Sixth Circuit Reverses Employer’s Judgment on FMLA Claim Because of Personnel Manual

Earlier this year, the Sixth Circuit  Court of Appeals in Cincinnati reversed an employer’s summary judgment on an FMLA claim.  Tilley v. Kalamazoo County Road Commission, No. 14-1679 (6^th Cir. 1/26/15). While the Court agreed that the plaintiff was not eligible for FMLA leave because he did not work at an eligible work site, the employer could be equitably stopped because it had misstated his eligibility in its Personnel Manual.   The Manual stated that employees were eligible for FMLA leave as long as they had been employed a year and had worked 1,250 hours in the prior twelve months, but said nothing about needing to work at a qualified work site with at least 50 employees within 75 miles. Because the plaintiff showed that he had reasonably relied on this misstatement of his eligibility to his detriment, it arguably violated the FMLA to terminate his employment, in part, because he failed to meet a work deadline during his medical leave.

According to the Court’s opinion, the plaintiff’s supervisor was unhappy with his job performance and had set a number of work deadlines and issued disciplinary warnings.  When the plaintiff’s final deadline of August 1 was approaching (pursuant to his final written performance warning), he was taken to the hospital and kept overnight because of chest pains.  His wife informed his employer that he would not be returning to work before August 5 and HR sent him FMLA paperwork on August 9.  He was informed in the Eligibility Notice that he was eligible for FMLA leave and HR did not check the box for employees who were not eligible because they did not work at an eligible work site.   He was also informed that he had 15 days to submit medical documentation to substantiate his need for FMLA leave.

Nonetheless, the plaintiff was terminated on August 12, in part for failing to meet his August 1 or other deadlines.  This lawsuit followed, where the plaintiff alleged that he had been terminated on account of his age and in violation of the FMLA.   The district court granted summary judgment to the employer on both claims and the Court of Appeals affirmed dismissal of the age discrimination claim.   The lower court found that the plaintiff was not eligible for FMLA leave because he did not work at a site with at least 50 employees within 75 miles on the date that his medical leave began.   The court also rejected any argument of reasonable and detrimental reliance on the eligibility notice because it had not been sent to him until after he began his medical leave.

On appeal, the Sixth Circuit agreed that the plaintiff was not an eligible employee under the FMLA.  Although the plaintiff produced evidence that the employer arguably employed at least 50 employees within 75 miles of his worksite a few weeks earlier in July 2011, he did not contradict the employer’s evidence that it had not employed at least 50 employees in that area on August 1, when he began medical leave:

But the number of employees at that time [July 2011) is not relevant. For purposes of the FMLA 50/75-Employee Threshold, the number of employees “is determined when the employee gives notice of the need for leave.” 29 C.F.R. § 825.110(e). 

Nonetheless, even though the plaintiff was not eligible under the FMLA statute or regulations, the Court found that the employer could be equitably estopped from denying his eligibility because of misinformation it provided in the its Personnel Manual.  

We have held that in order “to prevail on his equitable estoppel argument,” an employee “need show only (1) a definite misrepresentation as to a material fact, (2) a reasonable reliance on the misrepresentation, and (3) a resulting detriment to the party reasonably relying on the misrepresentation.”

In this case, the Manual provided that employees were eligible for FMLA if they worked for at least a year and 1,250 hours in the prior twelve months.  It said nothing about needing to work at a qualified work site where there were at least 50 employees within a 75 mile radius. “This is an unambiguous and unqualified statement that Road Commission employees, like [the plaintiff], who have logged 1,250 hours in the year before seeking FMLA leave are covered by the FMLA and are eligible to apply for FMLA benefits.”  

The [defendant employer] could have qualified its statement concerning employee eligibility by adding that its full-time employees would only be covered by the FMLA if they worked at, or within 75 miles of, a site at which the [defendant employer] employed at least 50 employees. That is precisely what other employers have done. . . . And courts have recognized that such qualifying language may effectively communicate to employees that they are assured of eligibility only if the FMLA 50/75-Employee Threshold is met. Cf. Pearle Vision, 251 F.3d at 1137. We conclude that the [defendant employer’s] unqualified statement that employees in Tilley’s position are covered under the FMLA satisfies the misrepresentation element of the equitable estoppel test.

The Court rejected the employer’s arguments that it should not be penalizing for explaining the FMLA to employees at non-qualified work sites because the FMLA regulations require all covered employers to provide a notice of FMLA rights at all work sites, even if the employees at particular sites do not meet the 50 employee/75 mile threshold.  This is because there is nothing in the FMLA requiring employers to misinform employees about the eligibility requirements and not including a statement about the 50 employee/75 mile threshold.   On the contrary, the DOL’s template notice form describes the 50 employee/75 mile threshold for FMLA eligibility.

Moreover, the plaintiff provided an affidavit that he relied on the misstatements in the Manual about his eligibility for FMLA leave before he began his medical leave.  He claimed that if he had known that he was not eligible for FMLA leave, he would have made other arrangements to finish his August 1 project.  While there are reasons to doubt the veracity of the plaintiff’s claim that he would have delayed treatment for a possibly life-threatening heart attack in order to complete his work project on time, the question of his veracity is for a jury at trial and not a judge at the summary judgment stage.

In addition, the Court believed that the plaintiff’s reliance on the Manual was reasonable from his perspective.  Indeed, HR sent him a notice confirming his eligibility for FMLA leave based on its own review and interpretation of the Manual.

Simply put, a reasonable person in [the plaintiff’s] position could fairly have believed that he was protected by the FMLA.  . . . . . The [employer] is thus in no position to argue that [he] acted unreasonably in reaching the same conclusion.

Finally, the plaintiff could show that he suffered to his detriment by relying on the misstatement of his FMLA eligibility in the Manual because he was ultimately fired in part for missing the August 1 deadline while he took medical leave.   Accordingly, the employer was not entitled to summary judgment on the FMLA claim.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Retired Employee Can Assert ERISA Claim Based on False Information Provided in Written Benefit Estimate

Last week, the federal Sixth Circuit Court of Appeals in Cincinnati issued a decision recognizing for the first time that a plaintiff can assert an estoppel claim against a pension plan under ERISA when the plaintiff relied to his detriment upon a written and certified estimate of his monthly retirement benefit in making his decision to retire and then was then told two years later that his actual benefits were substantially lower than the prior estimate, that his future benefits would be reduced accordingly and that he was requested to repay approximately $11,000 to the retirement plan. Bloemker v. Laborers Local 265 Pension Fund, No. 09-3536 (6^th Cir. 5/19/10). However, the Court affirmed the dismissal of the plaintiff's statutory and breach of contract claims.

According to the Court's opinion, the plaintiff's 2005 annual statement of status estimated that he "would be entitled to to a monthly benefit pension of

$2,666.99." Interested, he contacted the third-party administrator of his pension plan "to discuss the possibility of early retirement. He received a letter from her

stating that if he were to retire on April 1, 2005, he would be eligible for "approximately $2,564.00 per month, single life annuity, payable for your lifetime only."

Based on this, the plaintiff applied for early retirement benefits on February 10, 2005" and on March 1, 2005, he received a Benefit Election Form which was stamped by the TPA, stated that he would receive $2,339.47 per month for his life, and contained a certification stating:

Based on our records of your hours worked under the Plan and the contributions which have been made on your behalf, we hereby certify that you are entitled to receive the retirement benefit specified above, and that the amount shown for any optional forms of payment are equivalent to your basic benefit.

The plaintiff retired and in 2006 received a letter from the TPA indicating that a computer error caused it to miscalculate his early retirement benefits, that he was entitled to $500/month less than previously indicated and that he needed to repay the approximately $11,000 he had been overpaid to date. The plaintiff filed suit after exhausting his administrative remedies under the plan. In his suit, he alleged that the Plan and the TPA should be equitably estopped from denying him the larger retirement benefit on account of their material misstatements on which he relied to his detriment. He also alleged that the Plan and TPA breached a written contract to him in the application for benefits and that the TPA breached its statutory fiduciary duties to him. The trial court dismissed his claims

In the past, the Sixth Circuit has – unlike other circuit courts -- been reluctant to recognize estoppels claims against pension plans because estoppel "cannot be applied to vary

the terms of the unambiguous plan documents." In addition,

pension benefits are typically paid out of funds to which both employers and employees contribute. Contributions and pay-outs are determined by actuarial assumptions reflected in the terms of the plan. If the effective terms of the plan may be altered by transactions between officers of the plan and individual plan participants or discrete groups of them, the rights and legitimate expectations of third parties to retirement income may be prejudiced.

The Court remains unwilling to accept estoppels claims based on oral or verbal statements by low level employees which modify the written terms of the plan. "This policy concern is

greatly lessened when the representations at issue are made in writing, and, particularly here, where the representations constituted formal certifications."

Under Sixth Circuit precedent,

the elements of an equitable estoppel claim are: 1) conduct or language amounting to a representation of material fact; 2) awareness of the true facts by the party to be estopped; 3) an intention on the part of the party to be estopped that the representation be acted on, or conduct toward the party asserting the estoppel such that the latter has a right to believe that the former's conduct is so intended; 4) unawareness of the true facts by the party asserting the estoppel; and 5) detrimental and justifiable reliance by the party asserting estoppel on the representation.

The Court found these elements to be satisfied by the plaintiff's allegations in this case. It found the defendants' alleged gross negligence sufficient to constitute constructive fraud. Moreover, while it generally has found that a plaintiff can not prove justifiable reliance on a misrepresentation if the misstatement contradicted unambiguous plan documents, in this case, the plaintiff alleged that "it would have been impossible for him to determine his correct pension benefit given the complexity of the actuarial calculations and his lack of knowledge about the relevant actuarial assumptions."

We hold that a plaintiff can invoke equitable estoppel in the case of unambiguous pension plan provisions where the plaintiff can demonstrate the traditional elements of estoppel, including that the defendant engaged in intended deception or such gross negligence as to amount to constructive fraud, plus (1) a written representation; (2) plan provisions which, although unambiguous, did not allow for individual calculation of benefits; and (3) extraordinary circumstances in which the balance of equities strongly favors the application of estoppel.

The Court affirmed the dismissal of his fiduciary duty claims and breach of contract claims.

Section 1132(a)(1)(B) of ERISA provides that a plan beneficiary may bring suit "to recover benefits due to him under the terms of his plan." 29 U.S.C. § 1132(a)(1)(B). As discussed above, the written ERISA plan documents govern the rights and benefits of ERISA plan beneficiaries. . . . . Where a retirement plan creates benefits in excess of those established by ERISA, however, those rights may be enforceable in contract under federal common law. . . . Furthermore, when additional documents operate to modify or amend the plan, a beneficiary can rely on those modifications to determine his benefits. . . . .

However, the Benefit Election form submitted by the plaintiff "did not purport to be an amendment or a modification to the Plan. Nor did it purport to create a separate contract for benefits in addition to those provided by the Plan. Instead, it simply claimed to provide the actuarially certified benefit [the plaintiff] was entitled to, based on the Plan." Thus, there was no basis for asserting a claim for breach of contract.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Appeals Court Awards Employee Damages When Employer Violated Written Contract By Decreasing His Pay Rate.

Last month, the Trumbull County Court of Appeals affirmed an award of $42,116.38 in damages plus interest to a former employee who sued for breach of a written contract when, upon the advice of its accountant and based on poor economic conditions, his former employer decreased the plaintiff’s salary below $75,000/year in breach of his employment agreement. Sloan v. Shafer Commercial & Indus. Servs. Inc., 2008-Ohio-4765. The employer had also decreased the salaries of the other officers and laid off employees at the same time. Although the plaintiff objected to the wage cut, he continued to work for the employer for another 33 months. The court rejected the employer’s various arguments that, among other things, the plaintiff waived his contractual rights by continuing to work at the reduced pay, that he was guilty of laches for waiting three years to file his claim, and that he should be estopped from challenging the wage cut three years later. In particular, the court found the employee did not waive his contractual rights by continuing to work after the pay cut. While the employer might have had a good argument that the contract had been mutually modified by the parties, the court refused to consider this argument on appeal because the employer failed to raise that argument before the trial court.


Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/11/2008/2008-ohio-4765.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Eligibility Determination for Intermittent Leave Begins With Each FMLA Year Regardless of When FMLA Absence Began.

Today, the Sixth Circuit affirmed dismissal on summary judgment of an FMLA claim where the employee began intermittent leave on December 13 for chronic depression and did not return to work until January 15. Davis v. Michigan Bell Telephone Co., 07-1512 (6th Cir. 9/29/08). Although the employee had been eligible for FMLA leave when she began her absence on December 13, she had not worked 1250 hours in 2004 and, thus, was ineligible for FMLA leave in 2005. When her therapist informed her employer that she was capable of returning to work on January 3, but she did not return until January 15 – despite a warning from her employer, the employer deemed her absence as unexcused and terminated her employment in February for the chronic poor attendance. Although another physician later certified in March that the plaintiff’s continuing absence was related to her chronic depression, the employer determined that she was ineligible under the FMLA because a new leave year began on January 1 and she had not worked 1250 hours in the preceding calendar year. The Court rejected the plaintiff’s claim that she was not given effective notice of her ineligibility.

According to the Court, “[w]hen an employee has a chronic health condition for which intermittent FMLA leave has been approved, the leave commences upon the occurrence of the first absence caused by that condition, and it extends to cover every other absence caused by that condition during the same twelve-month FMLA period.” Thus, once an employee is deemed eligible for FMLA leave, every period of intermittent leave taken during the rest of that FMLA leave year for the same medical condition is deemed to be covered – regardless of the intermittent periods of work and regardless of whether the employee had worked 1250 hours in the twelve months preceding each absence. “In other words, each absence subsequent to the first absence is not treated as a separate period of FMLA leave with its own commencement date. To hold otherwise would render the term “intermittent leave” meaningless and would effectively read it out of the FMLA since a period of intermittent leave “must, by definition, comprise periods . . . in which the employee is present at work.” Id. “Thus, a series of absences, separated by days during which the employee is at work, but all of which are taken for the same medical reason, subject to the same notice, and taken during the same twelve-month period, comprises one period of intermittent leave.”

On the other hand, that intermittent leave, “can only extend to the end of the twelve-month FMLA period in which it began. See id. at 681-83. Once a new twelve-month FMLA period begins, any additional absences caused by that same chronic condition would constitute a new period of intermittent FMLA leave. See id. at 681. Otherwise, there would be no point at which the initial period of intermittent FMLA leave ended and a new period commenced. Under that scenario, employees would never have to reestablish their eligibility for FMLA leave and would therefore be perpetually entitled to twelve weeks of FMLA leave per year based on a single eligibility determination . . . . a period of intermittent leave cannot last beyond the specific twelve-month FMLA period in which it begins. Therefore, absences caused by the same chronic condition, but occurring in different twelve-month FMLA periods, must constitute different periods of FMLA leave. And as different periods of leave, they must have different times of commencement. The clear consequence of this is that [plaintiff’s] unexcused absences
in January of 2005, if approved as FMLA leave, would have constituted a new period of FMLA leave that commenced in January of 2005. Therefore, [plaintiff’s] FMLA eligibility was appropriately reevaluated in January of 2005, and the defendant was correct in determining that [plaintiff] was not eligible for FMLA leave with respect to her unexcused absences.”

The Court rejected “the concept of intermittent leave . . . should be considered a single period of leave simply because it is a continuous period of absence. A period of intermittent leave, however, is not made up of a single continuous absence. As explained above, an employee does not begin a new period of leave with each new absence. An obvious corollary to this rule is that the simple act of returning from an absence does not itself terminate a period of intermittent leave. Since a period of intermittent leave is not terminated solely by the act of returning to work, there is no basis for saying that [plaintiff’s] intermittent leave terminated when she returned to work on January 15. But it is obvious that the period of intermittent leave that began in September of 2004 must end at some point. If the intermittent leave that began in September of 2004 instead ended upon the beginning of a new twelve-month FMLA period, then [plaintiff’s] request for FMLA leave in 2005, if approved, would have constituted a new period of FMLA leave commencing in January of 2005. Thus, the ultimate question presented by [plaintiff’s] argument is whether her intermittent leave in 2004 ended upon the occurrence of a new twelvemonth FMLA period, or whether it ended at some arbitrary point, such as her return to work on January 15. Since the act of returning to work itself does not terminate a period of intermittent leave, there is no principled reason to conclude that [her] intermittent leave should cover absences up to January 15, but not those occurring thereafter. There is, however, a logical basis for concluding that [her] intermittent leave terminated upon the beginning of a new twelve-month FMLA period. Because the FMLA speaks in terms of twelve-month periods, see 29 U.S.C. § 2612(a), the most reasonable conclusion is that a period of intermittent leave terminates when a new twelve-month FMLA period begins.”

The Court based its conclusion on a balancing of the needs of the employee with the needs of the employer. “It would be unduly burdensome on a business’s need to operate efficiently and profitably if the business were required to provide an employee with twelve weeks of intermittent leave per year perpetually based on the fact that the employee was eligible for FMLA benefits on a single day. In order to accommodate the reasonable interests of businesses, it must be possible to reevaluate employees’ eligibility at some point, and the only logical method of finding that point is to conclude that a new period of intermittent leave commences when a new twelve-month period begins.”

The Court also rejected the employee’s equitable estoppel and faulty notice arguments on the grounds that an ineligible employee is not entitled to FMLA leave even if the employer were late in notifying the employee of his or her eligibility.

Insomniacs can read the full opinion at http://www.ca6.uscourts.gov/opinions.pdf/08a0353p-06.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.