If an employee unequivocally states she’s not returning to work, your duties under FMLA of job restoration and to maintain health benefits end, subject to your healthcare continuation duties under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
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Once an employee on leave unequivocally advises the employer that he or she does not intend to return to work, the employer then may give the employee notice that employment is ended. At this point, the employer’s obligation to provide healthcare coverage also ends. However, these benefits continue if an employee indicates that he or she may be unable to return to work but expresses a continuing desire to do so.