"Lack of Notice May Not Result in More Days of Leave"
by Richard S. Rosenberg and John J. Manier

In Ragsdale v. Wolverine World Wide, 2002 DJDAR 3017 (March 19, 2002), the United States Supreme Court ruled that an employee was not entitled to additional sick leave under the Family Medical Leave Act, 29 USC Section 2601 et seq., simply because the employer failed to notify her in advance that her absences were covered under the Act.

In doing so, the Court struck down a U.S. Department of Labor regulation which disallowed employers from counting any time off toward the employee's family leave entitlement unless the employer told the employee prior to commencing the leave that the time off was covered under the Act.

Tracy Ragsdale took 30 consecutive weeks of sick leave from her job at Wolverine World Wide while she was treated for Hodgkin's disease. Wolverine's sick leave program was far more generous than the Act, which entitles qualifying employees to 12 weeks of leave per year. 29 USC Section 2612(a)(1). However, Wolverine never notified Ragsdale that any of her leave would count towards her annual allotment under the Act. When Ragsdale asked for additional time off, Wolverine denied her request and terminated her for not returning to work.

Ragsdale sued Wolverine in an Arkansas federal court based upon a Labor Department regulation which states that if an employer fails to designate an employee's leave "as FMLA leave, the leave taken does not count against an employee's FMLA entitlement." 29 CFR Section 825.700(a).

Ragsdale argued that since she never got the requisite notice, she was entitled to 12 more weeks of leave, on top of the 30 she already had taken. The district court and the 8th Circuit both ruled that Wolverine was entitled to summary judgment. The Supreme Court agreed in a 5-4 decision written by Justice Anthony Kennedy.

Notably, the Court did not disturb the regulations which require employers to give individual employees reasonable written notice that absences will be counted as leave under the Act. 29 CFR Sections 825.208(a), 825.301(c). The Court assumed, without deciding, that these regulations are valid, even though they go beyond the Act's notice and posting requirements. 29 USC Section 2619(a).

Instead, the Court focused on the "penalty" regulation and found it to be "contrary to the Act's remedial design." The Act makes employers liable for "interfering with, restraining, or denying" an employee's exercise of rights. 29 USC Section 2615. However, an employer is liable only for damages incurred "by reason of the violation" or other money losses "as a direct result of the violation," and for "appropriate" equitable relief. 29 USC Section 2617(a)(1).

The Court noted that the penalty under the offending regulation "is unconnected to any prejudice the employee might have suffered from the employer's lapse" in failing to give notice. The regulation instead "creates an irrebuttable presumption" that the employee's exercise of rights under the Act was impaired "and that the employee deserves 12 more weeks" of leave.

The Court found "no empirical or logical basis" for this presumption. To illustrate this point, the Court noted that Ragsdale would have taken her entire 30-week leave even if Wolverine had given the required notice, because she was unable to work.

However, the Court emphasized that since there are circumstances where an employee might not take leave if he or she knew that the time counted toward the annual statutory allotment, the Act "requires [a] retrospective, case-by-case examination" to determine "whether the employee would have exercised his or her FMLA rights in the absence of the employer's actions."

Thus, a court or jury "must ask what steps the employee would have taken had circumstances been different." The Labor Department's regulation was ruled to be invalid because it eliminated this case-by-case approach.

The Court did acknowledge that 12 weeks' additional leave "might be an appropriate make-whole remedy for an employee who would not have taken any leave at all if the notice had been given." However, the Court opined that such facts will occur only in "the most exceptional of cases."

The Court also addressed a hypothetical where an employee undergoing cancer treatments every other week for 12 weeks "might want to work during the off weeks," thus "saving six weeks of leave for later," but instead feels compelled to stay on leave the entire 12 weeks because she did not know she qualified for intermittent leave under the Act. Under the Court's analysis, the employee might be able to recover damages for the denial of six weeks of leave, but not for the full 12 weeks.

Justice Sandra Day O'Connor wrote a dissenting opinion that was joined by Justices David Souter, Ruth Bader Ginsburg and Stephen Breyer. The dissent squarely found that the regulation requiring individualized notice was valid, and likewise would have upheld the mandatory 12-week penalty for failing to give such notice.

The holding in Ragsdale calls into question the continuing vitality of the 9th Circuit's expansive reading of the Act in Bachelder v. America West Airlines, 259 F.3d 1112 (9th Cir. 2001). In Bachelder, an employee was fired for taking too much leave. The 9th Circuit ruled that an employer unlawfully "interfere[s] with" an employee's leave rights any time it uses an employee's protected leave as "a negative factor" in an adverse employment action - regardless of whether the employer would have taken the same action for lawful reasons.

In doing so, the court upheld a Labor Department regulation to this effect, 29 CFR Section 825.220(c), and rejected the burden-shifting and "pretext" analysis used in job bias cases for the past three decades under McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).

However, the Supreme Court in Ragsdale made clear that an employer is liable under the Act only for losses incurred "by reason of" or "as a direct result of" any violation. This standard appears more forgiving to employers than the 9th Circuit's "negative factor" analysis.

The 9th Circuit in Bachelder also ruled that when an employer fails to tell employees in advance which of four methods it uses for calculating employees' entitlement to leave, "the option that provides the most beneficial outcome for the employee will be used." 29 CFR Section 825.200(e). The court opined that it is not enough for an employer to "parrot the language of the Act" by telling employees they are entitled to up to 12 weeks of unpaid leave within any 12 month period.

These requirements operated to penalize the employer in Bachelder much in the same way as the regulation which the Supreme Court invalidated in Ragsdale. Because the employer's handbook in Bachelder failed to specify which method the company was using to calculate leave entitlement, the 9th Circuit imposed the option which effectively gave the employee a right to 15 weeks of leave during her final year of employment.

Yet, as the Supreme Court in Ragsdale noted, the Act expressly requires employers to post conspicuous notices which either quote or summarize "pertinent provisions" of the Act, as well as information relating to filing a charge. 29 USC section 2619(a). This is precisely what the 9th Circuit faulted the employer in Bachelder for doing.

Even if the Labor Department is authorized to require employers to provide more specific notices that those required under the Act, the regulation which saddles noncompliant employers with "the option that provides the most beneficial outcome for the employee" appears to suffer from the same fatal defects as the "penalty" regulation struck down in Ragsdale: it purports to give employees the right to more than 12 weeks' leave per year where the employer fails to comply with a regulatory notice provision, regardless of whether the employee is prejudiced.

While the outcome in Ragsdale is favorable to employers, it nevertheless demonstrates the need for employers to comply with the notification requirements under the Act and the regulations. In particular, Ragsdale leaves open the possibility that an employer will be found liable if it fails to give adequate notice that leave will be counted under the Act if the employee can prove resulting prejudice. Under a "worst-case" scenario, the employee could be awarded reinstatement or "front pay" in lieu thereof if the employee is terminated before having exhausted the statutory allotment of leave.

Ragsdale also is likely to have an impact on claims brought under the Moore-Brown-Roberti California Family Rights Act, Govt. Code Section 12945.2. The Fair Employment and Housing Commission has adopted regulations which incorporate by reference the regulations interpreting the federal Act to the extent they are consistent with state law. Cal. Code Regs., tit. 2, Û 7297.10.

The California regulations make the employer responsible for designating leave as qualifying under the state and/or federal Acts "and to give notice of the designation to the employee." This designation cannot be retroactive, except where permitted under the federal Act and its implementing regulations. Cal. Code Regs., tit. 2, Û 7297.4(a)(1).

Neither the California Act nor its regulations specify a penalty for failing to comply with these notification requirements. However, the California Act provides that "[f]amily care and medical leave requested pursuant to this subdivision shall not be deemed to have been granted unless the employer provides the employee, upon granting the leave request, a guarantee of employment in the same or a comparable position upon the termination of the leave." Govt. Code Section 12945.2(a).

Accordingly, to be safe, California employers should continue to provide employees with the requisite written notice designating qualifying leave as covered under the federal and state laws, and include with this notice an express guarantee of reinstatement upon expiration of the leave.