What NYS Employers Should Know Before Terminating an Employee on Short-Term Disability

If you are an employer in New York, you have probably had to navigate short-term disability leave at some point. And one of the most common questions we hear is, “Can I terminate an employee who’s out on short-term disability?” The answer is: It depends. While short-term disability insurance is a partial income replacement, it does not protect an employee’s job. But that does not mean you can terminate without taking a closer look. In fact, doing so can raise some serious legal red flags if you are not careful.

In New York, employers are required to provide short-term disability insurance to cover employees who are unable to work due to their own non-work-related illness or injury. Here are the key features:

• Employees can receive 50% of their average weekly wages, capped at $170 per week.

• Wages are calculated from the last eight weeks of employment.

• The benefit can last for up to 26 weeks in any 52-week period.

• There’s a seven-day waiting period before benefits kick in.

As a partial income replacement insurance product, short-term disability does not specifically guarantee employee job protection. However, many factors make it risky to terminate an employee on short-term disability.

Accrued Sick Leave or PTO

If the employee has earned sick leave or vacation time, they’re entitled to exhaust that time prior to any possible termination. Keep in mind that New York’s Labor Law Section 196-b now requires all private employers to provide employees with paid leave, regardless of industry, occupation, part-time or overtime exempt status, and seasonal status. The amount of leave an employee is entitled to is based on the size of their employer's business, so be sure any required paid time off has been provided and used before considering termination.

Family and Medical Leave (FMLA)

If a company has 50 or more employees within a 75-mile radius, the employee may also be eligible for federal FMLA, which gives them up to 12 weeks of unpaid, job-protected leave. Employers can require employees to use up accrued PTO or sick leave during FMLA, but they still have the right to job restoration at the end of the leave. If they are still within that 12-week window, termination is not an option, unless there is an unrelated and well-documented reason, such as a layoff.

Disability Discrimination Protections

Lastly, if an employee has used up all sick time, PTO, and FMLA leave, or was not entitled to one or more of them, the federal Americans with Disabilities Act and the New York State Human Rights Law prohibit discrimination on the basis of disability, which is broadly interpreted as a physical or mental impairment affecting a major life activity. These disability discrimination laws require that the employer and employee engage in a good faith “interactive process” to determine if a reasonable accommodation (such as extended, unpaid leave) would help them return to work. Employers should be sure to document this process carefully and completely.

When Might Termination Be Defensible?

If the employer wishes to terminate an employee out on short-term disability, it should first analyze whether additional leave beyond accrued sick time, PTO, and FMLA leave entitlement would be reasonable or unduly burdensome, given the position at issue, potential coverage for that position, the employer’s number of employees, and other factors unique to each situation pertinent to the ability to accommodate an extended absence.

While employers should always be cautious, there are situations where terminating an employee on short-term disability leave may be legally justified:

• The Medical Prognosis Is Indefinite - If the employee’s doctor cannot give any estimated return-to-work date, and additional leave would create an undue hardship, termination might be appropriate. But this depends heavily on the facts—like the employee’s role, your ability to temporarily cover their duties, and how long the leave has already lasted.

• A Legitimate Layoff or Restructure - If there is a company or practice-wide layoff, and the employee on leave would have been let go regardless of their medical status, that decision is usually defensible. Employers should make sure they can show that the termination was part of a broader plan and not tied to the employee’s disability or leave.

While short-term disability leave does not automatically protect an employee’s job, termination during that leave is rarely straightforward. As always, companies considering any employee termination, especially those on short-term leave, should discuss all the relevant considerations with experienced employment law counsel.

If you have any questions about paid leave, short-term disability, or any Labor or Employment law issue, please contact someone from our Labor & Employment team:

• Paul F. Keneally, 585-258-2882, pkeneally@underbergkessler.com

• Jennifer A. Shoemaker, 585-258-2825, jshoemaker@underbergkessler.com

• Ryan T. Biesenbach, 585-258-2865, rbiesenbach@underbergkessler.com