Insurance-Based Paid Family Medical Leave Options for Employers in the “SEC”

Adams and Reese PFML Laws Series (Part 2 of 3)

In 2023, legislatures in five “Southeastern Conference” states passed statutes creating options for employers to voluntarily provide paid family and medical leave (PFML) through insurance benefits purchased from the private insurance market. Two of those laws took effect on January 1, 2024, and the other three laws are now about a year old.

This article discusses the numerous similarities and some differences among the laws of these five states.

By allowing for optional PFML benefits, these laws help fill in the gap left by the federal Family and Medical Leave Act, which only requires unpaid leave for eligible employees of certain covered employers for five qualifying reasons. Nothing in these PFML laws require employers to provide any leave of absence. Rather, these laws merely authorize insurance products that an employer may purchase to potentially ease the financial impact on workers who take leave permitted by the employer or certain leaves mandated by the FMLA.

Four of these “SEC” states – Alabama, Florida, Tennessee, and Texas – are within the Adams and Reese footprint, while a fifth “SEC” state – Arkansas – sits adjacent to our footprint. The statutes of Alabama, Florida, and Texas are quite similar since their respective Legislatures largely followed a legislative blueprint concerning the sale of PFML insurance endorsed by the National Council of Insurance Legislators (NCOIL).

Alabama

Alabama’s law – Ala. Code §§ 27-19-150 et seq. – authorizing disability insurers to offer PFML group insurance policies became effective in July 2023. Under these policies, paid leave benefits are available when an employee misses work to: 

• participate in providing care, including physical or psychological care, for a family member of the employee made necessary by a serious health condition of the family member.
• bond with the employee's child during the first twelve months after the child's birth, or the first 12 months after the placement of the child for adoption or foster care with the employee.
• address a qualifying exigency (as interpreted under the Family and Medical Leave Act) arising out of the fact that the spouse, child, or parent of the employee is on active duty, or has been notified of an impending call or order to active duty, in the Armed Forces of the United States.
• care for a family service member injured in the line of duty; or
• take other leave to provide care for a family member or other family leave as specified in the insurance policy.

As a result of this statute (Ala. Code § 27-19-153), Alabama employers (regardless of whether they are covered by the FMLA) can obtain group insurance by which employees may enjoy PFML benefits for four of the five types of leave defined in the FMLA. The fifth type of FMLA leave – absence due to an employee’s own serious health condition - likely would be covered under separate short-term disability or long-term disability insurance, a benefit already available to more than 47% of full-time U.S. workers.

The Alabama statute also permits the insurer to define how long benefits are paid, with a minimum floor of two weeks of benefits during a period of 52 consecutive calendar weeks. Insurance policies also can implement a waiting period before employees are eligible for benefits. Ala. Code § 27-19-155. Policies issued pursuant to this law must state the amount of benefits payable for covered leave reasons, the definition of wages or other income upon which the amount of benefits will be based, how the wages or other income will be calculated, and whether and under what circumstances benefits could be offset by wages or other benefits. Ala. Code § 27-19-157.

The Alabama statute provides a non-exhaustive list of expressly permissible insurance policy exclusions. As just two examples, an insurer may exclude coverage for any period of leave when the required notice and medical certification as prescribed in the policy have not been provided and for any period of leave where more than one individual seeks leave to care for the same family member. Ala. Code § 27-19-158(1), (7).

Arkansas

The Arkansas statute – Ark. Code § 23-62-112 – became effective in June 2023. Like the Alabama statute, this law permits insurance policies to cover paid leaves of absence under four of the five types of leave defined in the FMLA. Ark. Code § 23-62-112(b). Unlike the Alabama law, the Arkansas statute does not establish any minimum standards for PFML insurance policies.

Florida

The “Florida Paid Family Leave Insurance Act” became operative in May 2023.  Much like the Alabama and Arkansas statutes, the Florida law permits insurance policies providing paid leave for four of the five types of FMLA leave, as well as other absences specified in an insurance policy. Fla. Stat. § 627.445(2). For example, an insurance policy could provide benefits during a leave required by Fla. Stat. § 741.313(2)(a) when an employee or a family member of the employee has been a victim of domestic violence or sexual violence.

The Florida law mandates that policies provide a minimum benefit of two weeks of paid leave during any 52 consecutive calendar weeks. Fla. Stat. § 627.445(3)(b). The Florida law also imposes several additional requirements for insurance policies similar to the rules in the Alabama statute. The policy must state the amount of benefits that will be paid for covered circumstances, the definition of the wages or other income upon which the amount of benefits will be issued, the method by which such wages or other income will be calculated, whether insurance benefits are subject to offsets for wages or other income received and the circumstances under which the benefits may be offset, and the frequency of payments due for covered benefits. Fla. Stat. § 627.445(3)(c)-(h).

Several insurance policy exclusions allowed by the Alabama statute are also expressly allowed by the Florida statute. Two of the non-exhaustive examples are exclusions for any leave related to a serious health condition or other harm to a family member brought about by a willful act of the employee or when the employee performed work for remuneration or profit while on “leave.” Fla. Stat. § 627.445(5)(b), (c).

Tennessee

Passed in April 2023, the “Tennessee Paid Family Leave Insurance Act” applies to PFML insurance policies entered into, amended, or renewed on or after January 1, 2024, providing paid benefits during four of the five types of FMLA leave. Tenn. Code § 56-7-3603(3). Much like the Arkansas statute, the Tennessee law does not contain any particular requirements or minimum standards for PFML insurance policies. The Tennessee statute does empower the state insurance commissioner to promulgate rules to carry out the statute and authorize the sale of family leave insurance in Tennessee. Tenn. Code § 56-7-3604(c). As of the date of this article, the insurance commissioner has not yet published any regulations.

Texas

Enacted on September 1, 2023, the Texas statute applies to PFML insurance policies entered into, amended, or renewed on or after January 1, 2024. Like the Alabama and Florida laws, the Texas statute is based on the NCOIL blueprint and permits insurance policies providing benefits during four of the five types of FMLA leave as well as other family leave specified in the policy. Tex. Code § 1255.102.

The Texas statute requires the insurer to establish the length of benefits that are available and imposes a minimum of two weeks of paid leave benefits during any 52 consecutive calendar weeks, Tex. Code § 1255.104(b), and also requires a statement of any uncovered waiting period for benefits, Tex. Code § 1255.105. The Texas law mandates that each policy specify the amount of benefits paid for covered reasons, define the wages or other income on which benefits amounts are based, state method for calculating those wages or other income, and specify, if applicable, what wages or other income may offset benefits and he circumstances under an offset might occur. Tex. Code § 1255.106.

The Texas law has the same permissible exclusions from coverage as those in the Alabama and Florida statutes. Two permissible provisions include exclusions from coverage for any leave for which the insured employee is eligible to receive money from the insured's employer or from a fund to which the employer has contributed or is eligible to receive benefits under another statutory program or employer-sponsored program, including unemployment insurance benefits, workers' compensation benefits, statutory disability benefits, statutory paid leave benefits, or paid time off from the employer's paid leave policy. Tex. Code § 1255.107.

Takeaways

As companies look for new ways to attract and keep workers, paid leave benefits for family and medical absences funded through insurance products could be valuable recruitment and retention tools. Employers in Alabama, Arkansas, Florida, Tennessee, and Texas who must provide these types of leave under the FMLA or who voluntarily provide these leaves even without legal mandate may recognize positive effects from making these newly authorized insurance products available to their employees.

Next month, our series on PFML laws will conclude with a look at the laws of Colorado and the District of Columbia.

Read our PFML Laws Series

• Part 1 - "Does Your State Have Laws About Paid Family Medical Leave?"
• Part 2 - "Insurance-Based PFML Options for Employers in the 'SEC'"
• Part 3 - "Mandatory PFML Requirements for Employers in the Swamp and Rocky Mountain High"

About Our Author

Scott Hetrick is the Adams and Reese Labor and Employment Practice Team Leader and is a Partner practicing in the Mobile office. As a management rights advocate, Scott represents employers on federal and state labor and employment law compliance and dispute resolution. He speaks frequently on employment law and human resource management issues at seminars for personnel managers and business owners and has published numerous articles on employment law. Scott also has been recognized in Best Lawyers® in Employment Law since 2010, including being named “Lawyer of the Year” in Mobile.