"Fuzzy Math--
Miscalculation of Leave Results in Employer Liability"
by Richard S. Rosenberg and John J. Manier

The Ninth Circuit recently issued one of the most far-reaching decisions in the brief history of the Family and Medical Leave Act (29 U.S.C. Û 2601 et seq.). In Bachelder v. America West Airlines, 259 F.3d 1112 (9th Cir. 2001), the court laid out the rules for proving a claim for interference with FMLA rights, and in so doing vastly expanded employer liability under the act.

Penny Bachelder, an America West customer service representative, took five weeks of FMLA leave in 1994, and three additional months in April-June 1995. She also called in sick on numerous other occasions where FMLA was not implicated. The airline gave Bachelder a warning over her absenteeism in January 1996 and advised that she must improve her attendance. In the ensuing month, Bachelder had 15 additional absences for which she provided two doctor's notes indicating a diagnosis and return-to-work date. Bachelder also was absent one day in early April 1996 to tend to her ill baby. On April 9, Bachelder was fired. The termination letter she received specified three grounds for discharge, one of which was her 16 absences in 1996.

Bachelder sued America West in an Arizona federal district court under FMLA. The district court ruled that Bachelder's 1996 absences were not protected under FMLA, and granted partial summary judgment for America West on that basis. Bachelder's claims based on her 1994 and 1995 absences proceeded to a bench trial, which resulted in a final judgment for America West.

On appeal, the Ninth Circuit reversed the summary judgment for America West as to the 1996 absences, and directed the district court to grant Bachelder's cross-motion for summary judgment as to liability. The appellate court ruled that Bachelder's 1996 absences were indeed protected, that her termination violated FMLA as a matter of law, and that in light of this disposition, the district court's rulings at the bench trial were "beside the point" in light of this disposition.

The Ninth Circuit emphasized that Bachelder's lawsuit was governed by 29 U.S.C. Û 2615(a)(1), which prohibits an employer from "interfer[ing] with" an employee's FMLA rights. The court declared that an employer violates this provision any time it uses an employee's protected leave as "a negative factor" in an adverse employment action - regardless of whether the action also was based on additional, lawful factors. The "negative factor" language comes from a DOL regulation which the court found worthy of deference. 29 C.F.R. Û825.220(c). Bachelder is the first published appellate decision to expressly apply DOL's "negative factor" standard.

Significantly, the court held that the familiar burden-shifting and "pretext" analysis used in job bias cases under McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), does not apply to claims for "interference with" FMLA rights. In support of this conclusion, the court cited Diaz v. Fort Wayne Foundry Corp., 131 F.3d 711 (7th Cir. 1997), which found McDonnell Douglas inapplicable to a claim for denial of FMLA leave. However, the court ignored the Seventh Circuit's later decision in King v. Preferred Technical Group, 166 F.3d 887 (7th Cir. 1999), which distinguished Diaz and applied McDonnell Douglas where the plaintiff was allegedly fired for taking FMLA leave.

The Ninth Circuit concluded that America West's termination letter to Bachelder constituted "direct, undisputed evidence" that the airline considered Bachelder's 1996 absences as "a negative factor" in terminating her. Thus, the court held that America West violated FMLA if these absences were covered by the act.

On this latter question, the court noted that the DOL regulations offer employees several options for calculating FMLA entitlement: (1) the calendar year, beginning January 1; (2) a fixed, 12-month "leave year," beginning on any date; (3) a 12-month period measured forward from the employee's first date of FMLA leave; or (4) a "rolling" 12-month period measured backward from the date an employee uses any FMLA leave. 29 C.F.R. Û 825.200(b). Relying on DOL regulations, the court further held that where an employer fails to specify which of these four methods it will be using, "the option that provides the most beneficial outcome for the employee will be used." 29 C.F.R. Û 825.200(e) (emphasis added). Under this approach, Bachelder had additional FMLA time available at the time of her termination.

America West argued that it had adopted the favorable "rolling" method by issuing an employee handbook which stated that "employees are entitled to up to twelve calendar weeks of unpaid [FMLA] leave within any twelve month period." In rejecting this argument, the court found that this handbook provision "does nothing more than parrot the language of the Act," and could not "possibly inform employees of the method the employer has chosen" among the four options set forth in the regulations. Since America West failed to properly notify employees which counting method it was using, the Court applied the most employee generous "calendar year" method. This ruling was critical because Bachelder had not used up all of her annual FMLA leave entitlement under this counting method.

America West's next argued that the company could not be held liable because it believed in good faith that Bachelder had indeed exhausted all of her statutory leave. However, the Ninth Circuit stated that the employer's "good faith" is not a defense to liability and is relevant only to whether the employee also may recover statutory liquidated damages.

America West then asserted that Bachelder failed to prove that the company's alternative, performance-based reasons for the termination were pretextual. The Ninth Circuit found that the existence of alternative reasons for termination were not relevant to the analysis of an FMLA "interference" claim. In dicta, the court further indicated that a "mixed motive" defense is unavailable under the "negative factor" standard. The court thus held that since Bachelder's absences played a role in her termination (i.e., were a negative factor), America West's termination of Bachelder violated FMLA as a matter of law. The case was remanded for further proceedings.

Because Bachelder relies so heavily on the DOL's FMLA regulations, it is striking that the Ninth Circuit did not address any of the appellate decisions invalidating certain of these regulations. Indeed, the U.S. Supreme Court is now reviewing a challenge to a DOL regulation which provides that absences for family leave purposes do not count against an employee's annual FMLA allotment unless the employer expressly designates in writing in advance that the absences shall be counted as FMLA leave. Ragsdale v. Wolverine Worldwide, 218 F.3d 933 (8th Cir. 2000), cert. granted, 533 U.S. __ (2001). The Eighth Circuit in Ragsdale reasoned that "the DOL regulations create rights which the statute clearly does not confer."

The DOL's "leave year" regulation, particularly as construed by the Ninth Circuit, is vulnerable to a similar attack. The court essentially conferred Bachelder with up to 24 weeks' leave during her final 12 months of employment, simply because America West's leave policies paraphrased the language of the statute, rather than the regulations. The Supreme Court's decision in Ragsdale may thus determine the eventual fate of Bachelder.

In the meantime, employers should be sure to adopt compliant employee handbook policies which clearly and explicitly state which of the four "leave year" options the employer plans to follow. Bachelder creates yet another trap for employers seeking to terminate employees with dismal attendance. Even if prolific absenteeism is just one of many legitimate reasons for such a termination, the employer violates FMLA as a matter of law under Bachelder if any of the absences resulting in discipline are later found to be covered by FMLA.