Parental Leave Policy Pitfalls

By Kayla Halpin, CLMS, AVP, Absence Practice Lead, Symetra; Samantha Reed, Senior Absence Consultant, Symetra

Interest in family-focused benefits has increased dramatically since the pandemic as employers make ongoing commitments to their employees’ well-being. Millennials, now the largest generation represented in the workplace, are in their peak child-raising years. That underscores the importance of family-focused benefits like parental leave to attract and retain top talent. Keeping working parents on the job with parental leave policies and flexible work arrangements can increase employee engagement and foster a positive work environment.

Despite attempts to enact national paid leave policies, the United States continues to be one of the only countries out of 193 in the United Nations that does not have a national paid parental leave law. Instead, an increasing number of states have passed paid leave laws¹ (up to 15 by 2026 with no signs of slowing down), which has resulted in a patchwork of unequal paid leave benefits, depending on where an employee works.

To fill these gaps and provide equitable benefits across the entire employee population, many employers have chosen to offer a company paid or unpaid parental leave. Some have outsourced administration of parental leave policies, which consolidates administration of their company leaves with the federal Family and Medical Leave Act (FMLA) and state paid and unpaid leaves to ease the burden of managing the complexity and compliance inherent in administering these programs, but does not eliminate risk.

Why Is This Important?

Company leave is not subject to the same regulations and mandates as federal and state leave programs. Since employers have more leeway to design parental leave policies, that can create pitfalls. A few high-profile settlements for Equal Employment Opportunity Commission (EEOC) charges brought against well-known companies^2,3 illustrate these risks. In these cases, the complaints alleged that company-paid parental leave policies discriminated against new fathers by not providing them with equivalent benefits offered to new mothers.

Developing a clear, comprehensive, written parental leave policy provides clarity on eligibility requirements, entitlement, and process, which can mitigate potential compliance concerns and provide protection in the event of litigation.

Potential Vulnerabilities

While there are no federal laws specific to company-paid or unpaid parental leave, the EEOC has provided important guidance⁴ outlining how programs should be designed to comply with Title VII and state-specific anti-discrimination laws.    

To help avoid common errors, employers need to focus on a few key areas when developing or reviewing a parental leave policy:

• Design policies to be equitable across “similarly situated” employees. The EEOC clearly notes that during a bonding leave, birth parents, nonbirth parents, and adoptive parents must be similarly situated regarding the need for leave since they are all bonding with the new child. Because of this distinction, those covered under a company parental leave policy must receive the same benefits during leave, including eligibility criteria, duration of leave, paid benefit amounts (if applicable), and transitional return-to-work/phase-back programs.

• Separate your parental leave for bonding from any pregnancy disability-related medical leave:
  • Option 1: Provide leave during the bonding period only. All employees eligible for bonding leave (whether birthing parent, nonbirthing parent, or adoptive parent) can take their company parental leave for a bonding event. For birth mothers, parental leave would not start until after the employee has moved from medical leave for recovery from childbirth (such as short-term disability or the medical recovery portion of state paid family and medical leave programs) to bonding leave. This ensures alignment with the EEOC guidance to provide equitable benefits to similarly situated individuals.
  • Option 2: Provide additional maternity benefits to birthing parents during pregnancy-related medical leave and bonding leave. EEOC guidance does clarify that beyond Option 1 above, employers can provide additional paid leave benefits to birthing parents during medical recovery from pregnancy and/or childbirth. Since nonbirthing parents and adoptive parents would not require medical recovery from pregnancy and/or childbirth, providing these additional benefits to birthing parents does not violate EEOC discrimination laws because they are not considered to be similarly situated individuals.

• Do not differentiate between primary and secondary caregivers. Primary and secondary distinctions in company policies insinuate that families must choose between a breadwinner and a caregiver. With more dual-income households, it is an outdated notion that one parent is initially tasked with caregiving. Typically, both parents work and care for the children equally, so the best thing is to ensure company parental leaves are equal for all parents by reducing the caregiving bias in the workplace.

Practical Plan Design Considerations

It is essential to carefully define and document the approved plan design. Consider these common plan design options when creating a parental leave policy:

Training Can Increase Compliance

When designing a parental leave policy, employers should convey the appropriate tone and approach to encourage employees to take advantage of available programs. It is common to see employee handbooks that include generous parental leave, but within the organization, a stigma exists against employees using that time. Time spent training managers and human resources (HR) teams on the ins and outs of parental leave policies can reduce common mistakes. For example:

• Inform managers that parental leave will generally run concurrently with the FMLA. Ensure supervisors do not inadvertently engage in FMLA interference by discouraging employees from taking parental leave or their full entitlement period.
• Curb managers who make arrangements or agreements with employees that fall outside of the company policy. For example, if the policy states that employees must take all 10 weeks at once or forfeit the remainder, be sure managers don’t say they can “work it out” so that employees take four weeks initially and can use more time later.

As always, when developing or reviewing a policy, employers should confer with internal counsel and HR team(s), and hold process reviews regularly to ensure that company policies are non-discriminatory and to avoid the potential for violations or litigation.

References

1. DMEC. State and Local Leave Laws Resource. Retrieved from https://dmec.org/resources/state-and-local-leave-laws-resource/
2. Equal Employment Opportunity Commission. EEOC Sues Estée Lauder for Sex Discrimination. July 17, 2018. Retrieved from Estée Lauder Companies to Pay $1.1 Million to Settle EEOC Class Sex Discrimination Lawsuit | U.S. Equal Employment Opportunity Commission
3. Forbes. JP Morgan Chase Settles $5M Parental Leave Case, Commits to Gender Neutrality But Not Equality. June 1, 2019. Retrieved from https://www.forbes.com/sites/marybethferrante/2019/06/01/jpmorganchaseparentalleave/?sh=6889c5d04869
4. Equal Employment Opportunity Commission. Enforcement Guidance on Pregnancy Discrimination and Related Issues. Retrieved from https://www.eeoc.gov/laws/guidance/enforcement-guidance-pregnancy-discrimination-and-related-issues