• Employee Who Receives Disability Pay During FMLA Leave May Not Be Required to Use Vacation or Sick Leave
  • June 1, 2007 | Author: S. Richard Pincus
  • Law Firm: Holland & Knight LLP - Chicago Office
  • The Family and Medical Leave Act (FMLA) attempts to balance employees’ needs for leave to address family or medical issues with employers’ needs to run their businesses. One way the FMLA strikes this balance is by generally allowing employers to force an employee on unpaid FMLA leave to use up any paid time off, including sick or vacation leave. This rule prohibits employees from taking paid leave in addition to 12 weeks of FMLA leave.

    A recent decision of the United States Court of Appeals for the Seventh Circuit reminds employers of an important limitation on this right. The Court ruled that a Department of Labor regulation prohibits an employer from requiring an employee to use sick or vacation pay while on an FMLA leave for which she is also receiving paid benefits under a short-term disability plan or workers’ compensation. Repa v. Roadway Express, Inc., 477 F.3d 938 (7th Cir. 2007).

     

    Legal Background

    The FMLA guarantees qualifying employees up to 12 weeks of medical leave each year. Even though FMLA leave is generally unpaid, the “employee may elect, or an employer may require the employee, to substitute any of the accrued paid vacation leave, personal leave, or family leave of the employee for leave provided” under the FMLA. In other words, employers can generally require employees to use up their paid vacation, sick or personal leave during their FMLA leave.

    However, a regulation issued by the Department of Labor, 29 C.F.R. § 825.207(d)(1), limits employers’ rights to require employees to substitute paid sick leave and vacation when the employees are receiving paid disability benefits under a temporary disability benefit plan. It states:

    Disability leave for the birth of a child would be considered FMLA leave for a serious health condition and counted in the 12 weeks of leave permitted under FMLA. Because the leave pursuant to a temporary disability benefit plan is not unpaid, the provision for substitution of paid leave is inapplicable. However, the employer may designate the leave as FMLA leave and count the leave as running concurrently for purposes of both the benefit plan and the FMLA leave entitlement. If the requirements to qualify for payments pursuant to the employer’s temporary disability plan are more stringent than those of FMLA, the employee must meet the more stringent requirements of the plan, or may choose not to meet the requirements of the plan and instead receive no payments from the plan and use unpaid FMLA leave or substitute available accrued paid leave.

    29 C.F.R. § 825.207(d)(1). The regulation also provides: “As the workers’ compensation absence is not unpaid leave, the provision for substitution of the employee’s accrued paid leave is not applicable.” 29 C.F.R. § 825.207(d)(2).

     

    The Repa Decision

    Roadway is a commercial trucking company that has a collective bargaining agreement (CBA) with the International Brotherhood of Teamsters. That agreement establishes a multi-employer welfare plan that provides short-term disability benefits to Roadway employees who are “disabled and cannot work” due to an injury incurred outside of work.

    Diane Repa, a Roadway employee, suffered a non-work-related injury that required surgery and a six-week absence from work. She applied for and was granted short-term disability benefits under the CBA, and received $300 per week for six weeks. The same day she applied for disability benefits, Repa notified Roadway of her need for FMLA leave for the same six-week period. Roadway granted Repa’s FMLA leave request and told her that she was required to “substitute any accrued paid leave for any unpaid FMLA leave.” Upon Repa’s return from leave, Roadway paid her for five sick days and two weeks of vacation, and deducted those amounts from her leave banks.

    Repa sued, alleging that Roadway had violated the FMLA by requiring her to use her sick and vacation leave days when she was receiving disability benefits during her FMLA leave.

    The United States Court of Appeals for the Seventh Circuit agreed with Repa. Relying on the DOL regulation cited above, it ruled that Roadway violated the FMLA and had to restore her vacation and sick leave eligibility, and pay her attorneys’ fees as well. The Court rejected Roadway’s argument that the regulation applied only to disability leave for the birth of a child, and not to Repa’s situation. Although the first sentence of the regulation focuses on “disability leave for the birth of a child,” the remainder of the regulation addresses temporary disability plans. Nothing limits the regulation’s clear statement that “[b]ecause the leave pursuant to a temporary disability benefit plan is not unpaid, the provision for substitution [of paid leave] is inapplicable.”

    The Court also disagreed with Roadway’s contention that the regulation applies only to leave benefits paid by an employer’s own temporary disability benefit plan and not a third-party plan such as the Teamsters’ plan. Stating that “[n]othing in the second sentence of the regulation limits this outright prohibition [of substitution of paid leave] to where the temporary disability benefit plan is the employer’s plan,” the Court ruled that the fact that a third party manages the plan is irrelevant.

    Roadway also argued that the regulation impermissibly contradicted the FMLA in two ways and was therefore invalid. First, because the FMLA itself places no limits on an employer’s right to require an employee to use paid leave during a period of FMLA leave, the regulation could not add any limits. Second, by allowing employees to retain their paid leave, the regulation effectively permits employees to extend their FMLA leave beyond the 12 weeks Congress provided.

    The Seventh Circuit refused to address these arguments, finding that Roadway had lost the right to assert them. Because Roadway had not challenged the regulation’s validity in the trial court, “Roadway waived its right to challenge its validity on appeal.” As a result, the Court “express[ed] no opinion regarding this regulation’s validity and [left] that question for another case.”

     

    Significance

    The Seventh Circuit’s decision is a wake-up call for employers who offer paid short-term disability plans to their employees. It means that if employees are receiving such short-term disability benefits while on FMLA leave, they cannot also be required to use other paid leave. It also means that employees on an FMLA leave that also qualifies for paid workers’ compensation leave cannot be forced to use their other paid leave.

    There may be a silver lining, though – in the right case, the Seventh Circuit may very well find the regulation at issue invalid. When courts state that they “express no opinion about” an issue and “leave that question for another case,” it can be a signal that they will accept the argument if it is properly made. The argument that the regulation imposes improper limits on employers’ rights to require employees to use paid leave has force. The Supreme Court invalidated another FMLA regulation that forbade employers from counting leave against an employee’s 12-week FMLA allotment unless they told the employee in advance that the leave would be treated as FMLA leave, finding that the regulation impermissibly extended employees’ FMLA leave eligibility beyond the 12 weeks Congress intended.

    For now, though, employers need to assume that the DOL regulation applies. If employees are receiving short-term disability benefits or workers’ compensation benefits during a period of FMLA leave, you should not require them to use other paid leave.