Disability Leave: What It Means for Employers

What it means in practice

What the term covers. "Disability leave" is not a single law. It is the everyday name for time off when an employee cannot work because of their own health: surgery and recovery, a serious illness, an injury on or off the job, or pregnancy and childbirth. Leave to care for a family member is usually handled under family leave rules instead. Different laws answer the job-protection and pay questions, and one absence can involve several at once.

Job protection versus income replacement. On the job-protection side, the federal baseline is the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA) and the Pregnant Workers Fairness Act (PWFA), plus any state leave laws. On the income side are employer short-term and long-term disability (STD and LTD) plans, state disability insurance in the states that have it, and workers' compensation for work injuries. The two sides do not depend on each other. California's EDD says plainly that its Disability Insurance benefits "do not provide job protection," and points to the FMLA and the California Family Rights Act for that.

FMLA leave for a serious health condition. The Department of Labor says the FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave, including up to 12 workweeks in a 12-month period for a serious health condition that makes the employee unable to perform the functions of the job. Covered employers are private employers with 50 or more employees in 20 or more workweeks in the current or preceding calendar year, plus public agencies and schools of any size (29 CFR 825.104). An eligible employee has worked for the employer at least 12 months, has at least 1,250 hours of service in the 12 months before leave, and works at a site with 50 or more employees within 75 miles (29 CFR 825.110). During the leave the employer must keep group health coverage on the same conditions as if the employee had kept working (29 CFR 825.209), and on return the employee is entitled to the same or an equivalent position (29 CFR 825.214).

What counts as a serious health condition. The regulations define it as an illness, injury, impairment or physical or mental condition involving inpatient care or continuing treatment by a health care provider (29 CFR 825.113). Inpatient care means an overnight stay in a hospital, hospice or residential medical care facility (29 CFR 825.114). Continuing treatment includes incapacity of more than three consecutive, full calendar days with two treatments within 30 days or one treatment leading to a regimen of continuing treatment; any incapacity due to pregnancy or prenatal care; chronic conditions such as asthma, diabetes or epilepsy; long-term conditions; and conditions requiring multiple treatments, such as chemotherapy or dialysis (29 CFR 825.115). Ordinarily, the common cold and the flu do not qualify unless complications arise (29 CFR 825.113(d)).

ADA leave as a reasonable accommodation. The EEOC says the ADA requires employers with 15 or more employees to provide reasonable accommodations, and that this can include modifying leave policies and providing leave for a disability even where the employer offers no leave to others. Employees with disabilities must get access to existing leave on the same terms as everyone else. Beyond that, an employer must consider unpaid leave as an accommodation if the employee needs it and it does not cause undue hardship, even when the employee is not eligible under the employer's policy or has used up leave under workers' compensation, the FMLA or a state law. The EEOC adds that the ADA does not require paid leave beyond what the employer's paid leave policy provides. Whether a condition is a disability turns on the ADA definition; see substantial limitation.

The interactive process. When an employee asks for leave or more leave for a medical condition, the EEOC says the employer must treat it as a request for reasonable accommodation. If the request fits the employer's leave program, the FMLA or workers' compensation, the leave can be given under that program; if not, the employer should promptly engage in an "interactive process." The EEOC lists the focus as the reason for the leave, whether it is a block of time or intermittent, and when the need will end. An employer that granted leave with a fixed return date may not demand periodic updates, though it may check on the employee's progress.

Maximum-leave and no-fault policies. Employers may set a maximum amount of leave, but the EEOC says they may have to grant more as a reasonable accommodation unless that causes undue hardship. Its position is that complying with the FMLA does not necessarily satisfy the ADA, and that extra leave exceeding the FMLA amount is not, by itself, an undue hardship. Policies that cap unplanned absences may also need an exception for disability-related absences. The EEOC suggests that end-of-leave form letters, including those sent by third-party administrators of STD and LTD programs, tell employees to ask promptly if they need more leave as an accommodation. See absence management.

Undue hardship. Under the ADA regulations, undue hardship means significant difficulty or expense, weighed against factors such as the net cost of the accommodation, the employer's financial resources and size, and the impact on operations (29 CFR 1630.2(p)). For leave, the EEOC lists the amount and length of leave, its frequency, flexibility in which days are taken, whether it is predictable, the impact on coworkers and on timely work, and the impact on serving customers. An approximate or changing return date is judged case by case, but indefinite leave is an undue hardship. The employer may count leave already taken under any program. Leave as an accommodation includes the right to return to the original position; if holding it open becomes an undue hardship, the employer must consider alternatives such as a vacant position.

Pregnancy-related leave under the PWFA. The EEOC's PWFA rule covers employers with 15 or more employees (29 CFR 1636.2). Reasonable accommodation can include using paid leave, whether accrued, short-term disability or another employer benefit, or unpaid leave, for reasons such as recovery from childbirth, miscarriage or related conditions and attending health care appointments (29 CFR 1636.3(i)). An employer may not require an employee to take leave if another reasonable accommodation can be provided without undue hardship (29 CFR 1636.4(d)).

Returning to work. The EEOC says an employer violates the ADA if it requires an employee to be "100 percent" healed when the employee can do the job with or without reasonable accommodation, absent undue hardship, or if it claims a safety risk without showing a "direct threat." If the employee cannot do the old job even with accommodation, the EEOC's position is that reassignment to a vacant position for which the employee is qualified may be required. Under the FMLA, an employer with a uniformly applied policy may require a fitness-for-duty certification limited to the condition that caused the leave, but must say so in the designation notice (29 CFR 825.312); that requirement must also meet the ADA's job-related and consistent-with-business-necessity standard (29 CFR 825.702(e)).

Disability plans and the FMLA clock. Leave under an employer disability plan counts as FMLA leave if it meets the serious health condition criteria, and the employer may designate it and count it against the 12 weeks (29 CFR 825.207(d)). Because disability plan leave is not unpaid, neither side may require substitution of accrued paid leave, but they may agree, where state law permits, to use paid leave to top up a plan that replaces, for example, two-thirds of salary. The FMLA regulations also note that, under Title VII as amended by the Pregnancy Discrimination Act, employers should provide the same benefits to pregnant employees as to other employees with short-term disabilities (29 CFR 825.702(f)).

How disability pay is taxed. IRS Publication 15-A (for use in 2026) defines sick pay as any amount paid under a plan because of an employee's temporary absence due to injury, sickness or disability, including short- and long-term benefits paid by the employer or a third party such as an insurer. It is usually subject to social security, Medicare and FUTA taxes, with exceptions: payments after more than 6 calendar months since the last month worked, and the portion attributable to employee after-tax contributions, are not. Sick pay paid by the employer or its agent is subject to mandatory federal income tax withholding; a third party that is not the employer's agent withholds income tax only if the employee submits Form W-4S. Workers' compensation payments are not sick pay and are not subject to employment taxes. Sick pay is reported on the Form W-2, with box 13 "Third-party sick pay" checked when a third party paid it.

State disability insurance. A few states require income replacement for non-work disabilities, funded through payroll contributions; see SDI tax. Three examples from official pages: California EDD says Disability Insurance pays when a worker cannot work and loses wages because of a non-work-related illness or injury, pregnancy or childbirth, surgery, or alcohol or drug rehabilitation, at 70 to 90 percent of base-period wages; EDD lists a 2026 maximum weekly benefit of $1,765 for up to 52 weeks (see CASDI). The New York Workers' Compensation Board says disability benefits pay 50 percent of the average weekly wage for the last eight weeks, up to a maximum currently listed at $170 a week, for up to 26 weeks in 52 weeks after a seven-day waiting period. New Jersey says TDI pays 85 percent of the average weekly wage, up to $1,119 a week in 2026, for up to 26 weeks.

Workers' compensation temporary disability. Injuries at work are handled by workers' compensation, not SDI. For federal employees, the Department of Labor's OWCP administers the Federal Employees' Compensation Act: total disability compensation is 66 2/3 percent of the pay rate, or 75 percent with at least one dependent (20 CFR 10.401), and most employees with a traumatic injury first receive up to 45 days of continuation of pay from the agency (20 CFR 10.200). State systems differ; California's Division of Workers' Compensation says temporary disability generally pays two-thirds of lost gross wages, up to a maximum set by law. A workers' compensation absence can run concurrently with FMLA leave, and an employee may decline a light-duty offer and stay on unpaid FMLA leave, even if that ends the compensation payments (29 CFR 825.207(e) and 825.702(d)).

Example: a disability plan paid partly by employees. Publication 15-A describes an insurer paying an employee $2,000 a month of sick pay under a policy the employer funded 70 percent and employees funded 30 percent with after-tax dollars over the prior three policy years. Taxable sick pay is $1,400 a month ($2,000 x 70%); the other $600 is not subject to employment taxes.

Example: New Jersey TDI. As our own illustration of the stated rule, an employee whose average weekly wage is $1,000 would be paid 85 percent, or $850 a week, below the 2026 maximum of $1,119. An employee averaging $1,500 a week would hit the cap, because 85 percent ($1,275) exceeds $1,119.

Records and confidentiality. FMLA certifications and medical histories must be kept as confidential medical records in files separate from regular personnel files (29 CFR 825.500(g)). The ADA rules likewise require medical information to be kept on separate forms and in separate files, although supervisors may be told about necessary work restrictions and accommodations (29 CFR 1630.14(c)(1)).

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