X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
It is common for employers to negotiate separation agreements with employees. The employee receives severance pay and in return waives any legal claims he or she may have against the employer-any claim that the termination of employment is unlawful, for example. However, an employee may be able to sign such an agreement, collect the money paid pursuant to it and still sue the employer for alleged violations of the Family and Medical Leave Act of 1993 (FMLA), 29 U.S.C. 2601 et seq. The act, among other things, gives eligible employees the right to unpaid leave after certain family events, such as birth or adoption, and for serious medical conditions. It prohibits retaliation or discrimination against any employee for the exercise of such rights. The Department of Labor’s (DOL) implementing regulations say that “[e]mployees cannot waive, nor may employers induce employees to waive, their rights under the FMLA.” 29 C.F.R. 825.220(d). Most would agree that a prohibition against employees waiving their prospective rights-i.e., agreeing that their employers need not, in the future, provide leaves of absence to the employee-is needed to accomplish the FMLA’s purposes. Congress concluded that the law was needed because in the employment marketplace, employees often were unable to obtain such leaves, and because employees nonetheless should be entitled to them. If an employer could tell an employee, “You can have this job, but only if you agree that the company does not have to give you any leaves of absence,” the congressional goal of assuring employees leaves of absence under certain circumstances would be thwarted. However, the sweeping language of the DOL regulation arguably goes further, broadly stating that employees cannot waive FMLA rights, with no words limiting the scope of that prohibition. Thus, the question arises: If an employee believes that she was denied FMLA rights, can the employee negotiate a settlement with the employer, or does the DOL regulation prohibit such a settlement without court or regulatory involvement? And does the answer depend on whether the rights are substantive FMLA rights (i.e., the rights to leave and reinstatement following a leave) or proscriptive FMLA rights (i.e., the right to be free from discrimination or retaliation for exercising FMLA rights)? Circuit court split On July 20, the 4th U.S. Circuit Court of Appeals held that the FMLA bars the waiver of both prospective and retrospective FMLA rights, except when a court or the DOL specifically approves the waiver. Taylor v. Progress Energy Inc., 415 F.3d 364 (4th Cir. 2005). According to the 4th Circuit, employees cannot waive FMLA claims as part of a severance agreement. The holding applies to the attempted waiver of both substantive and proscriptive FMLA rights. In Taylor, the plaintiff was terminated as part of a reduction in force. The stated reason for the plaintiff’s termination was a poor performance review, which in turn was the result of her missing excessive time from work due to a medical condition. Upon her termination, the defendant employer offered her additional benefits as part of a severance package, but only if she agreed to release the defendant from any liability stemming from her employment. The plaintiff signed the release, received payments pursuant to it and thereafter filed her complaint, alleging that her discharge violated the FMLA. The 4th Circuit held that the release was unenforceable against the FMLA claim, relying heavily on the broad language of the regulation. The court found no reason to limit the regulation to the attempted waiver of substantive and/or prospective rights. Rather, it found that the regulation unambiguously prohibits all types of purported FMLA waivers and that such is a permissible construction of congressional intent. Two prior courts had reached the same interpretation of � 825.220(d). See Dierlam v. Wesley Jessen Corp., 222 F. Supp. 2d 1052, 1055 (N.D. Ill. 2002); and Bluitt v. Eval Co. of America Inc., 3 F. Supp. 2d 761, 763 (S.D. Texas 1998). Plain language The 4th Circuit found that the DOL, in its comments to the regulations, confirmed that it had intended the broad impact suggested by the plain language of the regulation. Business interests had advocated for the explicit allowance of FMLA waivers as part of severance packages, as is the case with waivers of claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq. and the Age Discrimination in Employment Act (ADEA), 29 U.S.C. 621 et seq. In rejecting that proposal, the DOL said that prohibiting employees from waiving their FMLA rights was sound public policy. The 4th Circuit further found the regulation to be a reasonable interpretation of the FMLA and approved the DOL’s analogizing of the FMLA to the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. 201 et seq. The FLSA, among other things, requires employers to pay nonexempt employees overtime pay at 1 1/2 times their regular hourly rate for hours worked in excess of 40 in any given week. The court pointed to the FMLA’s legislative history, which indicated a preference for the FMLA to be implemented in the same manner as the FLSA. Additionally, the FMLA itself instructs the DOL to “receive, investigate, and attempt to resolve complaints” in the same manner as is done under the FLSA. 29 U.S.C. 2617(b)(1). Finally, in rejecting reliance on Title VII and the ADEA, the court indicated that the DOL was correct in interpreting the purposes behind the FMLA as more closely mirroring the purposes of the FLSA. The 4th Circuit found that the analogy to the FLSA supports the reasonableness of the regulation, as the courts generally have held that the FLSA does not permit waivers of claims without court or DOL approval. See, e.g., Barrentine v. Arkansas-Best Freight Sys. Inc., 450 U.S. 728, 740 (1981); D.A. Schulte v. Gangi, 328 U.S. 108, 114-16 (1946). Conflict with 5th Circuit Taylor conflicts with Faris v. Williams WPC-1 Inc., 332 F.3d 316 (5th Cir. 2003), in which the 5th Circuit held that the FMLA barred only the prospective waiver of substantive rights. Both cases centered on the proper interpretation of � 825.220(d), and the court in Taylor explicitly declared its disagreement with the court’s analysis in Faris. Under facts similar to those in Taylor, the 5th Circuit held that an employee’s release of all rights in a severance agreement served to bar the employee’s subsequent FMLA retaliation claim against the employer. In Faris, the 5th Circuit differentiated between waiver of substantive rights during employment and the waiver of proscriptive rights upon termination. According to the court, the prohibition of � 825.220(d) against waiver of “rights under the FMLA” is limited to substantive rights. The court concluded that the plaintiff’s retaliation claim was a type of claim that protects substantive rights under the FMLA, but is not a “right” in and of itself. Section 825.220 is titled, “How are employees protected who request leave or otherwise assert FMLA rights?” In Taylor, the 4th Circuit concluded that “rights” included proscriptive actions, such as claims for retaliation and discrimination under the FMLA. The Faris court held otherwise, finding that although substantive rights could not be waived prospectively, post-dispute claims could be waived by private agreement. 5th Circuit’s different reasoning Unlike the 4th Circuit, the Faris court relied on Title VII and the ADEA to support its holding. The court found no good reason why Congress would bar waivers under the FMLA yet permit them under the ADEA and Title VII. The court concluded that the DOL would not have intended to depart from the ADEA and Title VII without explicitly stating such an intent in its FMLA regulations. The 5th Circuit made no mention of the FLSA in its opinion, though there is some support for the 5th Circuit’s approach, even in FLSA precedent. Supreme Court precedent prohibiting waiver of FLSA claims has involved substantive claims, but at least one court has held that a claim for retaliation under the FLSA may be waived by private agreement. Dorner v. Polsinelli, White, Vardeman & Shalton, 856 F. Supp. 1483, 1489 (D. Kan. 1994). Therefore, whether the FLSA provides clear authority for the prohibition against waiver of proscriptive FMLA rights is debatable. Other cases have also assumed, without substantive discussion, that knowing and voluntary waivers of FMLA claims in severance agreements are permissible. See, e.g., Halvorson v. Boy Scouts of America, No. 99-5021, 2000 WL 571933, at 2-3 (6th Cir. 2000); Riddell v. Med. Inter-Ins. Exchange, 18 F. Supp. 2d 468, 471 (D.N.J. 1998). The implications of the 4th Circuit’s decision are significant for the many employers who condition severance benefits on employee agreements to release the employer from liability. The implications also are significant for situations where an employee threatens litigation and both employer and employee wish to settle, but the potential for unenforceability presents a potential obstacle. Employers already have lived with this issue under the FLSA, as those rights cannot be waived. Many employers address this by inserting language in employee release forms, whereby the employee acknowledges that he or she has received all compensation that is due, has worked no overtime without full compensation, and so on. Thus, the employee acknowledges facts that, if taken as true, mean that the employee has no FLSA claim. A similar acknowledgment of facts that, if taken as true, mean that the employee has no FMLA claim also may be prudent. Thus, the employee could be asked to acknowledge that he or she has received all leaves of absence and reinstatements. Better yet, such language could be tailored to the employee’s circumstances-for example, an acknowledgement that the employee has not been denied any requested leaves of absence and that the employee has been reinstated to his or her prior position following all such leaves. This is not a complete solution. For example, arguably, the employee cannot really acknowledge that the decision to terminate his or her employment was not retaliatory, as the employee does not have first-hand knowledge of the reason for the decision. However, such acknowledgements of fact should reduce the employer’s risk. Employers also need to consider whether to seek court or DOL approval of release agreements and settlements. There are several drawbacks to this. First, doing so involves expense and delay. Second, it may prod the employee to retain counsel after the employee had decided not to do so to minimize her own expenses. Third, the court or the DOL may not approve the settlement. On the other hand, the failure to obtain such approval places in question whether there is an enforceable waiver of the employee’s FMLA rights. In circumstances when it is clear that there is a particular FMLA issue, it seems prudent for the employer nonetheless to seriously consider seeking such approval, notwithstanding the drawbacks. For example, when an employee has retained counsel, and that counsel has sent the employer a letter threatening litigation due to alleged FMLA violations, the prudent employer likely will want to obtain court or DOL approval as a precondition to paying to settle the claims-except, perhaps, within the 5th Circuit. Dismissal pact not enough Even when there is a pending FMLA lawsuit, the traditional stipulation to dismiss, with the statement that the parties have reached a confidential settlement agreement and wish to dismiss the case with prejudice pursuant to the settlement, may be insufficient. If court or DOL approval is needed, there is room to argue that the court has not approved a settlement unless the court was advised of the terms. See, e.g., Lynn’s Food Stores Inc. v. U.S., 679 F.2d 1350, 1354 (11th Cir. 1982) (suggesting that court review of the actual agreement is needed for “court approval” of FLSA waiver). Employers will want to keep abreast of developments in this area. After all, paying to settle with an employee and having the employee nonetheless be able to pursue his claims is highly undesirable, to say the least, from the employer’s perspective. David K. Haase is a partner and co-chairman of the labor and employment practice at Chicago’s Jenner & Block, where John W. Drury is an associate. They can be reached via e-mail, respectively, at [email protected] and at [email protected].

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.