What the DOL-Staples settlement teaches us about FMLA notices and disciplinary actions

With Jill R. Jensen-Welch & Melissa A. Schilling.

The Family Medical Leave Act (FMLA) and its implementing regulations impose strict notice obligations on employers. In addition to posting general notices, the FMLA regulations require that an employer tell an employee, in writing, of his/her eligibility to take FMLA leave within five business days after the employee requests FMLA leave or "the employer acquires knowledge that an employee's leave may be for an FMLA-qualifying reason."

Later, an employer is required to inform the employee, in writing, of its decision as to whether or not the leave will be designated as FMLA. These notice requirements and the FMLA certification process can be tedious even for the most diligent HR professionals. However, recent action from a federal district court in the Fourth Circuit reinforces the importance of complying with the FMLA's notice requirements. On May 27, 2015, a federal judge for the United States District Court for South Carolina signed a consent decree resolving litigation brought under the FMLA by the Secretary of Labor against Staples, Inc. Under the decree, Staples agreed to pay a former employee the total gross amount of $275,000. The amount was divided into two components -- $137,500 in back pay, lost benefits and front pay (which requires income tax deductions and payment of the employer's share of FICA, as well as reporting on a W-2) and $137,500 as "liquidated damages" (which does not require any deductions or payment of FICA, and is reported on a 1099-Misc). According to the Complaint, Jeffrey Angstadt began working for Staples when the company for which he worked was acquired by Staples. In mid-September 2010, Angstadt's wife was diagnosed with breast cancer. He promptly notified his supervisor, and requested (and was permitted) to defer training for which he had been scheduled. The Complaint asserts:

From September 13, 2010, until the time of his termination, Mr. Angstadt notified his supervisors . . . of his need to take full and partial days of leave from work in order to be present with his wife during her medical appointments, hospital stays for chemotherapy, and hospital stays for surgeries, due to her treatment for cancer and for complications arising from her treatment for cancer, including congestive heart failure. Mr. Angstadt was permitted to take full and partial days of Sick/Family Care and Vacation leave.

At 29 CFR § 825.300(b) and (c), the FMLA regulations require that within five business days after either an employee requests FMLA leave or the employer acquires knowledge that an employee's leave may be for an FMLA-qualifying reason, the employer must give the employee two distinct notices. These have been combined into a model notice called Notice of Eligibility and Rights & Responsibilities (WH-381). Following that initial two-part notice, and after acquiring necessary information about the leave to determine if it truly qualifies as FMLA leave (e.g., receipt of a Medical Certification), the employer is required by regulations, found at 29 CFR § 825.300(d), to inform the employee within five business days of the employer's decision as to whether or not the leave will be designated as FMLA. The DOL's model for this Designation Notice,Form WH-382, is available here.

Anyone with any degree of familiarity with the FMLA standards for serious health condition would know that breast cancer and being told of hospital stays for surgeries and for chemotherapy would give an employer knowledge that such absences may be for an FMLA-qualifying reason. According to the Complaint, at no time did Staples provide Angstadt with any notice regarding the FMLA no notice of eligibility, no notice of rights and responsibilities, and no designation notice. Staples did, however, allow Angstadt to be absent from work, without discipline for the absences, with the same health insurance benefits as received by similarly situated employees who were not absent for an FMLA-qualifying reason.

The Complaint is somewhat cryptic in stating that in March 2011, Angstadt's position was eliminated, and that he applied for and was awarded a new post in sales. On September 14, 2011, Angstadt was given a Performance Improvement Plan (PIP) about concerns that he had not achieved his minimum monthly sales goals and was not responding timely to internal and external customers. While the Complaint asserts that Angstadt had not been counseled or disciplined before in regard to his sales volumes or his responsiveness to customers, it is conceivable that his prior position may have required different tasks and goals, and his performance in that prior job may have been satisfactory. On January 20, 2012, four months after being placed on a PIP, Angstadt's employment was terminated based on the determination that he had not consistently met the expectations outlined in the PIP. The DOL filed the litigation on behalf of Angstadt in September 2013.

At this point, the reader may be getting a bit nervous. A $275,000 settlement of an FMLA claim based on a failure to provide individualized notices, even though the leave was provided, seems a bit much. Further, what's wrong with terminating Angstadt's employment for poor performance in a position held only 11 months, and where he was given notice and four months to improve? The problem may lie with another Staples policy. The Complaint alleges that Staples had a policy and/or practice that it might modify job performance expectations, including sales goals, for an employee requesting [FMLA] leave, and that Staples did have a policy or practice of plac[ing] a PIP on hold for an employee taking leave for FMLA purposes. If true, then Staples dropped the ball by not applying these policies/practices to Angstadt. There was no trial, so there are no findings of fact and no court opinion. Rather, all we have is a Consent Decree which is a document negotiated by the parties and entered by a judge as an enforceable court order. Still, this case provides several important lessons for employers:

• Use the Notices. The DOL is really, really, really serious about employees receiving individualized notices regarding their FMLA rights. Initially, that means providing a completed Notice of Eligibility and Rights and Responsibilities (Notice of Rights). Make sure that your internal systems on absences, or requests for absences, get information to some central source in the company that has responsibility for compliance with the FMLA notice requirements and knows what is going on. The Notice of Rights must be sent each time an employee requests a leave that might be FMLA-qualifying. Even if the individual is not eligible for FMLA, he or she must be told of the ineligibility and the reason for it.

• An employer can't put blinders on until the employee uses the magic word, FMLA. Anytime an employer  and that can be a front-line supervisor has information that even suggests a leave or an absence may be for an FMLA-qualifying reason, the employer has the duty to seek more information and get the Notice of Rights out within five business days of the request.

• Pre-Discipline Review. Before terminating the employment of  or otherwise disciplining an employee for a performance issue when that employee is on FMLA leave, or was on FMLA leave during the time under review, ask yourself whether the performance deficiency could have been caused or exacerbated by the FMLA leave. If so, you may be wandering into dangerous territory. At this point, there is no general rule that an employer must excuse performance deficiencies caused or exacerbated by FMLA absences, but failure to give some leeway may chill an employee's exercise of FMLA rights and lead to FMLA claims.

• Policy Review. Review your internal policies and procedures with regard to disciplinary actions and how they are impacted by absences, including FMLA absences. In the Staples litigation, according to the allegations of the Complaint, the real problem was that Staples had two policies that it failed to apply to Angstadt one absolutely placing a hold on a PIP if a person was on FMLA leave, and a second allowing a discretionary modification of performance standards that might take into account FMLA leaves. It is alleged that Angstadt didn't know to ask for relief from his PIP because he didn't know that his absences were FMLA qualifying probably because Staples failed to tell him so by not providing the FMLA-required notifications. Do you have some kind of special treatment policies for FMLA absences? And do you want to retain them? Check with your employment attorney for assistance. Remember, too, that the FMLA (29 CFR 825.215) requires that employees on FMLA leave be treated the same as employees on an equivalent leave status for a reason that does not qualify as FMLA leave. Do your policies about performance expectations for employees who may be on, for example, an extended workers' compensation leave, or an ADA reasonable accommodation leave of absence match those for employees who are on FMLA leave? Conversely, do those policies need to be modified to take into account the possibility of an FMLA leave that may go on, intermittently, for years?

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Russ Samson