Join Date: Sep 2008
Sophisticated and savvy employers are constantly performing risk-benefit analyses in all aspects of their business, including legal exposure. Often, a company must determine whether the risks – both practical and legal – justify the potential benefit of any given action. While this risk assessment process is nothing new to most managers or company officials, the risk analyzed is generally limited to what liability the company might face. A recent decision from a federal court of appeal highlights that managers want to be thinking about his or her own personal exposure if the manager unlawfully denies an employee benefits under the Family and Medical Leave Act (FMLA).
The case, Graziadio v. Culinary Institute of America, which was published on March 17, 2016, addressed a claim arising out of New York where an employee attempted to return from FMLA leave taken to care for her sons. However, the company’s human resources director would not allow her to return to work until she provided new documentation supporting the leave she had just taken. According to the case, for several weeks the employee asked what she needed to do, but the HR director never gave a meaningful response, and eventually terminated the employee, claiming job abandonment. The trial court initially dismissed the employee’s claims against the supervisor individually, stating that a human resources director could not be an “employer” under the FMLA. In a surprising twist, the Second Circuit Court of Appeals reversed that decision.
According to the Second Circuit, managers are not individually immune from liability for FMLA violations simply because they represent a company. Instead, the court stated it will use an “economic reality” test to determine if the manager in question possessed the power to control the employee. Key factors will be whether the manager has authority to hire or fire the employee, whether the manager controls work schedules or other conditions of employment, and whether the manager determines pay rates or keeps employment records. Managers will not be protected simply by being part of a chain of command—the HR director in Graziadio technically did not have the final authority to terminate (which rested with the vice president), yet the court found the director had “substantial authority” to influence or reach a decision to terminate employment. Thus, the court held that the HR director was on the hook for potentially being individually liable for damages the employee alleged she suffered from the company’s unlawful acts under the FMLA.
The Second Circuit’s decision is not technically binding on courts that might hear such claims in Indiana, Illinois, or Ohio, but it is part of a growing trend that a savvy employer will take notice of now. Certain management officials can already be individually liable for employees’ overtime or minimum wage claims under the Fair Labor Standards Act (FLSA), and a growing number of federal courts of appeal – primarily in the eastern and southeastern regions – are holding that the definitions of “employer” under the FLSA and FMLA (essentially, who can be liable in lawsuits under those statutes) should be treated identically. This puts many human resources professionals, managers, and directors at risk of potentially being named individually in lawsuits for FMLA claims.
While lawyers and companies alike will remain on the lookout for any ruling from the circuit courts of appeal that oversee cases in the Midwest, there are a few things employers can do to avoid being the test case and having their managers and directors at risk of a lawsuit individually. Employers should proactively train their human resources professionals on FMLA compliance, and educate them about the potential of risk associated with not following the FMLA’s mandates. Now more than ever, when an employer is faced with navigating the treacherous waters of the FMLA (and particularly in high-risk actions such as terminating an employee who takes FMLA leave), legal counsel can provide invaluable assistance.
For more information, contact Justin Spack at (317) 236-2495 or firstname.lastname@example.org, or any other member of Ice Miller's Labor and Employment Group.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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