Why it matters

Can an employee pursue a Title VII and Family Medical Leave Act (FMLA) action where an allegedly discriminatory employment decision was reversed? Yes, the U.S. Court of Appeals, Second Circuit has decided. Alana Shultz had worked for an employer for approximately 11 years when she informed the executive director, just prior to leaving for her honeymoon, that she was pregnant. When she returned, she was informed of her termination, effective a few weeks in the future. But when Shultz’s lawyer reached out to the employer about pursuing a lawsuit, it reinstated her position. Shultz declined to return to work and filed suit instead. A district court granted the employer’s motion to dismiss, but the federal appellate panel reversed. The termination notice itself was an adverse employment action, the court said, and can provide the basis of the action. “Here, the Congregation [employer] did not attempt to rescind the termination for two weeks,” the Second Circuit said. “Shultz thus had ample time to experience the dislocation of losing her employment at a particularly vulnerable time, undertake the effort of retaining counsel, and inform the Congregation that she was going to file suit.”

Detailed discussion

From 2004 to 2015, Alana Shultz worked as the program director of Congregation Shearith Israel in New York City. She was married in June 2015, and just before leaving for her honeymoon, she told the executive director that she was pregnant. The day after Shultz returned from her honeymoon, she was informed that her employment was terminated, effective Aug. 14, as part of a restructuring.

Shultz, who had never before heard about a planned restructuring, believed that the restructuring was a pretextual excuse to terminate her because of the Congregation’s disapproval of the fact that she was pregnant at the time of her marriage. Shultz contacted a lawyer, who informed the Congregation that Shultz intended to pursue claims stemming from her termination. A few days later, the executive director presented Shultz with a letter stating that the Congregation had “reinstated” her position and thus she would not be terminated.

Contending that she was subject to a “pattern and practice of repeat discrimination” in the ensuing weeks by the leaders of the Congregation, Shultz did not return to work and filed suit, alleging that the employer discriminated against her in violation of the Family and Medical Leave Act (FMLA) and Title VII, among other claims.

A district court judge granted the Congregation’s motion to dismiss, and Shultz appealed to the U.S. Court of Appeals, Second Circuit. The panel reversed with respect to her Title VII and FMLA claims, ruling that the notice of termination she received was itself an adverse employment action, despite its later revocation.

The employer argued that no adverse employment action occurs until the job is actually lost, because during the interim period before the firing becomes effective, the employee continues to work in the same position and receive the same pay and benefits.

But the federal appellate panel relied upon the “notice rule” established by the Supreme Court, where a claim becomes actionable on the date the employer notifies the employee he or she is fired—not on the last day of employment.

“The Supreme Court’s conclusion that a discrimination claim accrues upon notice of termination, rather than upon the implementation of that decision, necessarily implies that the notification of termination qualifies as an adverse employment action,” the court wrote. “[T]he conclusion that the notice of termination itself gives rise to a claim follows ineluctably from the Court’s rulings regarding the limitations period, because a limitations period ordinarily commences ‘when the plaintiff has a complete and present cause of action.’”

If the claim accrues at the time of notification, rescission of the notice at a subsequent point “cannot eliminate the adverse employment action that has already occurred, and negate an accrued claim for relief,” the panel added. “Accordingly, we conclude that the notice of termination itself constitutes an adverse employment action, even when the employer later rescinds the termination.”

This does not deprive an employer’s rescission of termination of legal effect, however, with consequences that come into play in the calculation of damages, the court noted. In some cases, the time between a notice of firing and its rescission may be so short as to render the termination de minimis. “An impulsive ‘You’re fired,’ followed immediately by a revocation of the firing, would present different circumstances than those of this case,” the panel wrote.

“Here, the Congregation did not attempt to rescind the termination for two weeks,” the court said. “Shultz thus had ample time to experience the dislocation of losing her employment at a particularly vulnerable time, undertake the effort of retaining counsel, and inform the Congregation that she was going to file suit.”

The court also recognized that its decision applies to a notice of termination and not to less significant employment actions, such as placing a counseling letter in an employee file.

Considering Shultz’s FMLA claim, the panel found “no reason to construe the FMLA differently from Title VII,” similarly reversing dismissal of the claim. The court affirmed dismissal of the plaintiff’s constructive discharge, hostile work environment and retaliation claims, however.

To read the decision in Shultz v. Congregation Shearith Israel, click here.