Applying an “economic reality” test derived from the Fair Labor Standards Act (FLSA), the US Court of Appeals for the Second Circuit recently ruled that an HR Director could be held personally liable for violations of the Family and Medical Leave Act (FMLA). Graziadio v. Culinary Inst. of Am., No. 15-888 (2nd Cir.3/17/16) In so holding, the Second Circuit followed the reasoning of three other federal appeals courts.

Facts

Cathleen Graziadio worked as a Payroll Administrator at the Culinary Institute of America (CIA). On June 6, 2012, Graziadio's seventeen- year-old son, Vincent, was hospitalized as a result of previously undiagnosed Type I diabetes, and Graziadio promptly informed her supervisor, Loreen Gardella, that she would need to leave work to take care of him. Seeking to have her absence designated as leave under the FMLA, she asked Mary Maffia, the payroll employee who processed FMLA documentation, to provide her with any necessary FMLA paperwork, which Maffia forwarded later that day. Graziadio returned to work on June 18, 2012, and, on or about June 27, 2012, submitted a medical certification supporting her need for leave to care for Vincent.

That same day, Graziadio's twelve-year-old son, T.J., fractured his leg playing basketball and underwent surgery for the injury. Again, Graziadio promptly notified Gardella that she would need immediate leave to care for her son and that she expected to return the week of July 9, "at least part time." When July 9 arrived, Gardella asked for an update on Graziadio's return, to which Graziadio responded that she would need to work a reduced, three-day week schedule until mid-to-late August and could return on Thursday, July 12, if that schedule was approved. She also asked, as she had in prior emails to Gardella, if there was "any further documentation that [CIA] may need from me." At this point, Gardella reached out to Shaynan Garrioch, CIA's Director of Human Resources, concerning Graziadio's request and the appropriate response to it.

Despite numerous calls and emails by Graziadio seeking to find out when she could resume work, neither Gardella nor Garrioch responded to Graziadio until July 17. Garrioch then sent Graziadio a letter stating that Graziadio's FMLA paperwork did not justify her absences from the workplace and that Graziadio must "provide updated paperwork to this office which addresses this deficiency." Garrioch also noted that Graziadio "ha[d] continued to be absent from the workplace due to the health condition of another one of [her] children" and that she would "also need to submit paperwork for this time off from work as well." Garrioch added that this paperwork had to be submitted within seven days for Graziadio's absences to be approved.

On getting this letter, Graziadio sent Garrioch a series of emails attempting to explain her situation and to determine what "paperwork" CIA wanted. She noted that she had repeatedly "asked if [CIA] would need further paperwork regarding [T.J.'s] accident to take the time off" but had "not received any reply to any of these emails and phone calls," and that she was "not clear on what paperwork you would like me to obtain," as she had not received any FMLA forms from CIA to be given to T.J.'s doctor. She also stated her intention to contact T.J.'s doctor "to obtain a note for the three days a week reduced schedule," "under the assumption that this will be enough paperwork" because she "ha[d] not heard from the CIA regarding what paperwork they specifically want." Lastly, Graziadio made clear that she planned to return to work the following week on that reduced schedule.

Garrioch insisted on meeting with Graziadio personally, and the two women exchanged several emails about such a meeting. Ultimately, no one set a time for a meeting, and Graziadio, facing persistent involuntary leave, retained an attorney. Her lawyer, Joseph Ranni, sent a letter to CIA's president on August 7, in which he reiterated that Graziadio wanted to return to work but could not do so because Garrioch found her FMLA documentation deficient and would not identify what other documentation was required. On August 30, 2012, Ranni had a conversation with CIA's counsel, in which, according to Ranni, "CIA continued to take the position that Ms. Graziadio would not be returned to work because she had not provided sufficient support to justify her absences" and insisted that "it was not the employer's obligation to explain what was missing from the paperwork and instead that it was Ms. Graziadio's obligation to comply with the statute." CIA also advised that it "would no longer communicate with Ms. Graziadio and all communications must occur between counsel."

Later that day, CIA's attorney sent Ranni a follow-up email. It began by affirming that CIA's "understanding is that Ms. Graziadio wants to return to work," and stating that if Graziadio wanted to return to work, "she must contact her supervisor to arrange for her return to work." However, "[i]n the event Ms. Graziadio wants to return to work," it continued, "I also want to make perfectly clear Ms. Graziadio's obligation to submit FMLA medical certifications." It then proceeded, for two paragraphs, to reiterate the alleged deficiencies in the medical documentation provided and to demand that Graziadio "provide two sufficient and complete FMLA medical certification forms" "by Monday," four days hence. Ranni claims that, because he was being hospitalized for injuries sustained in a motorcycle accident, he did not see the email until September 4, at which point he and Graziadio began to formulate a response.

CIA fired Graziadio one week later. On September 11, 2012, before Graziadio had responded to CIA's email, Garrioch sent Graziadio a letter announcing that she had been terminated for abandoning her position. Garrioch explained that Graziadio had been asked "through your attorneys . . . to return to work and to contact your supervisor to arrange a return to work date. . . . Based on the fact that you have not contacted your supervisor to arrange to return to work as of the date of this letter, it is obvious to us that you do not want to return to work." Accordingly, CIA was "processing an administrative termination of your employment effective as of the date of this letter."

Graziadio subsequently filed a complaint in the Southern District of New York, bringing claims against CIA, Garrioch, and Gardella for interference with FMLA leave, FMLA retaliation, and associational discrimination under the Americans with Disabilities Act (ADA) Defendants moved for summary judgment on all claims and, on March 20, 2015, the district court granted their motion in full. That decision was appealed.

Second Circuit Holds HR Director May Be Liable

On appeal, among other issues, Graziadio challenged the district court's conclusion that Garrioch does not constitute an "employer" under the FMLA and therefore cannot be held individually liable. The Court agreed with Graziadio that questions of material fact remain as to Garrioch's authority.

An individual may be held liable under the FMLA only if she is an "employer," which is defined as encompassing "any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer," 29 U.S.C. § 2611(4)(A)(ii)(I) ; see also 29 C.F.R. § 825.104(d). Several other circuits, as well as district courts within the Second Circuit, have observed that the FMLA's definition of "employer" largely tracks the definition of "employer" used in the Fair Labor Standards Act (FLSA), 29 U.S.C. § 203(d), and have come to the conclusion that the standards used to evaluate "employers" under the FLSA should therefore be applied to govern the FMLA as well.

Under this test, courts ask "whether the alleged employer possessed the power to control the worker[] in question, with an eye to the 'economic reality' presented by the facts of each case." To do so, they consider "a nonexclusive and overlapping set of factors," intended to "encompass[] the totality of circumstances." These factors include "whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records." "No one of the four factors standing alone is dispositive . . . [and] any relevant evidence may be examined so as to avoid having the test confined to a narrow legalistic definition." The Second Circuit observed that, In the FMLA context, courts assessing the economic reality of an employment relationship have construed this test as asking essentially whether the putative employer "controlled in whole or in part plaintiff's rights under the FMLA."

The district court dismissed Garrioch as a defendant, ruling that her relationship to Graziadio satisfied none of the listed factors. Instead, it found that Garrioch lacked meaningful "power to hire and fire" because Richard Mignault, CIA's Vice President of Administration and Shared Services, retained ultimate termination authority. And it further stated that Graziadio had "proffered no evidence . . . demonstrating that Garrioch supervised or controlled employee work schedules or conditions of employment, determined the rate and method of employee payment, or maintained employment records."

The Second Circuit concluded, however, that this analysis overlooks substantial evidence from which a rational trier of fact could find that Garrioch was an "employer" in economic reality and under the FMLA.

First, while termination authority formally rested with Mignault, Garrioch appeared to have played an important role in the decision to fire Graziadio. Mignault admitted, for instance, that he conducted no independent investigation concerning Graziadio's leave dispute, but merely "directed th[e] issue to Ms. Garrioch for handling." In addition, Garrioch herself described Graziadio's termination as a joint "decision that was made between myself and Richard Mignault."

Second, Graziadio presented evidence that Garrioch, as Director of Human Resources, exercised control over Graziadio's schedule and conditions of employment, at least with respect to her return from FMLA leave. Specifically, both Gardella and Maffia testified that Human Resources, and Human Resources alone, handled any employee's return to work after FMLA leave or that required work accommodations.

According to the Court, neither party put forward evidence concerning the rate and method of payment. And the maintenance-of-records factor does cut against finding Garrioch an employer, as the routine administration of FMLA leave was handled by the payroll department and, in particular, by Maffia. The Court observed, however that “on the overarching question of whether Garrioch ‘controlled plaintiff's rights under the FMLA,’ there seems to be ample evidence to support the conclusion that she did.” Deposition testimony and email exchanges demonstrated “a) that Garrioch reviewed Graziadio's FMLA paperwork, b) that she determined its adequacy, c) that she controlled Graziadio's ability to return to work and under what conditions, and d) that she sent Graziadio nearly every communication regarding her leave and employment (including the letter ultimately communicating her termination).”

Given all this evidence, the Court concluded that “a rational jury could find, under the totality of the circumstances, that Garrioch exercised sufficient control over Graziadio's employment to be subject to liability under the FMLA.” It therefore vacated the district court's dismissal of FMLA claims against Garrioch.

Takeaways

It is unclear whether ultimately Graziadio will be considered an employer subject to personal liability in this case. And even if she is, her employer may fully indemnify her and provide her with a defense. At a minimum, however, the case is an important reminder that HR directors and other managers can be pulled into litigation as individual parties in this and other types of employment litigation. And, sharp email exchanges, strong letters and pointed conversations may be used as evidence to attempt to show that the manager had an improper motive, which can subject both the manager and the employer to potential liability.