Under the Family and Medical Leave Act eligible employees are guaranteed 12 weeks of unpaid leave in a one-year period following certain events, including the birth or adoption of a child, or their own or a family member's serious health condition. Department of Labour regulations require a covered employer to inform an eligible employee in writing that his or her leave is to be considered Family and Medical Leave Act leave, and provide detailed information concerning the employee's rights and responsibilities under the act. Section 825.700(a) of the regulations also provides:
"If an employee takes paid or unpaid leave and the employer does not designate the leave as [Family and Medical Leave Act] leave, the leave taken does not count against an employee's [Family and Medical Leave Act] entitlement."In Ragsdale v Wolverine World Wide, Inc, 122 S Ct 1155 (2002) the US Supreme Court tackled the issue of whether the imposition of this penalty on account of an employer's failure to designate FMLA leave is consistent with the statute.
In Ragsdale the employee was diagnosed with Hodgkin's disease. She requested and received a one-month leave of absence pursuant to her employer's leave plan, and thereafter requested and received a 30-day extension of leave at the end of each of the next six months. The employer held the employee's position open during this seven-month period, but failed to notify her that 12 weeks of the absence would count as Family and Medical Leave Act leave. After the end of the seventh month the employee sought another 30-day extension. The employer advised her that she had exhausted the seven months of leave permitted under the company plan and rejected her requests for more leave or permission to work on a part-time basis. When the employee failed to return to work, her employment was terminated.
Thereafter, the employee filed suit. She claimed that she was entitled to reinstatement, backpay and other relief because the employer had not made the required designation of Family and Medical Leave Act leave. Accordingly, she argued, the 30 weeks she had taken did not count against her Family and Medical Leave Act entitlement and she should have been entitled to an additional 12 weeks of leave. The employer asserted that it had fully complied with the act by providing the employee with 30 weeks' leave, substantially more than the 12 weeks required under the statute.
The Supreme Court held that Section 825.700(a) is contrary to the Family and Medical Leave Act and beyond the Department of Labour's authority, finding that "the categorical penalty is incompatible with the Family and Medical Leave Act's comprehensive remedial mechanism". The court based its decision on the fact that the regulations punish an employer for its failure timely to notify an employee of the Family and Medical Leave Act designation without any demonstration by the employee of prejudice suffered from the employer's mistake. As the court noted, the plaintiff in Ragdale was unable to work for substantially longer than the 12 weeks afforded by the act (indeed, she was not cleared for work by her doctor until well after the 30-week leave period had ended), and even if the employer had complied with the notice regulations, the employee would still have taken the entire 30-week absence. The court also expressed a concern that the penalty imposed by Section 825.700(a) would discourage employers (like the employer in Ragsdale) from providing more generous leave policies than the statute requires.
Employees would likely consider the Ragsdale judgment as a decision where "bad facts made bad law". Indeed, it is possible that Section 825.700(a) might have been upheld by the Ragsdale court if the employee had been able to show prejudice in not receiving Family and Medical Leave Act designation of her leave by demonstrating that she would have been able to return to work after 12 weeks (perhaps by deterring or foregoing a course of treatment), especially in light of the five to four split in the Supreme Court. Moreover, the Supreme Court expressly noted that it was not deciding
"whether the notice and designation requirements [contained in the Family and Medical Leave Act regulations] are themselves valid or whether other means of enforcing them might be consistent with the statute."It is likely that that the Department of Labour will craft a regulation that provides for consideration of the individual facts and circumstances of a particular case, and thus seek to address the court's concern with the automatic penalty imposed by Section 825.700(a). Accordingly, covered employers should continue to comply with the notice and designation requirements by informing eligible employees in writing that their leave is to be considered Family and Medical Leave Act leave, as well as providing detailed information concerning the employee's rights and responsibilities under the act. For the time being, however, the drastic penalty for non-compliance has been ameliorated.
For further information on this topic please contact Kevin B Leblang or Robert N Holtzman at Kramer Levin Naftalis & Frankel LLP by telephone (+1 212 715 9100) or by fax (+1 212 715 8000) or by email ([email protected] or [email protected]).