be taking care of wives before or after childbirth).
    c. Lengths of leave
    • Most periods of leave are short. The great majority of all leave (almost 90 percent) falls within the 12week limit established by the FMLA. While the length of leave tends to vary depending on the reason for the leave, the median length of leave for all leave takers is ten days.
    d. Methods used to cover the work of leave-taking employees
    • By far the most prevalent method that employers use to cover work is to assign it temporarily to other coworkers (67.5 percent). Employers are least likely, however, to use work reassignment to cover work among highly educated, higher income employees  often the hardest to replace. Employers are most likely to find permanent replacements to cover the work of the youngest leave takers and those with the lowest family income. Many employers also hire temporary replacement workers to help cover the job duties of leave takers.
    e. Benefits, wage replacement and covering lost income during leave
    • The FMLA requires employers to continue health benefits during leave. Over 95 percent of covered employers report that they continue health benefits during FMLA leave, and three percent of leave takers at covered and no covered worksites report losing health benefits during leave. Although wage replacement is not required by the FMLA, a significant proportion of leave takers receive full wage replacement (46.7 percent) or partial wage replacement (19.6 percent) during their leave period. This is most likely to be sick pay, vacation pay or pay from a disability insurance plan, benefits which predated the FMLA. Wage replacement is more likely to be available to employees who work at covered worksites. Salaried employees, more highly educated employees, unionized employees, men and those with higher levels of household income are most likely to receive wage replacement; the employees least likely to receive wage replacement are the youngest and oldest employees, no salaried workers and nonunion workers. Also, employees who have never been married, those in the lowest income and education groups and Latino employees are most likely to be unpaid during leave.
    • Not surprisingly, then, employees who fare best in covering for lost income during leave-taking are employees with high family incomes, salaried employees, union members, highly educated employees and white employees. These employees are less likely than other leave takers to borrow money, cut leave short or to go on public assistance. Women and employees with annual family incomes of less than $20,000 per year are more likely to need public assistance in order to deal with lost income. Nine percent of leave takers overall use public assistance to supplement income during periods of leave, and 11.6 percent of women leave takers use public assistance for this reason.
    f. Returning to work
    • The vast majority of leave takers (84 percent) return to their same employer while six percent do not, and ten percent remain on leave. Employees in low wage jobs, including jobs with no wage replacement, are least likely to return to their same employer. Employees from households with incomes of less than $20,000 are far less likely to return to work; women and employees from no covered worksites are also less likely to do so. Employees with high family income levels, unionized workers and salaried employees are more likely to return to their same employer.

Employees' assessment of their leave-taking experiences

  • Overall, employees' experiences with family and medical leave policies, including the FMLA, have been positive. The majority of employees who take family or medical leave find it relatively easy to arrange, have few concerns about the job related consequences of taking leave and are relatively satisfied with the amount of leave they take.
  • To the extent that employees do have trouble arranging to take leave, express job related concerns about taking leave or are dissatisfied with the amount of leave they take, they are more likely to work in no covered worksites. Women, nonwhites and no salaried employees are particularly likely to report negative experiences on at least one of these measures. This finding is probably related to differences in wages and benefits among employees that existed in the labor market prior to FMLA, and which the FMLA, by expanding minimum levels of protection to all eligible employees, has helped to mitigate. Nonetheless, the majority of employees in all demographic groups report positive leave-taking experiences.

Overall Impact of the FMLA

The Family and Medical Leave Act has had a positive impact on employees overall. It has succeeded in replacing the piecemeal nature of voluntary employer leave policies and state leave statutes with a more consistent and uniform standard. The FMLA has not been the burden to business that some had feared. For most employers, compliance is easy, the costs are nonexistent or small and the effects are minimal. Most periods of leave are short, most employees return to work and reduced turnover seems to be a tangible positive effect. The FMLA, with its signature features of guaranteed job protection and maintenance of health benefits, begins to emerge, even now, as a significant step in helping a larger cross-section of working Americans meet their medical and family care giving needs while still maintaining their jobs and their economic security  achieving the workable balance intended by Congress.