COVID-19 is now actively disrupting lives and businesses in the US -- and unfortunately it’s just the beginning. Employers have moved to implement travel restrictions and taken other steps to try and keep their workers healthy, but as the disease spreads employers are facing a new set of issues. This article in the New York Times addressed questions employees may have about the impact of the outbreak on their jobs and their pay. Here, for employers, is a look at leave and disability issues and considerations in three scenarios you will likely encounter in the coming weeks and months. I’ll also discuss the likely impact on disability plan experience and the need to monitor plan vendors.
Employees who are diagnosed with COVID-19
For most employers, this is the most straightforward scenario. Once an employee is diagnosed with COVID-19, the disability and leave event should be similar to income continuation under any other illness. Typically, for the first week of absence due to an illness, paid sick leave or vacation would provide income continuation. Paid time off would also provide income continuation to employees who think they may be ill but have not yet been officially diagnosed. For illnesses that last more than a week, short-term disability (STD) benefits would kick in. While we expect that most disability insurers and administrators will be covering claimants diagnosed with COVID-19, employers should confirm with their vendors to identify any potential exclusions.
One potential exclusion could be for an employee who contracted COVID-19 while traveling on business. Depending upon the specific situation, the employee may be entitled to income continuation under workers’ compensation. Some employer STD plans cover occupational health claims with the workers’ compensation time off benefits offsetting any STD benefits payable. On the other hand, some employers exclude events covered under workers’ compensation from their STD policy completely. In those cases, STD benefits would not be payable.
Employees who are not diagnosed with COVID-19 but are not able to work
There will be situations where an employee either has yet to be diagnosed or has no reason to believe they’re at risk for COVID-19 but are unable to work. The employee may be quarantined by local authorities or by their employer. It is also possible that the employer’s work site is closed or public transportation is not available. In this scenario, some employees may be able to work remotely and be as productive as they would be under normal conditions. But, many employees, such as those working in retail, hospitality or manufacturing, will not be able to work if they cannot physically get to work. For short durations of leave, regular forms of paid time off may be sufficient. As the length of the leave increases, employees may resent being charged for paid time off for circumstances outside of their control or they may even exhaust their available time.
It is important to note that most disability policies will not cover absences of this type. In most plans, an employee must have some sort of physical impairment to be considered disabled. If an employee is quarantined due to a suspected exposure, it is unlikely that absence will be covered under employer disability plans, but employers should check with their vendor to confirm. Employers with self-funded plans may have additional flexibility to cover such periods under their plan, as long as all employees are treated in a way that is consistent with their written policy.
Some employers may have a formal or informal “emergency leave” policy that already exists, for when locations need to close due to natural disasters such as blizzards and hurricanes. Such policies, if formal, should have flexibility that permits the employer to adapt the leave based on each specific emergency. For example, instead of being for a fixed duration, the duration of emergency leave in response to COVID-19 may be approved by the employer in weekly increments and on a location-specific basis. Note, however, that while emergency leave policies for weather-related closures may typically be made by local managers, we recommend employers make decisions about COVID-19-related paid leave at a more senior level due to the larger potential organizational exposure.
Employers that do not currently provide paid sick leave to all their workers or who provide very limited paid time off may consider the use of emergency leave to extend paid sick leave as needed during this period without adding a permanent, accrued paid-time off entitlement.
Employees who are not diagnosed with COVID-19 but are not willing to work
This scenario is likely to be the most difficult to manage. Some employees may balk at physically coming to work if they fear their commute to work or work conditions themselves put them at risk for exposure to COVID-19. The ability of some employees to work may be impacted if public schools or other social support systems are closed. Whether or not these situations present valid reasons for not coming to work may be difficult for employers to evaluate. Absent extenuating circumstances, we expect that most employers will be directing employees to their existing paid time off and attendance policies if employees are absent.
Impact on disability and leave plans and policies
Putting aside the number of employees who will need to file disability claims due to a COVID-19 diagnosis, we are expecting employer disability experience overall to deteriorate, for several reasons. At a time when vendors will need to expand their capacity to handle the expected influx of COVID-19 claims, the vendors themselves may be shorthanded if they have COVID-19 related absences within their own staff. That is likely to lead to additional approvals to reduce backlogged claims, as well as an increase in disability durations as there will be limited resources on the vendor and employer side to manage return to work processes.
There may also be an increase in STD claims for unrelated conditions that are difficult to diagnose like depression and back pain as employees who are healthy but unwilling to work due to COVID-19 fears exhaust their sick and vacation days. The same may be true of employees whose compensation is tied to sales production and experience financial stress as the outbreak curtails their ability to network or travel.
We recommend that employers monitor their disability experience and their vendors, if any, vigilantly. While the need to closely monitor disability plans has always been there, COVID-19 adds a degree of risk and uncertainty that heightens that need. Beyond the disability plans themselves, benefits and HR staff should anticipate more questions as disability and FMLA claim volumes and related issues are likely to increase.
Of course, decisions about leave cannot be made in a vacuum and likely should be part of a broader talent management strategy. As employers navigate through the short-term waves causes by the COVID-19 crisis, they should also keep in mind the longer-term implications on the workforce driven by those short term actions. A thoughtful, measured employer response will help to smooth – at least somewhat -- the bumps in what is likely to be a rough road ahead.
For more information on Coronavirus and the implications for employers, please visit Mercer’s dedicated coronavirus page here.
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