• U.S. Supreme Court Issues Two Decisions of Importance to Employers
  • May 8, 2003
  • Law Firm: Orrick, Herrington & Sutcliffe LLP - San Francisco Office
  • Earlier this week the United States Supreme Court issued two very important decisions for employers. One involved the employer's duty to designate leaves as FMLA leaves and the other the timeliness of discrimination charges filed with the EEOC. This Alert summarizes these cases and explains the practical implications of the High Court's rulings.

    High Court Rules Against Department of Labor Regulation Concerning an Employee's FMLA Leave

    Tuesday, in a sharply divided opinion, the United States Supreme Court determined that a employer's failure to notify an employee that his or her leave is designated as Family and Medical Leave Act (FMLA) leave may still be counted as FMLA leave in Ragsdale v. Wolverine World Wide, Inc., 2002 WL 416011 (2002). The Ragsdale decision invalidates a Department of Labor (DOL) regulation, which provides that whenever an employer fails to notify an employee that the employee's leave is FMLA leave, the leave taken cannot count towards the employee's 12 weeks of FMLA leave entitlement. See 29 C.F.R. § 825.700(a). The Supreme Court held that the DOL regulation is incompatible with the FMLA's remedial mechanism, impermissibly extends the employer's leave obligations beyond the 12 weeks specified by the FMLA, and discourages employers from adopting more generous leave policies.

    The Facts of the Case

    Tracy Ragsdale was an employee of Wolverine, a maker of various brands of footwear, including Hush Puppies and Caterpillar work boots and shoes. When Ms. Ragsdale contracted Hodgkin's disease, she requested leave for her surgery and for subsequent radiation therapy. She was eligible for seven months of unpaid sick leave under Wolverine's leave plan. She requested and received a one-month leave of absence in February 1996, and then requested and received a 30-day extension at the end of each of the seven months that followed. Her position was held open throughout her leave, and Wolverine maintained her health benefits and paid her premiums during the first six months of her absence. However, Wolverine did not notify Ms. Ragsdale that 12 weeks of the absence would count as her FMLA leave.

    When in September Ms. Ragsdale sought a seventh 30-day extension, Wolverine advised her that she had exhausted her seven months of leave under the company plan and that 12 weeks of that leave were also counted as FMLA leave. Wolverine refused to further extend Ms. Ragsdale's leave and terminated her employment when she did not return to work.

    The Pertinent Regulations and the Parties' Contentions

    The DOL regulations require an employer to notify an employee that an absence will be considered FMLA leave. Employers must give written notice of the designation, along with detailed information concerning the employee's rights and responsibilities, within a reasonable time after the employee requests a leave. See 29 C.F.R. § §825.208(a), 825.301(c). The penalty for failure to give the proper notification is set forth in a separate regulation, 29 C.F.R. section 825.700(a) (the "penalty provision"). The penalty provision states: "If an employee takes paid or unpaid leave and the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee's FMLA entitlement."

    Relying on the penalty provision, Ms. Ragsdale claimed that she was denied FMLA leave to which she was entitled. Since Wolverine had not provided her the required notice and designation that her leave was FMLA leave, Ms. Ragsdale argued that her 30 weeks of leave did not count toward her FMLA entitlement. Thus, according to Ms. Ragsdale, at the time of her termination she was still entitled to 12 more weeks of leave under the FMLA.

    Wolverine conceded that it had not given Ms. Ragsdale specific notice that part of her leave would count as FMLA leave. Nonetheless, Wolverine maintained that it had complied with the FMLA by giving Ms. Ragsdale 30 weeks of leave, which was more than twice what the FMLA required. To the extent the DOL's penalty provision would mandate any additional leave, Wolverine argued that the penalty provision is contrary to the FMLA and, hence, invalid.

    The Court Invalidates the Penalty Regulation

    The Supreme Court held that the penalty provision is invalid, principally for three reasons.

    First, the Court noted that the penalty provision punishes the employer by automatically denying it any credit for leave granted before the notice, a penalty "unconnected to any prejudice the employee might have suffered from the employer's lapse." Indeed, under the penalty provision, the employer would be required to provide additional leave even if, despite the lack of written notice, the employee had full knowledge of the FMLA and expected the absence to count against the 12-week entitlement. This "categorical penalty" is "incompatible with the FMLA's comprehensive remedial mechanism," which requires an employee, to prevail in a FMLA claim, to prove that the employer interfered with, violated, or restrained her right to FMLA leave and that the employee has been prejudiced by the violation. See 29 U.S.C. §§ 2615-2617.

    The Court acknowledged that there may be instances in which an employer's failure to notify does in fact impact FMLA rights and prejudice the employee. For example, an employee who qualified for intermittent leave under the FMLA might take all of her FMLA leave at once, although able to work during a portion of that period, because she did not know her rights to intermittent leave. However, noted the Court, the categorical imposition of a penalty, without proof that the employee's rights have been violated or the employee has been prejudiced, constitutes an impermissible "end run" around the statute's remedial scheme. In effect, the penalty provision creates "an irrebutable presumption that the employee's exercise of FMLA rights was impaired -- and that the employee is entitled to 12 more weeks." That presumption, the Court explained, has no empirical or logical basis, as the facts of the case demonstrate. Ms. Ragsdale could not show that she would have taken more or less leave or intermittent leave if she had received the required notice. To the contrary, since Ms. Ragsdale's physician did not clear her to work until long after her 30-week leave period, even if Wolverine had complied with the notice regulations, Ms. Ragsdale still would have taken the entire 30-week absence. "Blind to this reality," the penalty provision would nonetheless require Wolverine to grant another 12-weeks leave, even though the failure to notify had absolutely no effect on Ms. Ragsdale's exercise of FMLA rights. According to the Court, the penalty provision thus "alters the FMLA's cause of action in a fundamental way: It relieves employees of the burden of proving any real impairment of their rights and resulting prejudice."

    Second, the Court noted, the penalty provision impermissibly "amends the FMLA's most fundamental substantive guarantee -- the entitlement to 'a total of 12 workweeks of leave during any 12-month period.'" This 12-week period was the result of Congress' careful balancing of the competing interests of employees and employers. The penalty provision "subverts the careful balance" by extending to certain employees a right to more than 12 weeks of FMLA leave, a right not contemplated by Congress.

    Third, the Court explained, Congress did not intend to discourage employers from enacting more generous leave policies than the minimum FMLA standards. Yet, that could be the precise effect of the penalty provision's "severe and across-the board remedy." To avoid inadvertent technical violations, employers might well decide to discontinue voluntarily providing more generous leave benefits in favor of a simple solution: offer only 12 weeks of leave, all of which is FMLA leave.

    Based on these factors, the Court concluded that the penalty provision, 29 C.F.R. section 825.700(a), "effects an impermissible alteration of the statutory framework" and was not within the Secretary's power to issue. As the Court was careful to note, it did not decide whether the notice and designation regulations are themselves valid. Moreover, the Court left open the possibility that an employee could prevail in an FMLA claim based on failure to provide timely notice, if the employee could prove that the failure to notify caused an interference with his or her FMLA rights and prejudice.

    What This Decision Means for Employers

    Employers should continue to provide timely notice that leave will be designated and count as FMLA leave. However, if the employer fails to so notify an employee, the employer is no longer automatically required to provide an additional twelve weeks of leave. By the same token, an employer may need to extend additional leave or face penalties where the failure to notify resulted in a violation of the employee's rights and prejudice to the employee. Therefore, in determining whether additional leave time should be granted based on a failure to timely notify, the employer should carefully assess the impact on the employee of the failure to notify.

    Supreme Court Upholds EEOC Regulation Allowing an Individual to Verify an Otherwise Timely Charge After the Time for Filing has Expired

    In Edelman v. Lynchburg College, 2002 WL 415904 (U.S., Mar. 19, 2002), the Supreme Court confirmed the validity of an Equal Employment Opportunity Commission (EEOC) regulation permitting an individual who has otherwise timely filed a charge of discrimination under Title VII of the Civil Rights Act of 1964 to verify the charge after the filing period. The Court's decision, as well as the regulation at issue, addresses two sections of Title VII: one requiring that an individual file a charge of discrimination within 180 days of the discriminatory act (or 300 days in states or localities where there is an anti-discrimination law and an agency authorized to grant or seek relief) as a jurisdictional prerequisite to bringing a lawsuit under Title VII; and the other requiring that an individual file the charge "in writing under oath or affirmation."

    In Edelman, the plaintiff faxed a letter to the EEOC within the requisite filing period complaining of gender, national origin and religious discrimination after Lynchburg College denied him academic tenure. However, at that time he made no oath or affirmation. The EEOC then contacted the plaintiff and arranged an interview with a member of its field office. After the interview, the EEOC sent the plaintiff a form Charge of Discrimination for him to verify by oath or affirmation. The plaintiff filed the verified Charge of Discrimination 13 days after the filing deadline. The EEOC subsequently completed an investigation and then issued plaintiff a notice of right to sue. The plaintiff brought suit in state court under both federal and state law.

    After removing the case to federal court, Lynchburg College moved to dismiss the federal discrimination claims based on the plaintiff's failure to verify his charge of discrimination within the requisite filing period. The plaintiff responded that, pursuant to the EEOC's regulation, his verification related back to the original charge, in the form of his timely filed letter to the EEOC. The district court held that the plaintiff's letter was not a proper EEOC charge and thus the plaintiff never timely filed. On appeal, a split Fourth Circuit panel ruled that the EEOC regulation allowing a later verification to relate back to the original charge was not valid. The appellate court found that the sections of the statute requiring verification and that a charge be filed in a specified period must be read together, and, thus, an individual must verify his or her charge within the filing period.

    The Supreme Court reversed, finding that the EEOC's regulation is an "unassailable interpretation" of the statute and further stating that the Court would adopt the same interpretation if it "were interpreting the statute from scratch." In so holding, the Court stated that the purpose of the filing limitations period was to encourage individuals to bring claims of discrimination before they became stale and that the verification requirement had the purpose of protecting employers from frivolous charges. The EEOC's "relation-back" regulation protects a lay claimant from inadvertently forfeiting his rights because he or she was not aware of the verification requirements at the time of filing. Additionally, the regulation "still looks out for the employer's interest by refusing to call for a response" to an unverified charge. The Court also based its decision on a long-line of cases allowing a later oath or affirmation where a statute or rule requires a verified filing. Additionally, the Court noted that Congress amended Title VII several times while this rule was in effect and never questioned its validity. Thus, this "suggested" that Congress approved of the regulation. In closing, the Court noted that the EEOC failed to comply with its obligation to provide the employer with a notice of the Charge of discrimination within 10 days of filing because it did not send the plaintiff's letter to the employer within that period, but left that issue open for remand to the district court.

    What This Decision Means for Employers

    Though the decision affirms the EEOC regulation allowing a claimant to verify a "charge" after the filing period has expired, it leaves open the question of what constitutes a "charge," an issue addressed by the district court but not by the Supreme Court. Encouraged by the Court's affirmance of its regulation on verifications, the EEOC may well now decide to issue a regulation that defines "charge" as well.