Employers routinely include releases of Family & Medical Leave Act (FMLA) claims in separation agreements with departing employees. Last week, the Fourth Circuit ruled that those releases are no longer valid with respect to claims under the FMLA unless the parties get Department of Labor (DOL) or Court approval. See Taylor v. Progress Energy, Inc. (Taylor II), -- F3d --, No. 14-1525 (4th Cir. July 3, 2007).

The DOL-promulgated FMLA regulations include a provision that “Employees cannot waive, nor may employers induce employees to waive, their rights under FMLA.” 29 C.F.R. § 825.220(d). The DOL narrowly interprets this provision to prohibit only prospective waivers, and endorses release of retrospective FMLA claims. In a surprising move, however, the Fourth Circuit Court of Appeals, rejected this view, and interpreted the regulation to allow releases of FMLA claims only with DOL or Court approval.

The plaintiff in Taylor missed a number of days of work due to pain and swelling in her leg. After a barrage of tests, she ultimately was diagnosed with an abdominal mass, and underwent surgery to remove the mass. Her employer refused to grant the plaintiff FMLA leave for any of her pre-surgery absences, and granted FMLA leave for only four of the six weeks she was out following the surgery. The plaintiff was then given a poor productivity rating and a lower-than-average pay increase because of her health-related absences. Five months after her surgery, the plaintiff was laid off as a part of a reduction in force. She signed a severance agreement that included a general release of claims in return for approximately $12,000 in severance benefits. The plaintiff then brought suit against her former employer alleging violations of the FMLA.

The District Court granted the employer’s motion for summary judgment based on the release the plaintiff had signed. In 2005, in the first Taylor decision, the Fourth Circuit Court of Appeals reversed the summary judgment order, holding that the release the plaintiff had signed was unenforceable with respect to the plaintiff’s FMLA claims based on the DOL regulation prohibiting employees from waiving their FMLA rights. Taylor v. Progress Energy, Inc. (Taylor I), 415 F.3d 364 (4th Cir. 2005).

The Fourth Circuit vacated this decision in 2006, and re-heard the case on October 25, 2006. The DOL participated in the rehearing as amicus curiae, arguing that the regulations only prohibit prospective waivers, and that an employee may release past FMLA claims without DOL or Court approval. The DOL also argued that requiring DOL or Court oversight would overly burden courts and the DOL and needlessly delay settlements, and that prohibiting retrospective waivers violates public policy which encourages the settlement of claims.

Just last week, the Fourth Circuit reinstated its earlier opinion in Taylor I, rejecting the DOL interpretation as contrary to the plain language of the regulation and to the DOL’s own earlier position. Taylor v. Progress Energy, Inc. (Taylor II), -- F3d --, No. 14-1525 (4th Cir. July 3, 2007). The Court noted that public policy does not permit settlement or waiver of claims where it would “thwart the legislative policy which [the employment law] was designed to effectuate." Id. at 8. The Court then found that permitting FMLA settlements could undermine the entire statute because the cost to the employer of complying with the FMLA could be greater than the cost of settling claims when benefits are denied, giving employers an incentive to deny FMLA benefits. The Court then compared the FMLA to the Fair Labor Standards Act (FLSA), where DOL or Court approval of settlements is required to ensure that employers are not advantaged by refusing to comply with the law, and held that DOL or Court approval is similarly required of FMLA settlements.

What Other Circuits Have Said

The only other Circuit Court to specifically rule on this issue is the Fifth Circuit, which upholds retrospective releases of FMLA claims absent DOL or Court approval. See Faris v. Williams WPC-I, Inc., 332 F.3d 316 (5th Cir. 2003). In Faris, the Fifth Circuit interpreted the DOL waiver of rights regulation to apply only to current employees and substantive rights, such as the right to receive FMLA leave and the right to be free from retaliation for seeking or obtaining FMLA benefits, but did not apply to the right to bring a claim for damages such that departing employees could fully release FMLA claims. The Sixth Circuit and Ninth Circuit Courts of Appeals have also upheld waivers of FMLA claims without discussing the DOL regulation relied on by the Fourth Circuit in Taylor. See Halvorson v. Boy Scouts of America, 2000 U.S. App. LEXIS 9648 (6th Cir. May 3, 2000); Schoenwald v. Arco Alaska, Inc., 1999 U.S App. LEXIS 20955 (9th Cir. Aug. 30, 1999). A number of District Courts, however, including district courts in New Jersey, Oregon and Pennsylvania, have followed the lead of Taylor I, invalidating releases of FMLA claims contained in severance agreements. No reported cases in the District of Minnesota or the Eighth Circuit have addressed this issue.

Practical Implications

While the Eighth Circuit has not specifically addressed the issue, it is worth keeping the Taylor II decision in mind. Employers should exercise some caution when settling claims with current employees or obtaining releases where there is a strong risk that the individual in question might pursue a claim under the FMLA. Whenever FMLA claims are included in a release, the release should also have a severability clause to ensure validity of the remaining provisions, even if the FMLA release is later called into doubt. Finally, where an FMLA claim has already been filed or presents the risk of substantial exposure, an employer may want to consider seeking judicial approval of any proposed settlement.