The U.S. Court of Appeals for the Fourth Circuit recently ruled in Taylor v. Progress Energy, Inc., that a U.S. Department of Labor (DOL) regulation implementing the Federal Family and Medical Leave Act (FMLA) bars all waivers of any rights under the FMLA, including releases signed in exchange for severance pay, without prior DOL or court approval.
FMLA is the federal law that requires covered employers to provide eligible employees with up to 12 weeks of unpaid family leave and/or medical leave during any 12-month period for the birth or care of a newborn child, the placement with the employee of a child for adoption or foster care, to care for an immediate family member with a "serious health condition", or for the employee's own serious health condition. The law covers private employers with 50 or more employees. Employees must have been employed for at least 12 months for at least 1,250 hours before the leave begins, and must be employed at a site where there are at least 50 employees within a 75 mile radius, to be eligible for FMLA leave.
What this means for employers:
This decision creates problems for employers seeking to quickly, quietly, and confidentially settle existing or potential employment disputes, and for employers seeking routine releases for separating employees.
If an employer offers severance pay to employees who are separated from employment in exchange for execution of a general release, under Taylor, the release would not be effective in Maryland, Virginia, the Carolinas, or West Virginia as to FMLA claims unless pre-approved by the DOL or a court.
The application of the Taylor decision could result in the employer receiving little, if any, value for a substantial payment that was made to secure a release of "all" claims.
A court could potentially apply the Taylor decision to invalidate an entire release, separation agreement or settlement agreement unless any such agreement contained a valid severability provision.
The Facts:
A North Carolina power company employee was denied leave under the Family and Medical Leave Act (FMLA) despite 7 years' service and a (very) serious health condition. Then she was laid off, based partly on her excessive absence. She wanted to sue, but judges and regulators have argued for 4 years about whether she can do so.
What happened. Barbara Taylor was working for Carolina Power & Light (CP&L), a Progress Energy subsidiary, when, in 2000, she was stricken with extreme pain and swelling in her right leg. Ordered by her doctor to take a week's bed rest followed by extensive testing, she asked about FMLA leave. HR told her she wasn't eligible because she hadn't been out for more than 5 consecutive days. Taylor was later diagnosed with an abdominal mass requiring surgery, leading to well over 5 consecutive days' absence. CP&L still wouldn't give her unpaid leave, and she contacted the federal Department of Labor (DOL).
The employer credited her with only 4 weeks' leave, gave her a poor evaluation for excessive absence, and then chose her for layoff based partly on the poor assessment. Scheduled for termination in June 2001, she signed a release of all legal claims against the company in order to qualify for severance benefits. She sued anyway, believing that her FMLA rights couldn't be waived. A federal district judge dismissed her claim because of the signed release, and Taylor appealed to the 4th Circuit, which covers Maryland, North Carolina, South Carolina, Virginia, and West Virginia.
What the court said. Appellate judges wrestled with DOL's interpretation of FMLA. A DOL regulation states that employees cannot waive under any circumstances their future (or prospective) FMLA rights but can do so for past (retrospective) rights. That is, Taylor could not have signed away her FMLA rights when first hired, but could give up her rights at termination. Finding the language of the statute ambiguous, judges decided to ignore the regulation and ruled 3 to 0 for Taylor. But that was in July 2005, and Progress Energy asked them to review their decision, which they did in October 2006. Again, especially based on a contradictory brief filed by DOL in a later case, they ruled 2 to 1 in Taylor's favor. The third judge dissented, arguing DOL's regulation should be given deference. But Taylor may now sue her former employer. Taylor v. Progress Energy, U.S. Court of Appeals for the 4th Circuit, No. 04-1525 (7/3/07).
Point to remember: Judges reaffirmed that FMLA is like the Fair Labor Standards Act in that employees can only waive their claims under both laws with the express permission of either DOL or a court.
US Court of Appeals Rules on FMLA Waivers - To learn more about this author, visit Allison Grace's Website.
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Allison Grace
(Visit Allison's Website)
Allison Grace, CEBS, CCP, CMS, is
President and Founder of Instant HR
Solutions and a human resources
professional with more than eighteen years
of experience. As a consultant, Allison
has worked with companies in various
industries including hedge funds,
technology, oil and gas development,
recruiting and accounting.
As a human resources professional, she has
conducted human resource audits and
established benefits plans, compensation
programs, performance review processes,
and employment-related policies and
procedures. Working within the hedge fund
industry, Allison has managed deferred
compensation plans with assets in excess
of $70m, and transitioned them to become
409A compliant.
Prior to her consulting work, Allison
worked in technology, advertising,
publishing, retail, insurance and
non-profit firms and held Director and
Vice President level human resources
leadership positions with such companies
as Register.com, Food Marketing Institute,
and The Thomson Corporation. Allison's
global human resources expertise includes
working with employees in the United
States, United Kingdom, Canada, France,
Germany, Eastern Europe and Africa.
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