The COVID-19 pandemic is exposing the deep flaws of unemployment insurance, workers compensation and the employment at-will doctrine. The pandemic also shows problems with how family and medical leave is administered.

Outsourced leave administration

Many large employers outsource FMLA leave eligibility decisions. Often times the leave administrator also decides whether an employee receives short-term and long-term disability. Even in normal times,  outsourced leave companies will miscalculate leave eligibility for employees. I believe this happens because the leave and disability companies aren’t communicating with HR departments. I’ve also heard from employees about faulty leave administration software.

Bad communication between leave administrators and HR departments leads to employees losing their jobs. Sure an employee can sue their former employer, but litigation is time consuming and uncertain.

But if even if leave companies and human resources departments are communicating, they may not be acting in good faith. Again, even in normal times human resources departments and leave administrators often hassle workers about insufficient documentation about the need for FMLA leave.

So, how does this pandemic make this bad situation worse.

Outsourcing leave during a pandemic

There are several reasons why leave administration falls short during a pandemic. First, more people will be taking leave either for themselves or take care of a family member. Congress has also expanded eligibility for family and medical leave benefits. As a result, like with unemployment, more people will be making demands for leave. This will slow down the process.

But, this heightened demand for leave could be met with a reduced response by leave administrators. The people employees rely on to process leave claims tend to be working at home.  Working from home has slowed down the processing of insurance and other claims.

Finally, family and medical leave requires medical documentation. Workers often stumble in completing required paperwork. But during a pandemic, doctors may lack the time to fill out paperwork. Despite this difficulty, the Department of Labor disagreed with the Centers for Disease Control and required employees to provide medical documentation of COVID-19 leave.

Why does leave administration stink so bad?

Family and medical leave administration sucks so badly for employees because it’s often tied to private disability insurance. Like workers’ compensation, private disability is a for-profit social insurance program. But unlike workers’ compensation , there is weak judicial accountability for denials of private disability.

Bluntly I believe the disability insurers use leave administration as a way to sell disability policies to employers. While disability policies can be useful for workers, insurers would rather collect premium than pay claims. Many employees would rather shift the cost of work injuries onto disability insurance.

When it comes to long-term disability policies, employers and insurers share goals when it comes to cost-shifting. Many long-term disability policies require covered employees to apply for social security disability insurance (SSDI). Policies often include language that lead the insurers recoup disability benefit payments if employees receive SSDI. This leads disability insurers file SSDI on behalf of employees even if they never decided to apply. I would expect to see this practice increase as unemployment increases to levels not seen since the Great Depression.