[aa_subtitle_display]If you have a growing small business, you may not have given much consideration to the Family and Medical Leave Act (FMLA.) The FMLA is a complicated law, but basically it allows certain employees to take up to twelve unpaid weeks off of work without the threat of losing their jobs. The act applies to all public employers that have more than 50 employees for at least 20 workweeks out of the year, which means that most private small businesses aren’t required to follow it. However, things become murky when a small business works with a professional employer organization (PEO.) When a business partners with a PEO, the PEO co-employs their clients’ employees, making the PEO the employer of record. So, since the employees now work for a company with more than 50 employees, are client companies required to comply with the FMLA?
The FMLA allows employees to take up to 12 unpaid weeks of work off to deal with an illness, care for a sick family member, or to bond with a new baby or adopted child. While this can be important time to many employees, it can be difficult for small businesses to work around. At larger companies, it can be easier to cross-train other employees to cover each other’s jobs or hire a temporary employee. As much as many businesses want to support their employees and give them the time off that they need, it can be hard to manage. Many small businesses also find it difficult to deal with human resources tasks or to provide their employees with good, affordable benefits: this is why they choose to partner with a PEO. Joining a PEO has many benefits for a client’s employees, but could it inadvertently make things difficult for the client company?
The simple answer is probably not. Though the PEO is the employer of record, if the client company is in control of the hiring and firing of employees and has fewer than 50 employees at their location, they will not be required to follow the FMLA requirements. However, if the PEO is capable of making staffing decisions for their client companies, things get murky. Most PEO agreements do not give PEOs the power to hire or fire their clients’ employees, so most PEO clients will be free from FMLA obligations.
Working with a PEO is all about figuring out what works best for your company. Small businesses may choose to offer family and medical leave to their employees even if they are not required, but it is important that businesses can make the choice for themselves. PEOs can make a lot of things easier for client companies – payroll, human resources issues, worker’s compensation, etc. – so luckily, they don’t make FMLA compliance more complicated.