Can we recoup benefit premiums owed by ex-employees? Short answer: not easily

Q         What is the general rule (or process) for recouping premiums owed by former employees? Typically, when an employee goes out on leave, we deduct the cost sharing from her paid time off (PTO). If she doesn’t have any PTO left, we double-deduct her pay when she returns. Is there a way to recoup the funds if an employee resigns before we can deduct the amount from her pay?

A   In most cases the employer isn’t able to recoup the full amount or, in some cases, any of the outstanding premiums. While you may seek to recoup health insurance and other benefit premiums owed by an employee upon her return from leave, you must do so in a manner that complies with the Family and Medical Leave Act (FMLA)—if the leave was FMLA-qualifying—and the Fair Labor Standards Act (FLSA).

Although the FMLA deems recoverable health and nonhealth benefit premiums to be debts owed by the employee to the employer and doesn’t prohibit recouping them, it also doesn’t provide a practical process for doing so when an employee’s employment terminates before the full amount is recovered. The Act provides only that an employer may initiate legal action against the employee to recover the costs. In many circumstances, the cost of legal action may far outweigh the amount to be recouped, effectively eliminating the value of recovery.