Guest Article

(From the March 25, 2002 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Supreme Court Strikes Small Piece of FMLA Regulation

The Supreme Court March 19 handed employers a victory in a case involving the validity of a small piece of the Department of Labor's Family and Medical Leave Act regulation. Ragsdale v. Wolverine World Wide, Inc., 535 U.S. ____ (2002). The Court ruled DOL exceeded its regulatory authority by specifying an employee's leave doesn't count as FMLA leave unless the employer designates it as such in cases where the employer's leave policy is more generous than FMLA requires.

Impact on Employers

Many employers, especially larger employers, have leave policies that are more generous than FMLA requires. Employers generally structure these policies to satisfy the FMLA's minimum requirements so that leave taken under their policies also counts toward the employees' FMLA leave entitlement.

True to the "no good deed goes unpunished" principle, the regulation at issue in this case requires employers who offer more generous leave policies to tell employees they are taking FMLA leave. If they don't, according to the regulation, the leave can't be counted as FMLA leave.

The Supreme Court did not rule that this notice requirement is invalid, but did throw out the sanction. In other words, employees may not rely on the regulation to claim they are still entitled to FMLA leave simply because their employers didn't tell them the leave they've already taken was FMLA leave.

As a practical matter, the Supreme Court's ruling notwithstanding, in cases where it is clear the leave qualifies as FMLA leave, the employer should always inform the employee that the leave is being treated as such. This practice should make it possible to avoid misunderstandings and, more importantly, unnecessary legal actions. But in many situations the employer may not know the reasons for the leave until after the fact, and the Supreme Court's ruling provides some protection for employers in these circumstances.

FMLA Background

In general, FMLA requires employers to allow employees to take up to 12 weeks per year of unpaid leave under certain circumstances. Employers may not interfere with, restrain, or deny employees' attempts to exercise their FMLA rights. If employers violate these rules, they may be held liable to employees for money damages, interest, and punitive damages, and may also be required to reinstate terminated employees, among other things.

The FMLA also requires employers to make employees aware of their FMLA rights by posting notices at their worksites. A $100 (per offense) civil penalty may be assessed against employers who fail to satisfy this requirement.

Case Summary

Ragsdale, a former Wolverine World Wide employee, used the company's leave plan to take 30-consecutive weeks off in 1996 after being diagnosed with Hodgkin's disease. The leave was not designated as FMLA leave, although it satisfied all of FMLA's minimum requirements. Ragsdale was not paid during the leave period, but her job was held open during the entire period, and Wolverine maintained her health benefits and paid her premiums during the first 6 months.

After Ragsdale had used all her leave under the Wolverine plan, she asked for another month. The company refused, and fired her when she did not return to work.

Ragsdale sued for reinstatement, back pay, etc., claiming that she was still entitled to 12 weeks of FMLA leave because Wolverine failed to designate the leave she had already taken as FMLA leave. In support of her claim, Ragsdale focused on one sentence in FMLA regulation section 825.700(a), which provides, "If an employee takes paid or unpaid leave and the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee's FMLA entitlement."

The issue in Ragsdale is the validity of FMLA regulation section 825.700(a). A federal district court and the 8th Circuit Court of Appeals ruled the regulation conflicted with the statute and was invalid because it required Wolverine, in this situation, to grant Ragsdale more than 12 weeks of FMLA-compliant leave in a single year. Ragsdale appealed this ruling to the Supreme Court.

The Supreme Court did not address whether DOL could impose the requirement that employers must designate leave as FMLA leave. Instead, the Court focused its attention on the remedy provided in the regulation - i.e., if the employer doesn't designate leave as FMLA leave, then it doesn't count as FMLA leave.

According to the Court, the regulation is invalid because "it alters the FMLA's cause of action in a fundamental way: It relieves employees of the burden of proving any real impairment of their rights and resulting prejudice." Thus, in this case, the regulation would have allowed Ragsdale to sue for damages without proving that Wolverine's conduct impaired her FMLA rights in any way. The Court found this agency-imposed sanction too heavy a burden to place on the employer, although the Court specifically stated it did decide the issue of whether such a designation as FMLA leave could be imposed if enforced by a less draconian penalty.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have questions or need additional information about this article, please contact Martha Priddy Patterson (202.879.5634) or Robert B. Davis (202.879.3094). Copyright 2002, Deloitte.