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High Court Invalidates FMLA Regulation

On March 19, 2002, the United States Supreme Court invalidated a United States Department of Labor (“DOL”) regulation as being “manifestly contrary” to the Family and Medical Leave Act of 19931 (FMLA).  See Ragsdale v. Wolverine World Wide, Inc., 122 S.Ct. 1155 (2002).  The regulation at issue, 29 CFR § 825.700, provides that any employee’s medical leave of absence from work that is not designated by the employer as FMLA leave by a written notice to the employee will not count against an employee’s twelve-week FMLA leave entitlement.  As set forth more fully below, the Court held that the regulation “effect[ed] an impermissible alteration of the [FMLA’s] statutory framework.”

In resolving what was clearly a close question of law – whether the DOL’s broad rulemaking authority permitted extension of the FMLA leave period as a remedy for the employer’s notice violation – the Court also recognized several important principles that will help employers to craft their policies and procedures for administration of their employees’ FMLA leaves.


First, an employer who grants employees more than the FMLA’s statutory 12-week leave period will now have a strong defense against a claim by an employee for additional leave as a remedy for technical violations of the DOL’s regulations.  The Court seemed to be persuaded that the employer in Ragsdale who granted the employee 30 weeks of medical leave could not be penalized by being required to grant even more leave.  Second, a violation of the FMLA cannot be established based upon a violation of the FMLA’s notice requirements where the employee cannot establish prejudice by reason of the employer’s violation.

These two common-sense principles should give employers great comfort in applying the often confusing and counter-intuitive regulatory scheme which has developed under the FMLA.  However, despite these apparent safe harbors, employers should continue to be cognizant of the DOL’s regulations requiring employers to designate leave as FMLA-qualifying, as well as the duty to supply employees going on FMLA leave with detailed written notice of their rights under the FMLA.  The Court did not resolve whether these regulations were consistent with the FMLA, nor whether the DOL could create a regulatory regime imposing remedies other than extension of leave, such as financial penalties.  The Court also did not discuss what remedy might be appropriate where the employee could show prejudice from a violation of the regulations.


Background
In 1993, Congress enacted the FMLA for the purpose of balancing the demands of the workplace with the needs of families.  To this end, the FMLA guarantees “eligible”2 employees up to 12 weeks of job-protected, unpaid leave from their employment in any 12 month period due to the birth of a child, because of the placement of a child with the employee for adoption or foster care, or because the employee, or the employee’s spouse, child or parent has a “serious health condition.”3  During FMLA leave, an employer must continue a departing employee’s health coverage under the employer’s group health plan,4 and, upon completion of the FMLA leave, the employer must restore the employee to the same position held prior to the employee’s leave or to an “equivalent” position.5  It is unlawful for an employer to “interfere with, restrain, or deny the exercise of” these rights,6 and violators are subject to liability for backpay, liquidated damages and appropriate equitable relief.7


Congress authorized the Secretary of Labor to “prescribe such regulations as are necessary to carry out” the FMLA.8  These regulations include requirements that employers provide various types of notice to employees of their rights and responsibilities under the FMLA.  For example, when an employee takes FMLA leave, the employer is required to provide written notice to the employee containing, at a minimum, the following information:  (i) that leave will be counted against the employee’s 12-week entitlement; (ii) whether the employee will be required to provide medical certification and the consequences of the failure to do so; (iii) the right of the employee or employer to substitute paid leave and any conditions accompanying such substitution; (iv) arrangements for payment of health insurance premiums; (v) whether a fitness for duty certificate will be required; (vi) whether the employee is a “key employee”9 and, if so, the possibility that leave may be denied; (vii) the employee’s entitlement to be restored to the same or equivalent position at the end of the FMLA leave; and (viii) that the employee may be responsible for reimbursing the employer’s portion of health premiums paid on the employee’s behalf if the employee fails to return to work.10


The Ragsdale Decision
In 1995, Tracy Ragsdale began her employment with Wolverine Worldwide, Inc. (“Wolverine”) as a factory worker.  The following year, Ragsdale was diagnosed with Hodgkin’s disease.  Because treatment of her condition required surgery and months of radiation therapy, Ragsdale was unable to work during this time period.  Under Wolverine’s leave plan, Ragsdale was eligible for seven months of unpaid sick leave.  She requested and received a 1-month leave of absence beginning in February, 1996.  At the end of the 1-month period, Ragsdale requested and received a 30-day extension.  This pattern continued for each of the next six months, as Wolverine continued to grant Ragsdale 30-day extensions.  Wolverine kept open Ragsdale’s position throughout the 30 week period that she remained out of work, and also maintained her health benefits and paid her premiums during the first six months of her absence.  At no time during the 30 week period did Wolverine notify Ragsdale that 12 weeks of her absence would be designated as leave under the FMLA.


When Ragsdale ultimately sought a seventh 30-day extension of leave, Wolverine advised her that she had exhausted her seven months of leave under the company plan.  Ragsdale requested that she be granted additional leave, or that she be permitted to work on a part-time basis.  Wolverine refused these requests, and terminated Ragsdale’s employment.

Ragsdale filed suit under the FMLA seeking reinstatement, backpay, and other relief.  Her lawsuit relied solely upon Wolverine’s violation of DOL regulation 29 CFR § 825.700, which is entitled, “What if an employer provides more generous benefits than required by the FMLA?”  This regulation provides, in part, that if an employee takes medical leave “and the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee’s FMLA entitlement.”  Even though Ragsdale had requested and received 30 weeks of medical leave – more than double the minimum 12-week period that Wolverine was required to give – Ragsdale argued that her 30 weeks of leave did not count against her FMLA entitlement because Wolverine did not designate the leave as FMLA leave.  Instead, she argued that when she was denied the additional leave and her employment was terminated by Wolverine, she became entitled to an additional 12 weeks of job-protected leave under the FMLA.


In response, Wolverine argued that even though it never gave Ragsdale specific notice that a portion of her absence would count as FMLA leave, it nevertheless complied with the FMLA because it provided her with 30 weeks of leave in any event.  A sharply divided Supreme Court ultimately sided with Wolverine by invalidating the regulation upon which Ragsdale based her FMLA claim.  The Ragsdale majority found that the FMLA guarantees employees 12 weeks of leave, and that the employer’s failure to give notice that the leave would count against her FMLA leave could not be used as a basis to extend the 12-week limit imposed by the statute.  Because the regulation at issue effectively would have required the employer to provide more than 12 weeks (in this case, 42 weeks), the Court held that § 825.700(a) “effects an impermissible alteration of thestatutory framework” of the FMLA.

The Court recognized that the Secretary of Labor has issued comprehensive notice regulations in addition to a general notice provision that Congress has already included in the FMLA statute.  The FMLA requires a covered employer11 to post a general notice of FMLA rights in a conspicuous place in the workplace setting forth excerpts or summaries of pertinent FMLA provisions.12  According to the Secretary of Labor, more comprehensive notice regulations are necessary to ensure that employees are aware of their FMLA rights when they take leave.13  Without deciding whether such regulations are necessary, the Court found that the penalty imposed by § 825.700 as a consequence of a breach was “contrary to the FMLA’s remedial design.”


The Court reasoned that the penalty set forth in § 825.700 for an employer’s failure to provide timely notice of the FMLA designation is unconnected to any prejudice the employee might suffer from the employee’s failure to receive notice that the leave will be counted as FMLA leave.  As the Court noted, § 825.700 “establishes an irrebuttable presumption that the employee’s exercise of FMLA rights was impaired – and that the employee deserves 12 more weeks.”  The facts of Ragsdale were such that even if the employer had complied with the notice regulations, the employee’s Hodgkin’s Disease still would have required her to take the entire 30-week leave of absence.

§ 825.700 Contravenes FMLA’s Remedial Scheme

The Ragsdale Court invalidated § 825.700 after determining that the regulation altered the cause of action available to employees for violations of the FMLA.  Specifically, the FMLA provides a cause of action to employees against employers who violate § 2615 of the FMLA, which makes it unlawful for “any employer to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under” the FMLA.14  Section 825.700 entitled Ragsdale to bring suit under the FMLA despite her inability to show that her employer’s actions in failing to designate her leave as FMLA leave somehow restrained her exercise of FMLA rights.  As the Court noted, “[w]hile [the FMLA] says that employees must prove impairment of their statutory rights and resulting harm, the Secretary’s regulation instructs the courts to ignore this command.”


The Court invalidated the penalty set forth in § 825.700(a) on additional grounds as well.  Specifically, in passing the FMLA, Congress decided upon a grant of 12 weeks of FMLA leave as a crucial compromise between the interests of employers who wanted fewer weeks allotted, and the interests of employees who wanted more weeks allotted.  Section 825.700 would “subvert[] the careful balance” struck by Congress in enacting the FMLA by requiring employers to provide more than 12 weeks of FMLA leave as a penalty for an employer’s failure to designate leave as FMLA leave.

Moreover, the Court found that the penalty was “in considerable tension” with Congress’ intent that the FMLA not discourage employers from adopting leave policies that are more generous than those minimum policies set forth in the FMLA.15  For employers who meet the minimum requirements of the FMLA, compliance with the requirement that leave be designated as FMLA leave is quite simple:  all qualifying leave given to the employee must be designated by the employer as FMLA leave.  But the situation is different for employers that offer their employees more generous options – such as leave for family reasons not specified in the FMLA or leave to employees who are not yet eligible for FMLA leave – leave which is not permitted to be designated as FMLA leave.16  These employers must quickly decide at the time leave is requested whether to designate the leave as FMLA leave.  The Court noted that for these generous employers, § 825.700 “imposes a high price for a good-faith but erroneous characterization of an absence as non-FMLA leave.”  The Court feared that employers might simply decide to adopt less generous leave policies as a preferable option due to the ease of compliance with the designation requirement.  The Court invalidated § 825.700, in part, to avoid this undesirable result.


The Ragsdale Dissent
Justice O’Connor – joined by Justices Souter, Ginsburg & Breyer – issued a dissenting opinion based on their belief that the Secretary of Labor was justified in requiring individualized notice to employees and in imposing a remedy which extends the period of leave in the event an employer violated the regulation.  Although the majority of the Court did not rule upon the validity of the Secretary’s regulations requiring individualized notice to employees, the dissent stressed the merits of providing this comprehensive notice to employees, and concluded that nothing in the FMLA precludes the Secretary from requiring individualized notice.


The dissenting justices also disagreed with the Court’s suggestion that the penalty imposed by § 825.700 would exceed the FMLA’s compromise guarantee of 12 weeks of leave.  As the dissent noted, § 825.700 does not require an employer to provide more than 12 weeks of leave – “an employer may avoid this penalty by following the regulation.”  Also, the dissent stressed that requiring employers to provide FMLA designation notice to employees is not onerous, as such notice requires “nothing more than informing the employee of what the employer already knows:  that the leave is FMLA-qualifying.”


Finally, the dissent disagreed with the majority’s view that the penalty imposed by § 825.700 might discourage employers from providing more generous leave policies than the FMLA requires.  Although the FMLA does contain a provision specifying that nothing in the FMLA should be construed to discourage employers from adopting more generous leave policies,17 the dissent viewed this provision as merely “a general interpretive principle.”  It should not, the dissenters reasoned, be relied upon to prevent the Secretary of Labor from crafting “any regulation that might have even a small discouraging effect, no matter how otherwise important.”

Conclusion

The Ragsdale decision reflects a general reluctance by the Supreme Court to punish employers who exceed the minimum leave requirements of the FMLA.  As a result of the Court’s invalidation of § 825.700, an employer who adheres to the FMLA by permitting an employee to take 12 weeks of job-protected leave will not be required to provide additional job-protected leave solely because the employer fails to designate the leave as FMLA leave.  Nevertheless, employers must continue to adhere to still-valid FMLA notice regulations, which require employers to provide to employees notice that details the specific expectations and obligations of an employee who takes FMLA leave, and explains to the employee any consequences of failing to meet those obligations.  Since Ragsdale suffered no prejudice as a result of her employer’s failure to give notice, it remains an open question whether an employee who is prejudiced by the employer’s failure to give notice is able to establish a violation of the FMLA even where the employee received more than 12 weeks of leave.  



1.        107 Stat. 6, as amended, 29 USC § 2601, et seq.
2.        An “eligible employee” means an employee of a covered employer who: (1) has been employed by the employer for at least 12 months;
(2) has been employed for at least 1,250 hours of service during the
12-month period immediately preceding the commencement of the leave; and (3) is employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.  29 CFR § 825.110(a).
3.        29 CFR § 825.100(a).  
4.        29 CFR § 825.209(a).
5.        29 CFR § 825.100(c).
6.        FMLA § 2615(a)(1).
7.        FMLA § 2617(a)(1).
8.        FMLA § 2654.
9.        A “key employee” is one who is among the highest paid 10 percent of the employer’s salaried employees within 75 miles of the worksite.  
29 CFR § 825.217 (1995).
10.        29 CFR § 825.301(b)(1).
11.        Generally speaking, only employers with 50 or more employees are covered by the FMLA.  See 29 CFR § 825.104.
12.        FMLA § 2619(a).  The failure to comply with this general notice requirement subjects the employer to monetary civil penalties.  FMLA § 2619(b).

13.        See 60 Fed.Reg. 2220 (1995).
14.        See FMLA § 2617(a)(1) (citing FMLA § 2615).
15.        § 2653 of the FMLA states that “[n]othing in this Act … shall be construed to discourage employers from adopting or retaining leave policies more generous than any policies that comply with the requirements under this Act.”
16.        See 60 Fed.Reg. 2230 (1995) (“Leave granted under circumstances that do not meet … specified reasons for FMLA-qualifying leave may not be counted against [the] FMLA’s 12-week entitlement.”)
17.        See FMLA § 2653.

Legalese