Sixth Circuit Affirms Dismissal of FMLA Claims Without Actual Damages

Last month, the Sixth Circuit affirmed dismissal of FMLA interference and retaliation claims brought by a terminated warehouse worker, but remanded for the court to consider her state law claims.  Thiess v. Walgreen Company, No. 14-3892 (6^th Cir. 12-7-15).  The plaintiff could not show that she suffered any compensable harm from the alleged FMLA interference.  Her allegation “that she would have taken more absences if her request had been granted in no way proves that [the employer] interfered with her request in any way.”  She also could not show unlawful retaliation when the employer had an honest belief following its internal investigation that she was properly terminated in accordance with company policy for fabricating assault allegations against a co-worker and assaulting him.  Finally, the Court remanded the case for resolution of her remaining claims.

According to the Court’s opinion, the plaintiff failed to provide medical certification to support her request for intermittent FMLA leave despite many opportunities and reminders.  In the meantime, the employer provisionally issued disciplinary actions for her unexcused absences that she alleged should have been covered by her FMLA request.   A few months later, she alleged that a co-worker assaulted her and filed a criminal complaint against him.  Following separate investigations by the police and the employer, which included video evidence, both the police and the employer determined that the plaintiff had falsely accused her co-worker and had actually assaulted him.  Accordingly, she was terminated. 

The plaintiff brought suit in state court alleging sexual harassment, discrimination and retaliation, and violation of the FMLA.   The employer removed to federal court on the basis of diversity jurisdiction.  After dismissing the FMLA claims on summary judgment, the trial court remanded the remaining claims back to state court. 

The Court of Appeals found that the plaintiff could not show FMLA interference because she suffered no financial harm from the employer’s failure to approve her FMLA leave.  Although she alleged that she would have taken more time off work than she actually did if it had been approved and if she had not been provisionally disciplined, she suffered no compensable damages from this alleged harm. “[T]he FMLA does not provide a remedy “unless the employee has been prejudiced by the violation.”  

The FMLA provides that an employee whose rights are interfered with is entitled to

damages equal to the amount of any wages, salary, employment benefits, or other compensation denied or lost to such employee by reason of the violation; or in a case in which wages, salary, employment benefits, or other compensation have not been denied or lost to the employee, any actual monetary losses sustained by the employee as a direct result of the violation.

29 U.S.C. § 2617(a)(1)(A)(i). If an employee does not suffer any damages, then the FMLA does not provide a remedy.

The Court also rejected the FMLA retaliation claim because the plaintiff could not show that the employer lacked on honest belief that she had violated company policy by fabricating assault allegations against a co-worker and assaulting him.  Therefore, there was insufficient evidence that it terminated her on account of her FMLA requests instead of its proffered reasons:

In deciding whether an employer reasonably relied on the particularized facts then before it, we do not require that the decisional process used by the employer be optimal or that it left no stone unturned.” . . . In reviewing Walgreens’s decision to fire Theiss, we are looking for “error on the part of the employer that is too obvious to be unintentional.”  . . . In light of this standard, we find nothing in the record showing any gross deficiency or oversight in Walgreens’s investigation. There is no evidence showing that Walgreens’s reasons for firing Theiss were dishonest, pretextual, not sincerely held, or discriminatory. On the contrary, Walgreens had a specific policy that provided for immediate termination in cases of “harassment or horseplay” and “falsifying . . . documents.” Since Walgreens determined—after due investigation—that this is precisely what Theiss had done, her termination was directly in line with a clearly established company policy.

Finally, the Court found that the case had been improperly remanded back to the state court after the dismissal of the FMLA claims.  The case had been removed to federal court on the basis of diversity jurisdiction, not just federal question jurisdiction.  Accordingly, the court had jurisdiction over the state law claims on the basis of diversity of citizen between the parties.

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 Finds Unpaid Wage Suit Was Really a Request for IRS Refund

Many states like Ohio have their own wage payment statutes which require employers to pay employees all of their wages by a particular date unless the employee has authorized certain deductions or unless deductions are required by law (such as payroll taxes). When employees are not paid (at all or on time), they not only sue for breach of contract, but also for violation of the wage payment statute.  However, last month, the Sixth Circuit found one such lawsuit for unpaid wages was really a request for an IRS refund because the employer had purportedly deducted not only the employee’s share of payroll taxes from her wages, but also its share of the payroll taxes.   Berera v. Mesa Medical Group, PLLC., No. 14-5054 (6^th Cir. 2-19-15).  According to the Sixth Circuit, the plaintiff’s only remedy for these improper payroll deductions was to seek a refund from the IRS instead of suing her employer under the state wage payment statute for wrongfully deducting amounts from her wages.  Therefore, it dismissed her suit for unpaid wages and directed her to seek repayment only from the IRS.

According to the Court’s opinion, the plaintiff discovered after her employment ended that her W-2 tax form did not accurately reflect the wages she had earned.  A few months later, she filed a class action in state court and alleged under the state wage payment law that that the employer had forced her and her co-workers to pay the employer’s share of payroll taxes and caused them to receive less money than they had earned as wages. After learning that the basis of the lawsuit concerned wrongfully withheld payroll taxes, the employer removed the case to federal court and moved to dismiss.  The trial court found that the allegations actually stated a claim for a tax refund, even if the employer failed to remit the wrongfully withheld payroll taxes to the IRS, because the amounts were deducted as a tax. The Sixth Circuit affirmed.

Section 7422(a) of the Internal Revenue Code governs tax-refund lawsuits. It provides:   

No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the [IRS], according to the provisions of law in that regard, and the regulations of the [IRS] established in pursuance thereof.

26 U.S.C. § 7422(a).

The exhaustion-of-remedies requirement in § 7422(a) is mandatory. Under § 7422(a), a taxpayer is barred from bringing an action in federal court for a refund of any internal revenue tax or sum erroneously, illegally, or wrongfully assessed “until a claim for refund . . . has been duly filed with the [IRS].”

Both the Third and Seventh Circuits have held that employees cannot sue their employers for wrongfully withheld payroll taxes, but must instead, seek a refund from the IRS. Those courts concluded that the federal tax laws completely pre-empted any inconsistent state law remedy.  The Sixth Circuit declined to find complete pre-emption, but agreed that the plaintiff must exhaust her administrative remedies before pursuing litigation.  

The Court rejected the plaintiff’s argument that the IRS would not be able to provide her with a remedy if the employer had failed to remit the wrongfully withheld payroll taxes.  Instead, the Court agreed with the other Circuits that if the employer had failed to remit the wrongfully withheld taxes to the IRS, the IRS was capable of collecting it.

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.