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Thursday, March 27, 2008

Wal-Mart lawsuit for reimbursement of medical costs illustrates important HR issue

Wal-Mart is at the center of a huge public relationship mess after it has asked a former employee to reimburse most of the $470,000 its health plan paid for medical costs following a traffic accident. has the details:

[Debbie] Shank suffered severe brain damage after a traffic accident nearly eight years ago that robbed her of much of her short-term memory and left her in a wheelchair and living in a nursing home.

It was the beginning of a series of battles -- both personal and legal -- that loomed for Shank and her family. One of their biggest was with Wal-Mart's health plan.

Eight years ago, Shank was stocking shelves for the retail giant and signed up for Wal-Mart's health and benefits plan.

Two years after the accident, Shank and her husband, Jim, were awarded about $1 million in a lawsuit against the trucking company involved in the crash. After legal fees were paid, $417,000 was placed in a trust to pay for Debbie Shank's long-term care.

Wal-Mart had paid out about $470,000 for Shank's medical expenses and later sued for the same amount. However, the court ruled it can only recoup what is left in the family's trust.

The Shanks didn't notice in the fine print of Wal-Mart's health plan policy that the company has the right to recoup medical expenses if an employee collects damages in a lawsuit.

Just because your company is legally entitled to do something does not mean that it should. Take the FMLA as an example. Section 104(c)(2) of the FMLA provides that if an employee fails to return from an FMLA leave of absence for less than 30 days, and for a reason other than the continuation, recurrence, or onset of a serious health condition or some other circumstance beyond the employee's control, the employer may recover any premiums that it paid to maintain group health coverage for the employee during the period of FMLA leave.

Is it a good idea to exercise this right? Consider the new mom who decides after her FMLA leave expires to stay at home with her newborn. That decision will absolutely leave the employer in the lurch. The employer might want to do something to send a message to other employees not to take advantage of the FMLA by taking the time off and then choosing not to return. But consider: 1) mechanically, how do you go about exercising this right; and 2) what negative message does it send if you go to court to collect this money? Keep in mind, even if you have written authorization from an employee to make certain paycheck deductions for sums owed, FMLA leave is unpaid. By the end of an employee's leave, there almost certainly will not be any pay left from which you will be able to make a deduction.

Take a look at some of the comments posted on to its story:

Although this is a very stupid thing for a company that makes Billions to do, this doesn't surprise me really. Our society has migrated away from action based on morals and ethics to one that is only concerned about the letter of the law.

One of the most unconscionable things I have ever seen. Another reason to hate Wal-Mart and to never spend another cent there... I'd rather pay double somewhere else than help support a company capable of something like this.

Hey Wal-Mart why don't you just send your attorneys to the lady's house and dump her out of her wheelchair???

Before you decide to seek reimbursement from a former employee, think long and hard about the effect on your current employees, and whether it's good for your business to have them bringing these types of resentments against your business into the workplace.

An update on this story is available.