In Waag v. Sotera Def. Sols., Inc., 857 F.3d 179 (4th Cir. 2017), the United States Court of Appeals for the Fourth Circuit ruled an employee who takes leave under the Family Medical Leave Act (“FMLA”) does not have an absolute right to return to his/her original position and as long as the employee is reinstated to an “equivalent” position, the requirements of the statute are satisfied. The court’s decision in Waag illustrates that determining what constitutes an “equivalent” position can be a fact intensive analysis and it sheds light on what employers should consider when reinstating an employee to a different position than the one he/she had before taking FMLA leave.

In September 2012, Sotera Defense Solutions, Inc. (“Sotera”), was selected as a non-exclusive prime contractor for the Software and System Engineering Services Next Generation (“NexGen”) program to provide warfighting software solutions and support to the United States Army at the Aberdeen Proving Ground in Maryland. In early October 2012, Gary Waag (“Waag”) was asked to become the Program Manager (“PM”) for Sotera’s NexGen work because he had experience managing indefinite delivery/indefinite quantity (“IDIQ”) contracts. Since the PM position was focused mainly on marketing and business development, Waag’s salary was not directly billable to the government and, instead, it was paid out of Sotera’s overhead costs.

On October 17, 2012, Waag sustained a severe hand injury and took medical leave under the FMLA. Sotera appointed another employee to be the new NexGen PM because Waag was unable to return to work until mid-December or early January 2013. When Waag returned from leave in late December 2012, he was assigned to work at Sotera’s new Electronic Warfare Program (“EWP”), which involved modeling and simulation. Waag had experience in these areas and spent most of his time in January 2013 on the EWP Management Trainer proposal, which involved a $70-80 million contract. The proposal was submitted in February 2013.

Shortly after Waag began his medical leave, the federal government implemented substantial budget cuts under its federal budget sequestration program. As a result, Sotera received substantially less work from the federal government and missed its 2012 revenue goal by $110 million. In turn, Sotera needed to cut $2.3 million from its overhead costs and it achieved that by laying off some of its employees. Sotera laid off “employees who were not performing work directly billable to the government, and ‘who were assigned to less important strategic priorities.”’ Waag was among the employees laid off in February 2013.

Waag filed suit in federal court in Virginia claiming “Sotera violated his FMLA rights (1) by failing to restore Waag ‘to the same position’ after he returned from medical leave, (2) by failing to restore him to a ‘bona fide equivalent position,’ and (3) by ‘terminating his employment.’” The district court granted Sotera’s motion for summary judgment. Waag appealed.

To support his first argument, Waag relied on 29 C.F.R. § 825.214, which provides:

On return from FMLA leave, an employee is entitled to be returned to the same position the employee held when leave commenced, or to an equivalent position with equivalent benefits, pay, and other terms and conditions of employment. An employee is entitled to such reinstatement even if the employee has been replaced or his or her position has been restructured to accommodate the employee's absence.

In response to Waag’s argument that he was not reinstated to his original position, the Fourth Circuit explained the “[FMLA’s] restoration provision does not indicate a preference for restoring covered employees to their pre-leave positions over ‘equivalent’ positions, and it does not require an employer to hold open an employee's original position while that employee is on leave.” The Fourth Circuit also rejected Waag’s reliance on § 825.214, stating the regulation is consistent with the FMLA because “[t]he phrase ‘such reinstatement’ refers to the reinstatement mentioned in the previous sentence of the regulation—reinstatement ‘to the same position the employee held when leave commenced,” or reinstatement ‘to an equivalent position.’” (emphasis in original).

With respect to Waag’s second argument about not being reinstated to an equivalent position, the Fourth Circuit explained, “[t]he equivalency requirement . . . does not extend to de minimus, intangible, or unreasonable aspects of the job.” The Fourth Court reiterated the district court’s findings that Waag’s salary for both jobs was $189,000, he was eligible for bonuses in both positions, his worksite was the same as before, his title was “Senior Director” for both positions, and he reported to a Sotera Vice President in both positions. In trying to show that the positions were not equivalent, Waag pointed to a “47-item Action List” that indicated numerous job duties of the NexGen PM position were not related to business development. The Fourth Circuit disagreed, stating “these duties were conditional [and] Waag would have performed them only after Sotera had successfully bid for a NexGen task order.” However, because “the government did not award any NexGen task orders until early 2014, these were not duties that Waag was performing before taking medical leave or could have performed after returning from leave.” Waag also pointed to a number of other alleged differences between the positions that the court found unpersuasive. The Fourth Circuit also commented that “[t]o the extent Waag complains about a loss of prestige, such a difference is de minimis and would not prevent Waag’s post-leave position from being considered equivalent to his original one.” Under these circumstances, the Fourth Circuit found “no reasonable factfinder could conclude that Sotera failed to place Waag in ‘an equivalent position’ or that the difference between the two jobs were more than merely de minimus.”

The Fourth Circuit also rejected Waag’s third argument that his FMLA rights were violated because Sotera restored him to a “sham position [under 29 C.F.R. § 825.216(a)(1)], created to make it appear that Waag had been restored to an equivalent position but that in actuality was slated for elimination.” The Fourth Circuit concluded “no reasonable juror would believe . . . that Wagg was put in a short-term sham job to cover Sotera’s decision to fire Waag when he returned from leave.”

Lastly, the Fourth Circuit rejected Waag’s retaliation claim because “Sotera established a legitimate non-discriminatory reason for terminating Waag[,]” namely that “the ‘financial hardship’ resulting from government sequestration forced Sotera to lay off numerous employees, of which Waag was one.” The Fourth Circuit explained even though “close temporal proximity” between Waag’s medical leave and him being laid off “may suffice to demonstrate causation[,]” for a retaliation claim, Waag “still ‘bears the burden of establishing that Soterra’s proffered explanation is pretext for FMLA retaliation.” The Fourth Circuit found “no genuine issue of material fact ‘such that a reasonable factfinder could conclude the adverse employment action was taken for an impressable reason, i.e. retaliation.”

The Fourth Circuit’s decision in Waag is important for a few reasons. First, it dispels a common misconception about the FMLA that companies must restore employees to the same position after they return from FMLA leave. Companies have the option to restore an employee returning from FMLA leave to the same positon or an equivalent position. Second, Waag illustrates how determining what constitutes an “equivalent” position under the FMLA can be a fact intensive analysis and it sheds light on what companies should consider when reinstating an employee to a different position than the one he/she occupied before taking FMLA leave.