The FMLA required the Department to issue regulations to implement Title I and Title IV of the FMLA within 120 days of enactment, or by June 5, 1993, with an effective date of August 5, 1993. Given this short implementation period, the Department published a notice of proposed rulemaking in the Federal Register on March 10, 1993 (58 FR 13394), inviting comments until March 31, 1993, on a variety of questions and issues. The Department received a total of 393 comments at that time from a wide variety of stakeholders, including employers, trade and professional associations, advocacy organizations, labor unions, State and local governments, law firms, employee benefit firms, academic institutions, financial institutions, medical institutions, Members of Congress, and others.

After considering these comments, the Department issued an interim final rule on June 4, 1993 (58 FR 31794) that became effective on August 5, 1993. The Department also invited further public comment on the interim regulations through September 3, 1993, later extended to December 3, 1993 (58 FR 45433). During this comment period, the Department received more than 900 substantive and editorial comments on the interim regulations, from a wide variety of stakeholders.

Based on this second round of public comments, the Department published final regulations to implement the FMLA on January 6, 1995 (60 FR 2180). The regulations were amended on February 3, 1995 (60 FR 6658) and on March 30, 1995 (60 FR 16382) to make minor technical corrections. The final regulations went into effect on April 6, 1995. D. Legal Challenges

The Ragsdale Decision

Since the enactment of the FMLA, hundreds of reported Federal cases have addressed the Act and/or implementing regulations. The most significant court decision on the validity of the regulations is that of the United States Supreme Court in Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81 (2002). In its first case involving the FMLA, the Court ruled in March 2002 that the penalty provision in 29 CFR 825.700(a), which states ``[i]f an employee takes * * * leave and the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee's FMLA entitlement[,]'' was invalid because in some circumstances it required employers to provide leave to employees beyond the 12week statutory entitlement. ``The FMLA guaranteed [Plaintiff] 12not 42weeks of leave[.]'' Ragsdale, 535 U.S. at 96. While the Supreme Court did not invalidate the notice and designation provisions in the regulations, it made clear that any categorical penalty for a violation of such requirements set forth in the regulations would exceed the Department's statutory authority. Id. at 9196.

Other Challenges to ``Categorical Penalty'' Provisions

As the Department explained in its December 2006 RFI \1\ and the subsequent 2007 Report on the RFI comments,\2\ Ragsdale is not the only court decision addressing penalty provisions contained in the regulations. Another provision of the regulations, Sec. 825.110(d), requires an employer to notify an employee prior to the employee commencing leave as to whether or not the employee is eligible for FMLA leave. If the employer fails to provide the employee with such information or the information is not accurate, the regulation bars the employer from challenging eligibility at a later date, even if the employee is not eligible for FMLA leave according to the statutory requirements. The majority of courts addressing this notice provision have found it to be invalid, even prior to the Ragsdale decision. See, e.g., Woodford v. Cmty. Action of Greene County, Inc., 268 F.3d 51, 57 (2d Cir. 2001) (``The regulation exceeds agency rulemaking powers by making eligible under the FMLA employees who do not meet the statute's clear eligibility requirements.''); Brungart v. BellSouth Telecomm., Inc., 231 F.3d 791, 79697 (11th Cir. 2000) (``There is no ambiguity in the statute concerning eligibility for family medical leave, no gap to be
[[Page 7878]]
filled.''); Dormeyer v. Comerica BankIllinois, 223 F.3d 579, 582 (7th Cir. 2000) (the regulation tries ``to change the Act'' because it makes eligible employees who, under the language of the statute, are ineligible for family leave; ``The statutory test is perfectly clear and covers the issue. The right of family leave is conferred only on employees who have worked at least 1,250 hours in the previous 12 months'').
\1\See 71 FR 69504, 69505 (Dec. 1, 2006).
\2\See ``Family and Medical Leave Act Regulations: A Report on the Department of Labor's request for Information,'' 72 FR 35550, 35560 (June 28, 2007).
Legal Challenges to the Definition of Serious Health Condition

Other regulatory provisions have been challenged as well. In particular, challenges to the regulatory section defining the term ``serious health condition'' as a condition causing a period of incapacity of more than three consecutive calendar days and continuing treatment, 29 CFR 825.114(a)(2)(i), has received significant attention. See, e.g., Miller v. AT&T Corp., 250 F.3d 820 (4th Cir. 2001); Thorson v. Gemini, Inc., 205 F.3d 370 (8th Cir. 2000).

As the Department explained in its December 2006 RFI \3\ and subsequent Report on the RFI,\4\ the Department itself has struggled with this definition. After the Act's passage, the Department promulgated Sec. 825.114(c), which states that ``[o]rdinarily, unless complications arise, the common cold, the flu, ear aches, upset stomach, minor ulcers, headaches other than migraine, routine dental or orthodontia problems, periodontal disease, etc., are examples of conditions that do not meet the definition of a serious health condition and do not qualify for FMLA leave.'' This regulatory language was intended to reflect the legislative history of the FMLA and expresses the Congressional intent that minor, shortterm illnesses for which treatment and recovery are very brief would be covered by employers' sick leave programs and not by the FMLA. See H.R. Rep. No. 1038, at 40 (1993); S. Rep. No. 1033, at 2829 (1993). Consequently, in an early response about the proper handling of an employee's request for leave due to the common cold, the Department responded by stating ``[t]he fact that an employee is incapacitated for more than three days, has been treated by a health care provider on at least one occasion which has resulted in a regimen of continuing treatment prescribed by the health care provider does not convert minor illnesses such as the common cold into serious health conditions in the ordinary case (absent complications).'' Wage and Hour Opinion Letter FMLA57 (Apr. 7, 1995). More than a year and a half later, however, the Department reversed its interpretation, stating that Wage and Hour Opinion Letter FMLA57 ``expresses an incorrect view, being inconsistent with the Department's established interpretation of qualifying `serious health conditions' under the FMLA regulations.'' Wage and Hour Opinion Letter FMLA86 (Dec. 12, 1996). The Department further stated that such minor illnesses ordinarily would not be expected to last more than three days, but if they do meet the regulatory criteria for a serious health condition under Sec. 825.114(a), they qualify for FMLA leave. The Department received significant commentary about its changing interpretations of the definition of serious health condition in response to its RFI. See Chapter III of the Department's 2007 Report on the RFI comments (72 FR at 35563).
\3\See 71 FR at 69506.
\4\See 72 FR at 35563.

Other Legal Challenges

Many other legal issues have arisen over the nearly thirteen years the final regulations have been in effect. For example, litigation has ensued under Sec. Sec. 825.302.303 as to what constitutes sufficient employee notice to trigger an employer's obligations under the FMLA. See, e.g., Sarnowski v. Air Brook Limousine, Inc.,F.3d ,2007 WL 4323259 (3rd Cir. 2007) (employee with chronic heart problems who informed employer of need for continuing medical monitoring and possible surgery provided sufficient notice); Spangler v. Fed. Home Loan Bank of Des Moines, 278 F.3d 847 (8th Cir. 2002) (employee who had made employer aware that she had problems with depression gave sufficient notice when she called in and indicated she was out because of ``depression again'').

Among other cases, the Tenth Circuit Court of Appeals considered the definition of ``worksite'' for determining whether an employee seeking FMLA leave was employed at a worksite where 50 or more employees were employed by the employer within 75 miles. Section 825.111(a)(3) states that when an employee is jointly employed by two or more employers, the employee's worksite is the primary employer's office from which the employee has been assigned or to which the employee reports. In Harbert v. Healthcare Services Group, Inc., 391 F.3d 1140 (10th Cir. 2004), the Court of Appeals invalidated Sec. 825.111(a)(3), insofar as it is applied to the situation of an employee with a longterm fixed worksite at a facility of the secondary employer. The First Circuit Court of Appeals looked at a different eligibility criterion, the requirement that the employee has been employed by the employer for at least 12 months, and addressed whether an employee who had a break in service may count previous periods of employment with the same employer toward satisfying the 12month employment requirement (29 U.S.C. 2611(2)(A)(i); 29 CFR 825.110(a)(1) and (b)). See Rucker v. Lee Holding Co., 471 F.3d 6 (1st Cir. 2006) (a complete break in service of a period of five years does not prevent the employee from counting previous employment to meet the 12month employment requirement). Another regulation that has been the subject of litigation is Sec. 825.220(d), which in part discusses the impact of a light duty work assignment on an employee's FMLA rights. Further, most recently, the Fourth Circuit Court of Appeals ruled in Taylor v. Progress Energy, 493 F.3d 454 (4th Cir. 2007), petition for cert. filed, 76 U.S.L.W. 3226 (U.S. Oct. 22, 2007) (No. 07539), that other language in Sec. 825.220(d) prevents an employee and employer from independently settling past claims for FMLA violations without the approval of the Department or a court.

E. Prior Studies and Reports

Title III of the FMLA established a temporary Commission on Leave to conduct a study and report on existing and proposed policies on leave and the costs, benefits, and impact on productivity of such policies. The Commission surveyed workers and employers in 1995 and issued a report published by the Department in 1996, ``A Workable Balance: Report to Congress on Family and Medical Leave Policies.'' \5\ In 1999, the Department contracted with Westat, Inc.,\6\ to update the employee and establishment surveys conducted in 1995. The Department published that report, ``Balancing the Needs of Families and Employers: Family and Medical Leave Surveys, 2000 Update'' in January 2001.\7\ \5\ See http://www.dol.gov/esa/whd/fmla/fmla/1995Report/Family.htm .
\6\ Westat is a statistical survey research organization serving agencies of the U.S. Government, as well as businesses, foundations, and State and local governments.
\7\See http://www.dol.gov/esa/whd/fmla/fmla/toc.htm. F. Request for Information

On December 1, 2006, the Department published a Request for Information (RFI) in the Federal Register (71 FR 69504).

The RFI asked the public to comment on its experiences with, and [[Page 7879]]
observations of, the Department's administration of the law and the effectiveness of the FMLA regulations. The RFI's questions and subject areas were derived from a series of stakeholder meetings the Department conducted in 20022003, a number of rulings of the U.S. Supreme Court and other Federal courts as discussed above, the Department's own experience administering the law, information from Congressional hearings, and public comments filed with the Office of Management and Budget (OMB) as described by OMB in three annual reports to Congress on the FMLA's costs and benefits.\8\ More than 15,000 comments were received from workers, family members, employers, academics, and other interested parties.\9\ This input ranged from personal accounts, legal reviews, industry and academic studies, and surveys to recommendations for regulatory and statutory changes to address particular areas of concern. The Department published its Report on the comments received in response to the Department's RFI in June 2007 (see 72 FR 35550 (June 28, 2007)).
\8\ These OMB reports may be found at the following Web sites: 2001 report at: http://www.whitehouse.gov/ gov/
http://www.whitehouse.gov/omb/inforeg/2004_cb_final.pdf. \9\ All comments are available for viewing via the public docket of the Wage and Hour Division of the Employment Standards
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210. Many comments are also available on http://www.regulations.gov. G. Stakeholder Meeting

The Department also conducted a stakeholder meeting regarding the medical certification process on September 6, 2007. This meeting included representatives from employee organizations, employer organizations, and the health care provider community.

H. Other Statutory and Regulatory Developments

As discussed in the RFI and the Report on the RFI, in addition to developments in the courts, several important legislative and regulatory developments have occurred that either directly or indirectly impact the FMLA regulations. In 1996, Congress enacted the Health Insurance Portability and Accountability Act (HIPAA), Public Law 104191, which addresses in part the privacy of individually identifiable health information. On December 28, 2000, and as amended on August 14, 2002, the Department of Health and Human Services issued regulations that provide standards for the privacy of individually identifiable health information, codified at 45 CFR Parts 160 and 164 (``HIPAA Privacy Rule''). These standards apply to ``covered entities,'' defined as a health plan, a health care clearinghouse, or a health care provider who transmits any health information in electronic form in connection with a transaction as defined in the privacy regulations.\10\

\10\See 45 CFR 160.102(a) and 45 CFR 160.03.

The HIPAA Privacy Rule has had an impact on the FMLA's medical certification process in a number of ways. For example, the FMLA provides employers with the right to obtain medical information to determine that a requested leave qualifies as FMLA leave, and the employee is required to assure that this information, if requested, is provided to the employer to be entitled to FMLA leave for a serious health condition. If an employee does not do this, the absence does not qualify for FMLA leave.\11\ While these rules are fairly
straightforward, recent enforcement experience reveals that there is confusion with regard to the interaction of the HIPAA Privacy Rule and FMLA. For example, some employees incorrectly believe that the HIPAA Privacy Rule prevents employers from requiring FMLA certification. See discussion of Sec. Sec. 825.306.308 for further discussion of the impact of the HIPAA Privacy Rule on the medical certification process. \11\See Wage and Hour Opinion Letter FMLA20052A (Sept. 14, 2005).

Similarly, since the final FMLA regulations were implemented in 1995, the Equal Employment Opportunity Commission (EEOC), the agency responsible for enforcing the Americans with Disabilities Act (ADA), has issued guidance with regard to the privacy of employee medical information. See, e.g., Enforcement Guidance: DisabilityRelated Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act (ADA) (EEOC 2000). The FMLA looks to the ADA for guidance on privacy of employee medical information.\12\
\12\See 29 CFR 825.500(g).

III. Proposed Changes to the FMLA Regulations

The following is a sectionbysection discussion of the proposed revisions. Where a change is proposed to a regulatory section, that section is discussed below. However, even if a section is not discussed, there may be minor editorial changes or corrections that did not warrant discussion. The titles to each section of the existing regulations are in the form of a question. The proposal would reword each question into the more common format of a descriptive title and the Department invites comments on whether this change is helpful. In addition, several sections have been restructured and reorganized to improve the accessibility of the information (e.g., guidance on leave for pregnancy and birth of a child is addressed in one consolidated section; an employer's notice obligations are combined in one section). Section 825.102 (Effective date of the Act)

The proposal deletes this section, which discussed when the Act became effective, because it is no longer needed. The section number itself is reserved to avoid extensive renumbering of other sections in the regulations.
Section 825.103 (How the Act affects leave in progress on, or taken before, the effective date of the Act)

The proposal deletes and reserves this section, which discussed how the Act affected leave in progress on, or taken before, the Act's effective date, because it is no longer needed.

Section 825.106 (Joint employer coverage)

Sections 825.106 and 825.111(a)(3) of the existing regulations govern employer coverage and employee eligibility in the case of joint employment and set forth the responsibilities of the primary and secondary employers. Under Sec. 825.106(d), employees jointly employed by two employers must be counted by both employers in determining employer coverage and employee eligibility. Thus, for example, an employer who jointly employs 15 workers from a leasing or temporary help agency and 40 permanent workers is covered by the FMLA. Likewise, if an employer with 15 permanent workers jointly employs 40 workers from a leasing company that employer is also covered by the FMLA.

Although job restoration is the primary responsibility of the primary employer, the secondary employer is responsible for accepting the employee returning from FMLA leave if the secondary employer continues to utilize an employee from the temporary or leasing agency and the agency chooses to place the employee with that secondary employer. The secondary employer is also responsible for compliance with the prohibited acts provisions with respect to its
[[Page 7880]]
temporary/leased employees, and thus may not interfere with an employee's attempt to exercise rights under the Act, or discharge or discriminate against an employee for opposing a practice that is unlawful under FMLA. See the existing Sec. 825.106(e).

In Wage and Hour Opinion Letter FMLA111 (Sept. 11, 2000), the Department considered the application of the FMLA regulations' ``joint employment'' test in current Sec. 825.106 to a ``Professional Employer Organization'' (PEO). The PEO in question had a contract with the client company under which it appeared to enter into an employer employee relationship with the client's employees (who were leased back to the client and continued to work at the client's worksite pursuant to the terms of the contract). The PEO in this case assumed substantial employer rights, responsibilities and risks, including the responsibility for personnel management, health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. Moreover, the PEO in this case had the right to hire, fire, assign, and direct and control the employees.

Based on the facts described in the incoming letter, the Opinion Letter concluded that the PEO was in a joint employment relationship with its client companies for these reasons:

1. The PEO was a separately owned and distinct entity under contract with the client to lease employees for the purpose of handling ``critical human resource responsibilities and employer risks for the client.''

2. The PEO was acting directly in the interest of the client in assuming human resource responsibilities.

3. The PEO appeared to also share control of the leased employees consistent with the client's responsibility for its product or service.

The Opinion Letter stated that ``it would appear that'' the PEO is the ``primary employer'' for those employees ``leased'' under contract with the client. Thus, under existing Sec. 825.106, the PEO would be responsible for giving required FMLA notices to its employees, providing FMLA leave, maintaining group health insurance benefits during the leave, and restoring the employee to the same or equivalent job upon return from leave. The ``secondary employer'' (i.e., the client company) would be responsible for accepting the employee returning from FMLA leave if the PEO chose to place the employee with the client company. The Opinion Letter concluded that the client company, as the ``secondary employer,'' whether a covered employer or not under the FMLA, was prohibited from interfering with a ``leased'' employee's attempt to exercise rights under the Act, or discharging or discriminating against an employee for opposing a practice that is unlawful under the Act.

While no specific questions concerning PEOs were contained in the RFI, the Department did seek information on ``any issues that may arise when an employee is jointly employed by two or more employers'' (71 FR at 69509). In response to the RFI, a number of stakeholders commented that it is not correct to consider PEOs (sometimes called ``HR Outsourcing Vendors'') to be joint employers with their client companies and explained the differences between a temporary staffing agency and a PEO. ``A temporary staffing agency is a labor supplier. It supplies employees to a client while a PEO is a service provider providing services to existing employees of a company.'' See comments by JacksonLewis. Unlike a temporary staffing agency, a PEO does not have the ability to place an employee returning from FMLA leave with a different client employer. Id.

The AFLCIO commented that PEOs engage in a practice known as ``payrolling,'' in which the client employers transfer the payroll and related responsibilities for some or all of their employees to the PEO, and that typically, the PEO also makes payments on behalf of the client employer into State workers' compensation and unemployment insurance funds, but the PEO does not provide placement services. In contrast with temporary staffing agencies, the AFLCIO commented, PEOs do not match people to jobs.

The law firm of Littler Mendelson advised that ``Employee leasing arrangements''like those involving temporary services firms and other staffing companiesrefer to arrangements in which the staffing firm places its own employees at a customer's place of business to perform services for the recipient's enterprise. The PEO, in contrast, assumes certain administrative functions for its clients such as payroll and benefits coverage and administration (including workers' compensation insurance and health insurance). The PEO typically has no direct responsibility over the employees of its clients including ``hiring, training, supervision, evaluation, discipline or discharge, among other critical employer functions.''

The law firm of Fulbright & Jaworski commented that PEO responsibilities vary by organization and contract, but that most are not involved in the daytoday operations of their client's business and do not exercise the right to hire, fire, supervise or manage daily activities of employees. The firm urged the Department to clarify that opinion letter FMLA111 (Sept. 11, 2000) is about an atypical PEO that actually exercised control over the client's employees.

The Department proposes to amend Sec. 825.106(b) to clarify that PEOs that contract with client employers merely to perform administrative functions, including payroll, benefits, regulatory paperwork, and updating employment policies, are not joint employers with their clients, provided they merely perform such administrative functions. On the other hand, if in a particular fact situation a PEO has the right to hire, fire, assign, or direct and control the employees, or benefits from the work that the employees perform, such a PEO would be a joint employer with the client company.

Some of the comments concerning PEOs suggest confusion over how to count employees jointly employed for purposes of employer coverage (``over 50 workers'') and employee eligibility (``over 50 employees within 75 miles''). Some of these comments suggest that all of the employees of both the primary and secondary employers (and even those of other secondary employers) must be combined and counted together for purposes of these two tests. However, under the existing Sec. 825.106(d) only those employees who are jointly employed by the primary and each of the secondary employers are included in the employee counts of both firms. The home office employees of the primary employer and the employees placed with other secondary employers are not included, for example, in the employee counts for each secondary employer.

For the reasons discussed above, existing paragraph (b) of Sec. 825.106 is proposed to be changed to paragraph (b)(1) and a new paragraph (b)(2) is proposed to be added to clarify how the joint employment rules apply to PEOs. Under the proposal, PEOs that contract with client employers merely to perform administrative functions including payroll, benefits, regulatory paperwork, and updating employment policiesare not joint employers with their clients, provided: (1) They do not have the right to exercise control over the activities of the client's employees, and do not have the right to hire, fire or supervise them, or determine their rates of pay, and (2) do not benefit from the work that the employees perform. On the other hand,
[[Page 7881]]
if in a particular fact situation a PEO has the right to hire, fire, assign, or direct and control the employees, or benefits from the work that the employees perform, such a PEO would be a joint employer with the client employer. The proposal also includes a crossreference in paragraph (d) to proposed Sec. 825.111(a)(3), which, as discussed below, would change the determination of the ``worksite'' for purposes of employee eligibility with respect to employees who are placed by a primary employer at the worksite of a secondary employer for more than 12 months.

Section 825.108 (Public agency coverage)

This section addresses what constitutes a ``public agency'' for purposes of coverage under the Act. Under the current regulations, the dispositive test for determining whether a public agency is a separate and distinct entity (and therefore a separate employer for determining employee eligibility) or simply is part of another public agency is the U.S. Bureau of the Census' ``Census of Governments.'' See U.S. Census Bureau, 2002 Census of Governments, Volume 1, Number 1, Government Organization, GC02(1)1, U.S. Government Printing Office, Washington, DC 20002 \13\ (http://www.census.gov/prod/2003pubs/gc021x1.pdf). In contrast, regulations issued under the Fair Labor Standards Act (FLSA) use this test merely as one factor in determining what constitutes a separate public agency for its purposes. See 29 CFR 553.102. The Department proposes no changes to this section. Because the FMLA definition of ``public agency'' refers to the definition under the FLSA (29 U.S.C. 203(x)), however, the Department seeks public comment on whether this test in the FMLA regulations should be amended to conform with the test in the FLSA regulations.
\13\ The Census of Governments is taken at fiveyear intervals. Section 825.109 (Federal agency coverage)

This section of the existing regulations identifies the Federal agencies that are covered by the Department of Labor's FMLA regulations. Shortly after these regulations were promulgated, Congress enacted the Congressional Accountability Act of 1995, 2 U.S.C. 1301 (CAA), which in part amended the FMLA by repealing Title V of the FMLA pertaining to Congressional employees. See Section 504(b), Public Law 1041. As a result, Congressional employees are now covered by the CAA as administered by the Office of Compliance created by the CAA.

Section 202(c) of the CAA also specifically provided that the General Accounting Office (now named the Government Accountability Office) (GAO) and Library of Congress (LOC) are subject to Title I of the FMLA. For those agencies, the FMLA is administered by the Comptroller General and the Librarian of Congress, respectively. See 29 U.S.C. 2611(4)(A)(iv) and 2617(f).

The CAA also called for a study of how the FMLA is administered for the Government Printing Office (GPO), as well as the GAO and LOC. 2 U.S.C. 1371. The Congressional Office of Compliance issued its study on December 31, 1996. The study concluded that the GPO is covered by Title II and the Office of Personnel Management's regulations, rather than Title I and the Department of Labor regulations. In a letter dated April 25, 2000, the GPO asked the Department to amend its FMLA regulations to delete the reference to GPO coverage, because that agency is covered by Title II. In its response of January 31, 2001, the Department concurred with the conclusion that the GPO is covered by Title II and stated that it would amend the regulations accordingly whenever they were next modified. The proposal would amend paragraphs (a) and (d) of this section to reflect these changes.

Pursuant to section 604(f) of the Postal Accountability and Enhancement Act, Public Law 109435, Dec. 20, 2006, 120 Stat. 3242, the Postal Rate Commission was redesignated as the Postal Regulatory Commission, and the proposed rule would amend paragraph (b)(2) of this section to reflect this change.

Section 825.110 (``Eligible'' employee)

Current Sec. 825.110 sets forth the eligibility standards employees must meet in order to take FMLA leave. Specifically, current Sec. 825.110(a) restates the statutory requirement that to be eligible for FMLA leave, an employee must have been employed by an employer for at least 12 months, have been employed for at least 1,250 hours of service during the 12 months preceding the leave, and be employed at a worksite where 50 or more employees are employed by the employer within 75 miles of the worksite.

Current Sec. 825.110(b) provides detail on the requirement that the employee must have been employed by the employer for at least 12 months, stating that the 12 months need not be consecutive. It further explains that if the employee was maintained on the payroll for any part of a week, that week counts towards the employee's fulfilling the 12 months employment requirement and that 52 weeks is deemed equal to 12 months.

In its RFI, the Department sought comment on whether and how to address the treatment of combining nonconsecutive periods of employment to meet the 12 months of employment requirement. (71 FR at 69508) This eligibility criterion has been the subject of litigation. In Rucker v. Lee Holding, Co., 471 F.3d 6 (1st Cir. 2006), the court considered whether an employee's previous employment of five years counted toward the 12month employment eligibility requirement even though it was separated by a fiveyear break in service from his current employment. The First Circuit Court of Appeals held that ``the complete separation of an employee from his or her employer for a period of years, here five years, does not prevent the employee from counting earlier periods of employment toward satisfying the 12month requirement.'' Id. at 13. In regard to whether a break in service of more than five years would be permissible, the court stated that this important policy issue should be resolved by the Department in the first instance as a part of its exercise of its statutory authority. Id.

A number of commenters urged the Department to support the Rucker decision that prior months of service may be combined for eligibility purposes even when separated by breaks in service of many years. The National Partnership for Women & Families, for example, stated that ``an arbitrary time limit on how long a worker could leave the employment of a particular employer would operate as an unfair and disproportionate burden on women workers. Many women leave work for extended periods of time, for example, to stay home with young children during their formative years.'' (See comments by National Partnership for Women & Families.)

Employer comments received on this issue overwhelmingly disagreed with the First Circuit ruling on combining prior periods of service together. For example, the University of Notre Dame stated, ``There is a tremendous administrative burden associated with adopting the First Circuit Court of Appeals' interpretation of section 825.110 that an employer has the duty to aggregate nonconsecutive service to establish `12 months of service.' As we understand this possible interpretation, the ability to aggregate past service with current service to equate to 12 months
[[Page 7882]]
is virtually unlimited.'' Other comments received on this issue included suggestions for amending the regulations to allow the employer to: disregard prior employment periods if all ties between the company and worker were severed; follow company policy or State law regarding the treatment of previous employment; and require that the 12 months of employment be consecutive. Employer commenters cited the administrative burden associated with combining previous employment periods as the rationale for their recommendations including that the FMLA itself only requires recordkeeping for three years and not indefinitely.

The Department received comments similar to these in response to the 1993 interim final regulations, which suggested limiting the period of time used in determining whether the employee had been employed by the employer for 12 months. In the final regulations, however, the Department declined to include such a limit, reasoning that ``[m]any employers require prospective employees to submit applications for employment which disclose employees' previous employment histories. Thus, the information regarding previous employment with an employer should be readily available and may be confirmed by the employer's records if a question arises.'' (60 FR at 2185) Furthermore, the Department did not find a basis under the statute or its legislative history for adopting the recommendations received in response to the Interim Final Rule. Id. Indeed, the statute does not directly address the issue of whether the 12 months of employment must be consecutive, and the legislative history provides limited insight into Congressional intent regarding extended breaks in employment. The Senate Committee Report in discussing the requirement that the employee must have worked for the employer for 12 months states ``[t]hese 12 months of employment need not have been consecutive.'' S. Rep. No. 1033, at 23 (1993). The House Committee Report uses the same language in describing the 12 month requirement. See H.R. Rep. No. 1038, pt. 1, at 35 (1993).

Based on the Department's experience in administering the FMLA, the First Circuit's ruling in Rucker, and comments received in response to the RFI, the Department proposes a new Sec. 825.110(b)(1) to provide that although the 12 months of employment need not be consecutive, employment prior to a continuous break in service of five years or more need not be counted. Thus, under the proposed rule, if an employee in 2008 has worked five months for an employer and worked for the same employer for two full years in 19978, the employer would not have to consider the two years of prior employment in determining whether the employee currently is eligible for FMLA leave. The FMLA requires covered employers to maintain records for three years. 29 CFR 825.500(b) (``[E]mployers must keep the records specified by these regulations for no less than three years and make them available for inspection, copying, and transcription by representatives of the Department of Labor upon request.''). The Department is not proposing to change the threeyear record keeping requirements under FMLA. Thus, employers would have documentation to confirm previous employment for a former employee who at the time of rehiring had a break in service of three years or less. Where an employee relies on a period of employment that predates the employer's records, it will be incumbent upon the employee to put forth some proof of the prior employment. This is consistent with the employee's obligation to establish he or she is an eligible employee. See Novak v. MetroHealth Medical Center, 503 F.3d 572, 577 (6th Cir. 2007); Burnett v. LFW, Inc., 472 F.3d 471, 477 (7th Cir. 2006). Of course, in determining whether an employee has met the eligibility criterion, an employer may have a policy to consider employment prior to a longer break in service, but in that event must do so in a uniform manner for all employees with similar breaks in service.

The Department considered several alternatives in developing this proposed change to Sec. 825.110(b). Because the legislative history states that the 12 months of employment need not be consecutive, the Department could not adopt suggestions that any break in service ``resets'' the count for determining whether the employee has met the 12 months employment eligibility criterion. On the other hand, the Department believes it is not reasonable that the time frame used for considering prior employment for eligibility should be without end. At the same time, the Department is mindful of the comment by the National Partnership for Women & Families about the burden on women workers who may leave and reenter the workforce after the formative years of their children. But see S. Rep. No. 1033, at 16 (1993). The Department believes that the proposed outer limit of a five year break in service is a permissible interpretation of the statute and strikes an appropriate balance between providing reemployed workers with FMLA protections and not making the administration of the Act unduly burdensome for employers.

However, the Department also proposes new paragraph (b)(2) of this section to address two exceptions to the general rule contained in proposed new paragraph (b)(1): a break in service resulting from the employee's fulfillment of military obligations; and a period of approved absence or unpaid leave, such as for education or child rearing purposes, where a written agreement or collective bargaining agreement exists concerning the employer's intent to rehire the employee. In these situations, employment prior to the break in service must be used in determining whether the employee has been employed for at least 12 months, regardless of the length of the break in service.

The current discussion of how weeks are counted for fulfilling the 12 months requirement is proposed to be redesignated as paragraph (b)(3) of this section.

Further, the Department proposes to add a new paragraph (b)(4) in this section to note that nothing prevents an employer from considering employment prior to a continuous break in service of more than five years when determining if an employee meets the 12month employment criterion provided the employer does so uniformly with respect to all employees with similar breaks in service.

Paragraph (c) of Sec. 825.110 is proposed to be revised to address hours an employee would have worked for his or her employer but for the employee's fulfillment of military service obligations. This revision codifies the protections and benefits offered by the Uniformed Services Employment and Reemployment Rights Act (USERRA).

In addition, the Department proposes several changes to Sec. 825.110 in light of the Ragsdale decision. Current Sec. 825.110(c) may result in some instances in employees who are ineligible for FMLA leave nonetheless being ``deemed eligible'' because of an employer's failure to meet its burden of maintaining records needed to establish the employee's eligibility. Current Sec. 825.110(d) may also result in an employee who is not eligible for FMLA leave being ``deemed eligible'' based on the employer's lack of (or incorrect) notice to the employee. Read in concert with Ragsdale, in which the U.S. Supreme Court invalidated a similar provision in the current Sec. 825.700(a), [[Page 7883]]
the Department believes these provisions in current Sec. 825.110(c) and (d) need to be modified.

On the other hand, the Court in Ragsdale suggested that if an employer fails to notify an employee of his or her FMLA rights, the employee may have a remedy if the employee can show that the employer interfered with, restrained or denied the employee the exercise of his or her FMLA rights and that the employee suffered damages as a result. See Ragsdale, 535 U.S. at 89. Therefore, the Department has incorporated into the proposed text of Sec. 825.300 a statement that in these situations if an employee shows individualized harm because the employer interferes with, restrains or denies the employee of his or her FMLA rights, the employee is entitled to the remedies provided by the statute. The Department also proposes to add this language to Sec. 825.220, which addresses how employees are protected when they assert their FMLA rights, and proposed Sec. 825.301, which addresses designation of FMLA leave.

For organizational purposes, the notice provisions contained in current Sec. 825.110(d) have been moved to proposed Sec. 825.300(b) with other notice requirements employers must provide to employees under the regulations. This organizational change should make it easier for employees and employers to locate these requirements by consolidating them into one section. The proposal includes a cross reference to Sec. 825.300 in paragraph (d) of Sec. 825.110.

The Department also proposes to clarify the language in current Sec. 825.110(d) stating that employee eligibility determinations ``must be made as of the date leave commences.'' This language has led to confusion when employees who have fulfilled the 1,250 hours worked requirement for eligibility, but not the 12 months of employment requirement, begin a block of leave. (Although periods of leave do not count towards the 1,250 hour requirement because leave is not ``hours worked,'' periods of leave do count towards the 12 months of employment requirement because the employment relationship continues, and has not been severed, during the leave.) For example, where an employee who has worked for an employer for 11 months and 1,300 hours commences a three month block of leave for birth and bonding, confusion exists as to whether that portion of the leave that occurs after the employee reaches 12 months of employment is FMLA protected. Compare Babcock v. BellSouth Advertising and Publishing Corp., 348 F.3d 73 (4th Cir. 2003), with Willemssen v. The Conveyor Co., 359 F.Supp.2d 813 (N.D. Iowa 2005). The proposal clarifies that when an employee is on leave at the time he or she meets the 12month eligibility requirement, the period of leave prior to meeting the statutory requirement is nonFMLA leave and the period of leave after the statutory requirement is met is FMLA leave.

The Department proposes to delete current Sec. 825.110(e), regarding counting periods of employment prior to the effective date of the FMLA, because the revisions proposed in Sec. 825.110(b) discussed above render the provision unnecessary.

The Department proposes no changes to current paragraph (f) (paragraph (e) in the proposal) of this section, which states that whether an employee works for an employer who employs 50 or more employees within 75 miles of the worksite is determined as of the date the leave request is made. In the RFI, the Department sought comment on the differing regulatory tests used for determining employee eligibility: the determination of whether the employee has been employed for at least 12 months and for at least 1,250 hours in the 12 months preceding the leave is made as of the date the leave is to commence; however, the determination of whether 50 employees are employed by the employer within 75 miles of the worksite is made as of the date the leave request is made (emphasis added). (71 FR at 69508). Some of the comments received in response to the RFI urged the Department to make these tests the same, namely, to require the determination of employee eligibility in both cases as of the date the leave is to begin. The Department appreciates the difficulty experienced by many employers in complying with these different regulatory tests; however, the proposal does not adopt this suggestion for the reasons discussed in the preamble to the 1995 final regulations:
[T]he purpose and structure of FMLA's notice provisions intentionally encourage as much advance notice of an employee's need for leave as possible, to enable both the employer to plan for the absence and the employee to make necessary arrangements for the leave. Both parties are served by making this determination when the employee requests leave. Tying the worksite employeecount to the date leave commences as suggested could create the anomalous result of both the employee and employer planning for the leave, only to have it denied at the last moment before it starts if fewer than 50 employees are employed within 75 miles of the worksite at that time. This would entirely defeat the notice and planning aspects that are so integral and indispensable to the FMLA leave process.
(60 FR at 2186)
Section 825.111 (Determining whether 50 employees are employed within 75 miles)

Current Sec. 825.111 sets forth the standards for determining whether an employer employs 50 employees within 75 miles for purposes of employee eligibility. Paragraph (a)(3) of this section provides that when an employee is jointly employed by two or more employers, the employee's worksite is the primary employer's office from which the employee is assigned or reports.

In Harbert v. Healthcare Services Group, Inc., 391 F.3d 1140 (10th Cir. 2004), the Court of Appeals held that Sec. 825.111(a)(3), as applied to the situation of an employee with a longterm fixed worksite at a facility of the secondary employer, was arbitrary and capricious because it: (1) Contravened the plain meaning of the term ``worksite'' as the place where an employee actually works (as opposed to the location of the longterm care placement agency from which Harbert was assigned); (2) contradicted Congressional intent that if any employer, large or small, has no significant pool of employees nearby (within 75 miles) to cover for an absent employee, that employer should not be required to provide FMLA leave to that employee; and (3) created an arbitrary distinction between sole and joint employers.

The court noted that Congress did not define the term ``worksite'' in the FMLA, and it concluded that the common understanding of the term ``worksite'' is the site where the employee works. With respect to the employee eligibility requirement of 50 employees within 75 miles, the court noted that Congress recognized that even potentially large employers may have difficulty finding temporary replacements for employees who work at geographically scattered locations. The court stated that Congress determined that if any employer (large or small) has no significant pool of employees in close geographic proximity to cover for an absent employee, that employer should not be required to provide FMLA leave to that employee. Therefore, the court concluded:

An employer's ability to replace a particular employee during his or her period of leave will depend on where that employee must perform his or her work. In general, therefore, the congressional purpose underlying the 50/75 provision is not effected if the ``worksite'' of an employee who has a regular place of work is defined as any site other than that place.
[[Page 7884]]

391 F.3d at 1150.

In comparing how the regulations apply the term ``worksite'' to joint employers and sole employers, the court stated:

The challenged regulation also creates an arbitrary distinction between sole employers and joint employers. For example, if the employer is a company that operates a chain of convenience stores, the ``worksite'' of an employee hired to work at one of those convenience stores is that particular convenience store. See 58 Fed. Reg. 31794, 31798 (1993). If, on the other hand, the employer is a placement company that hires certain specialized employees to work at convenience stores owned by another entity (and therefore is considered a joint employer), the ``worksite'' of that same employee hired to work at that same convenience store is the office of the placement company.

Id.

Importantly, the court did not invalidate the regulation with respect to employees who work out of their homes: ``We do not intend this statement to cast doubt on the portion of the agency's regulation defining the `worksite' of employees whose regular workplace is his or her home. See 29 C.F.R. Sec. 825.111(a)(2).'' Id. at 1150 n.1. Nor did the court invalidate the regulatory definition in Sec. 825.111(a)(3) with respect to employees of temporary help companies: ``An employee of a temporary help agency does not have a permanent, fixed worksite. It is therefore appropriate that the joint employment provision defines the `worksite' of a temporary employee as the temporary help office, rather than the various changing locations at which the temporary employee performs his or her work.'' Id. at 1153.

The RFI requested specific information, in light of the court's decision in Harbert, on the definition in Sec. 825.111 for determining employer coverage under the statutory requirement that FMLAcovered employers must employ 50 employees within 75 miles.

Some commenters who argued that the current regulations are sound and do not require change pointed to the legislative history that the term ``worksite'' is to be construed in the same manner as the term ``single site of employment'' under the WARN Act and the regulations under that Act. See comments by AFLCIO and National Partnership for Women & Families. The AFLCIO agreed with the dissent in Harbert that the Secretary's interpretation of ``single site of employment'' under the WARN Act regulations as applying equally to employees with and without a fixed worksite is a ``permissible and reasonable interpretation'' and does not result in arbitrary differences between sole and joint employers under the FMLA. The National Partnership commented that the purpose of designating the primary office as the worksite is to ensure that the employer with the primary responsibility for the employee's assignment is the one held accountable for compliance with these regulations. The National Partnership stated that the same principles articulated in the regulations with regard to ``no fixed worksite'' situations also should apply to this factual scenario. ``In cases where employees have longterm assignments, we believe the purposes of the FMLA are best served by using the primary employer from which the employee is assigned as the worksite for determining FMLA coverage.''

On the other hand, the law firm of Pilchak Cohen & Tice commented that, under the current regulations, employees at the same size establishment are treated differently because one works for a traditional sole employer and the other works for a staffing firm:

For example, where a small retail store chain may have many employees nationwide, each store could employ fewer than 50 employees. Those employees clearly would not be eligible for FMLA in the traditional employment context. Yet, under the current regulation, if that same retail chain utilized contract employees from an entity which employed more than 50 employees from its home office and that is where the contract employees received their assignments from or reported to, those contract employees could have FMLA rights at the retail chain. This creates an arbitrary distinction between sole and joint employers. . . .Under 29 C.F.R. Sec. 825.106(e), an employer could contract for an engineer, Employee A, for a sixmonth project, and then find out after the employee has only been there for two weeks, that Employee A will need 12 weeks off due to the upcoming birth of his child. Upon Employee A's departure, the employer would then have to spend the time and expense training Employee B only to [be] forced to return Employee A to the position, even though it had already spent time training two individuals. The employer would then have to spend additional time and expense bringing Employee A ``up to speed'' on the project and complete the training initially started.
Pilchak Cohen & Tice stated that the regulation would be more palatable if, to qualify for FMLA job restoration with the client company, the contract employee had to have at least 12 months of service at that location.

The National Coalition to Protect Family Leave commented that the court in Harbert was correct in distinguishing between a jointly employed employee who is assigned to a fixed worksite and a jointly employed employee who has no fixed worksite and changes worksites regularly. ``As for the former, the worksite for purposes of determining whether they are eligible employees * * * would be the fixed worksite of the secondary employer. As for the latter, the worksite would continue as stated in the regulation[.]''

After weighing the comments on this issue submitted in response to the RFI, the Department believes it needs to amend the regulations to reflect the decision in Harbert. The proposed rule would modify Sec. 825.111(a)(3) to state that after an employee who is jointly employed is stationed at a fixed worksite for a period of at least one year, the employee's worksite for purposes of employee eligibility is the actual physical place where the employee works. No changes are proposed with respect to employees whose worksite has not been fixed for at least one year. Also, no changes are proposed for Sec. 825.111(a)(2) with respect to employees who work out of their homes, except to update the current language ``as under the new concept of flexiplace'' to give it a more modern meaning, ``as under the concept of flexiplace or telecommuting.''

The Department has not adopted the comment from Pilchak Cohen & Tice that in order to qualify for FMLA job restoration with the client company, a contract employee should have at least 12 months of service at that location. To do so would take away the job restoration protections for an employee who is entitled to FMLA leave under the law. However, the primary responsibility for placement following FMLA leave rests with the primary employer, the staffing firm in the example given. The client company must consent to the placement only if it has used another contract employee from the same staffing firm to temporarily fill the position during the period of the FMLA leave.\14\ \14\ See 29 CFR 825.106(e). In the preamble to the final rule, the Department agreed with comments that joint employment
relationships present special compliance concerns for temporary help and leasing agencies in that the ease with which they may be able to meet their statutory obligations under FMLA may depend largely on the nature of the relationship they have established with their clientemployers. However, the Department found there were no viable alternatives that could be implemented by regulation that would not also deprive eligible employees of their statutory rights to job reinstatement at the conclusion of FMLA leave. See 60 FR at 2182. Section 825.112 (Qualifying Reasons for Leave, General Rule)

To make it easier to find information in the regulations, the Department has
[[Page 7885]]
reorganized some sections, including portions of current Sec. 825.112, which sets forth the qualifying reasons that entitle an eligible employee to FMLAprotected leave. For example, there is no single place in the current regulations for the provisions that address leave taken for the birth of a child or placement of a child for adoption or foster care. Rather, these provisions are scattered throughout several sections of the current regulations, including paragraphs (c) and (d) of current Sec. 825.112.

No changes have been made to current paragraphs (a) and (b) of this section except for the addition of new paragraph titles. Language from current paragraphs (c) and (d) addressing leave taken prior to the birth of a child or placement of a child for birth or adoption has been moved to new sections in the proposed regulations that cover pregnancy, birth, adoption and foster care. See proposed Sec. Sec. 825.120 and 825.121.

Current paragraph (e) of this section that addresses foster care has been moved to proposed Sec. 825.122, which provides definitions for the various family relationships covered by the Act. Similarly, current paragraph (g) of this section, which addresses leave for substance abuse treatment and an employer's ability to take disciplinary action in connection with substance abuse, has been moved to proposed Sec. 825.119 that specifically addresses leave in connection with substance abuse.
Sections 825.113, 825.114, and 825.115 (Serious Health Condition, Inpatient Care, and Continuing Treatment)

In response to the RFI, the Department received extensive commentary on the regulatory definition of a serious health condition. The full range of comments is discussed in detail in Chapters III and IV of the Department's 2007 Report on the RFI comments (see 72 FR at 35563; 35571). There are six separate definitions of serious health condition in the regulations. Many stakeholders addressed their comments toward what is called the ``objective test'' contained in the regulations at Sec.

FOR FURTHER INFORMATION CONTACT Richard M. Brennan, Senior Regulatory Officer, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, Room S3502, 200 Constitution Avenue, NW., Washington, DC 20210; telephone: (202) 6930066 (this is not a toll free number). Copies of this proposed rule may be obtained in alternative formats (Large Print, Braille, Audio Tape or Disc), upon request, by calling (202) 6930675. TTY/TDD callers may dial tollfree 18778895627 to obtain information or request materials in

alternative formats.

Questions of interpretation and/or enforcement of the agency's current regulations may be directed to the nearest Wage and Hour Division District Office. Locate the nearest office by calling the Wage and Hour Division's tollfree help line at (866) 4USWAGE ((866) 487 9243) between 8 a.m. and 5 p.m. in your local time zone, or log onto the Wage and Hour Division's Web site for a nationwide listing of Wage and Hour District and Area Offices at: http://www.dol.gov/esa/contacts/whd/america2.htm .