Disability and Disability Insurance

More on Disability and Leave Compliance

Marcia Carruthers | November 6, 2015

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Pregnant woman at work

The body of laws affecting disability, absence, and return-to-work programs has grown tremendously in the last 40 years. The Rehabilitation Act (1973) and the Americans with Disabilities Act (1990) were the dominant forces in the early years of disability management. Fast forward to 2015, and there are now hundreds programs on the federal, state, and local level. Depending on the location of a company, they will be impacted by a dizzying number of compliance issues. Understanding how these laws impact employers and what the changes mean for their benefits programs are critical.

In July's commentary, Disability Benefits Compliance Primer, we explored the Americans with Disabilities Act (ADA), the ADA Amendments Act (ADAAA), the Family and Medical Leave Act (FMLA), and the Rehabilitation Act of 1973. This column is dedicated to state leave laws, paid sick leave (including California's recently enacted paid sick Leave), and the Health Insurance Portability and Accountability Act (HIPAA).

State Leave Laws

This encompasses state temporary disability and pregnancy disability programs.

State Temporary Disability

Temporary disability insurance (TDI) programs are designed to provide wage replacement for nonwork-connected sickness or injury. For most employers, providing disability income replacement coverage is a choice; however, some states and Puerto Rico have developed their minimum disability insurance standards. These guidelines ensure local employees who are deemed disabled are provided with a minimum compensation based on pre-disability earnings. Currently, the five states listed below and the US territory of Puerto Rico provide a statutory disability plan:

  • California
  • Hawaii
  • New Jersey
  • New York
  • Puerto Rico
  • Rhode Island

Covered employers and employees: Eligibility parameters exist for both employers and their employees under each statutory plan. In all cases, eligible employees must be covered by eligible employers. Typically, the self-employed and public entities are not covered. Details vary among the jurisdictions. In California, for example, employers are considered covered if they have one or more employees whose wages are $100 or higher in the preceding quarter.

Administration: Understanding the application of these laws is important for employers with operations in multiple states as well as those who have a variety of parties (e.g., states, insurance companies, other locations) that play roles within the administration of their coordinated/integrated programs. Administering statuary plans can increase the operational burden for employers depending on plan options.

Funding and eligibility requirements, waiting periods, definitions of earnings and disability, durations, unique offset parameters, continuity of coverage, notice, and enforcement also differ among the six jurisdictions. Additionally, the way these plans link with a corporate-sponsored disability plan vary, based on the statuary requirements. Nonetheless, employers must remain in compliance with these plans. This article provides only a very general overview. Specific questions about your employee populations should be discussed with your internal legal resources and external subject matter experts.

Funding: A multitude of plan options exists in each jurisdiction, except Rhode Island where a state plan must be used by all employers. Conversely, Hawaii does not have a state plan and thus requires employers to establish private plans (often called voluntary plans), which may be insured, self-insured, or approved collective bargaining agreements.

Waiting Period: The waiting period is the uncompensated time before benefits are paid. Each -state has a standard 7-day waiting period. In California and Puerto Rico, this waiting period may be waived if the employee is hospitalized following injury.

Earnings: An employee's earnings are more than simple wages. All means of compensation must be understood, based on the individual plan in place. This includes items such as commissions and bonuses, as well as the cash value of compensation when paid through means other than cash.

Definition of Disability: Each state has a similar definition of disability: the inability to perform regular and customary work due to physical or mental conditions; however, variations do exist. Laws for all jurisdictions require that a disabled employee is under the care of a provider. In addition to a specific definition, all states require a certain amount of documentation, including diagnoses, dates of absence, insight from provider regarding limitations, and an estimated return-to-work date. Each plan varies based on which diagnoses may or may not be covered; however, the most significant difference usually cited is the fact that California provides coverage for elective surgeries that are typically denied by other statutory (and nonstatutory) plans.

Duration: The length of time employees can be on statutory disability ranges from 26 to 52 weeks, depending on the state, affected by length of employment, base earnings, etc. California has the longest at 52 weeks, Rhode Island with 30 weeks, and the rest offer up to 26 weeks.

Offsets: All states have designed their plans to offset other state programs, including workers compensation and unemployment compensation. Claims are typically excluded from disability coverage if they are already covered under one or both of these two programs.

Continuity of Coverage: Dependent on other plans that may impact an employee, an employee's coverage for when benefits apply may be affected. One example may be if there are preexisting condition limitations.

Notice: Each state requires notification, such as posters describing the employer or employee rights under the regulation that must be displayed in a conspicuous location. In addition, employers must supply the information required to process claims when requested by employees or the plan administrator and must keep records regarding employee eligibility.

Enforcement: Each state is responsible for the administration and enforcement of temporary disability plans except voluntary plans. For example, in California, the Employment Development Department (EDD) is the department charged with overseeing state disability insurance (SDI) coverage. Detailed information can be obtained from the website for each jurisdiction (see Table 1.1 below):

Pregnancy Disability Leave

Momentum is building for expanded paid leave and progressive employers who want to attract and retain workers. This is especially true for workers in the millennial generation who are moving into prime child-bearing years and looking for better integration between their work and family lives. Nowhere is this more apparent than in pregnancy disability leaves.

Leading the way is California, which enacted a mandatory pregnancy disability law (PDL) requiring any employer employing 5 or more employees to provide up to 4 months of leave for pregnancy, childbirth, and related medical conditions. This law was further clarified in 2012 to define "4 months" to be equivalent to 17.3 weeks. This leave need not be paid, but the employee may use any accrued paid leave she has available. These benefits are in addition to the California Family Rights Act (CFRA), providing paid leave for up to 12 weeks of leave related to the birth or adoption of a child.

It should be clarified that PDL leave is not "maternity" leave. In other words, employers don't have to provide time off under this law for the employee to spend with her new child if the employee is once again able to work. However, parental leave may be available under the federal Family Medical Leave Act (FMLA) and CFRA. 

Covered Employers and Employees: Employers employing five or more employees are covered. A woman who works for a covered employer is eligible for pregnancy disability leave regardless of the length of time she has worked for the employer. Further, an employee does not have to work full-time in order to be eligible.

Notice: Employers are required to provide notification of the availability of the leave and have it posted in all worksite locations.

Enforcement: The Department of Fair Employment and Housing (State of California) is responsible for enforcement of this law. Complaints must be filed within 1 year of the last act of discrimination.

Paid Sick Leave

An emerging national trend to provide mandated paid sick leave, on a federal, state, and municipal level is growing. On August 6, 2015, the New York Times reported that President Barack Obama drafted an executive order to force any company that contracts with the federal government to issue paid leave of up to 56 hours a year to employees who are sick, seeking medical attention, or needing to care for a sick relative. The message underscored the building expectation that paid sick leave automatically comes with a job.

In addition to the federal move, three states enacted laws: Connecticut, Massachusetts, and again California. With an additional 18 jurisdictions, the list keeps growing.

These laws provide a number of challenges for employers and service providers. For larger firms, there are already sick leave policies and procedures in place. But, for smaller companies, many of which are also federal contractors, they will need to get up to speed as management of these leaves will require a more disciplined approach. Additional challenges are seen in controlling communications, integrating/coordinating with other leave programs, and setting policies.

Covered Employers and Employees: At the state level, all accrual begins with the date of employment. Use of that time varies. It is after the first 90 days in California, but defined as the 680th hour in Connecticut. All states allow use for care of children and spouses, but some extend to grandchildren, parents, and siblings. At the federal level, all unused time can be accrued year after year.

Notice: Employers must provide some degree of notice in all states. Connecticut requests an individual notice or posting of employee rights. In Massachusetts, they must do both—give the individual notice and post it publicly. California adds a layer of complexity by requiring employers to inform employees of hours available on their wage payment.

Enforcement: Each entity has its own enforcement arm. Consult your state or municipality for further information.


No discussion of disability and leave laws would be complete without the mention of the privacy rule standards as part of the Health Insurance Portability and Accountability Act (HIPPA) of 1996 The privacy rule standards address the use and disclosure of individuals' health information, now considered "protected health information" by organizations subject to the privacy rule. These organizations are "covered entities," and are required to maintain standards for individuals' privacy rights in order to understand and control how the employees' health information is used.

Covered Employers: All employers are mandated to comply with this act.

Enforcement: Within the US Health and Human Services Department, the Office for Civil Rights (OCR) has the responsibility for implementing and enforcing the privacy rule with respect to voluntary compliance activities and civil money penalties.


The expansion of disability and leave laws is expected to continue as employers seek to find ways to maintain and increase their workforce. Prudent employers must not only educate themselves with the existing laws, but also look ahead to develop their own benefits packages that meet the expectations of a younger workforce. The DMEC Compliance Conference each spring is an example of an opportunity for this education. In the end, staying ahead of the disability and leave compliance curve translates into a more productive and loyal workforce, as well as a healthier bottom line.


Disability Management Employer Coalition (DMEC), Tools of the Trade: A Compilation of Programs and Processes for the Absence, Disability, Health and Productivity Professional (2009).

Employee Benefit News, "Momentum Building for Paid Parental Leave," Editor's Desk (August 2015).

Spring Consulting Group, Disability Management Archives (July 2015).

State of California, Department of Fair Employment & Housing, Pregnancy Leave.

State of California, Office of the Labor Commissioner, "Healthy Workplaces/Healthy Families Act of 2014 Paid Sick Leave poster.

"Obama Drafts Order on Paid Sick Leave for Contractors," The New York Times (August 6, 2015).

Marcia Carruthers, MBA, ARM, CPDM, is cofounder and chairman of the Disability Management Employer Coalition (DMEC), a San Diego based nonprofit trade association providing educational resources to employers in the area of disability, absence, health, and productivity. For information, visit www.dmec.org or email Ms. Carruthers at [email protected].

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