In the course of negotiating separation agreements, employers often require employees to waive any claims they may have against the employer in return for severance pay and other post-termination benefits. The Fourth Circuit, however, recently ruled that the plain language of a Department of Labor (“DOL”) regulation precludes the waiver of rights under the Family and Medical Leave Act (“FMLA”), including claims for past violations. Taylor v. Progress Energy, Inc., Case No. 04- 1525.

The plaintiff, Barbara Taylor, worked for the defendant, Progress Energy, Inc., as a data management assistant. In 2000, she began to suffer from pain and swelling in her leg. Taylor consulted a doctor, who ordered a week of bed rest. As a result, she missed five days of work. Taylor returned to work, but more tests were ordered, resulting in more time missed from work. Immediately following her initial absence, Taylor inquired as to whether she was eligible for FMLA leave. At first, Taylor was told that she was not eligible for FMLA leave because she had not been absent from work for a long enough period. The doctors ultimately found an abdominal mass that was causing her pain. She underwent surgery and was absent from work for another six weeks. However, Taylor was only credited with four weeks of FMLA leave.

After Taylor’s return to work, Progress Energy terminated her employment due to a poor productivity rating – which she claimed was due to her health-related absences. In exchange for severance pay and other benefits, Taylor signed a severance agreement and release. The agreement released all claims and waived all rights she may have or claimed to have relating to her employment.

Although she signed the release and accepted the severance pay, Taylor filed a lawsuit in a North Carolina federal court alleging that Progress Energy violated the FMLA. Progress Energy countered by arguing that the release signed by Taylor barred her suit. The district court agreed and granted summary judgment in favor of Progress Energy. On appeal, the Fourth Circuit reversed the trial court’s decision. The Fourth Circuit’s reversal was based on the DOL regulation concerning waiver of FMLA rights, which provides: “Employees cannot waive, nor may employers induce employees to waive their rights under FMLA.” (29 C.F.R. § 825.22(d)).

The DOL disagreed with the Fourth Circuit’s interpretation and requested a rehearing to permit the DOL to argue its interpretation of the regulation. The Fourth Circuit granted the rehearing request. In the rehearing, the DOL argued that the word “rights” does not include “claims” and that the DOL’s reading of its own regulation is consistent with the well-accepted policy of encouraging settlement of claims in employment law. Again, the Fourth Circuit disagreed, citing the plain language of the regulation. The Court reasoned that the FMLA provides a minimum floor of protection for employees by guaranteeing that a minimum amount of family and medical leave will be available annually to each covered employee. Thus, according to the appeals court, waiver of such rights would frustrate the purpose of this Act.

Although the Fourth Circuit decision is only binding on employers in North Carolina, South Carolina, Maryland, Virginia, and West Virginia, the court’s reasoning could be applied by courts in other states. Therefore, unless an employer arranges for a court or the DOL to approve a release in advance, employers risk having to litigate FMLA claims raised by an employee who has signed a waiver or release and accepted the monetary consideration given in return for signing the release. This is the type of issue that we expect will “soon” be resolved by the U.S. Supreme Court – particularly since other courts and the U.S. Department of Labor disagree with the Fourth Circuit. Unfortunately, when it comes to getting a decision from the Supreme Court, “soon” is likely to be at least a year away.