The scenario is familiar to management counsel and their clients: An employee is on the brink of termination when he or she calls in with a doctor’s note triggering leave under the Family and Medical Leave Act. The client is frustrated and asks: “What can we do?”

In her May 16 opinion in Johnson v. Resources for Human Development , Judge Anita B. Brody of the U.S. District Court for the Eastern District of Pennsylvania gave some guidance, while also discussing the “key employee” exception to reinstatement under the FMLA.

Termination for performance considered

According to Brody’s opinion, Angie Johnson was director of RHD’s Adolescent Career and Employment Services program from 2001 through early 2009. RHD is a nonprofit corporation providing human services programs in a number of states. The program under Johnson’s direction (called ACES) provides training for at-risk youths on finding and securing employment. The program receives funding from the Philadelphia Department of Human Services.

In fall 2008, DHS considered suspending its funding for ACES because of budgetary concerns. In this same time frame, Johnson’s supervisor, Jennifer Arthur-Lewis, claims to have suggested to her supervisors, Robert Fishman and Richelle Gunter, that they should consider terminating Johnson for poor performance, the opinion said. There appears to have been no documentation supporting Arthur-Lewis’ recommendation or that she made the termination “suggestion.”

A few months later, in December, Fishman met with Johnson to discuss her performance. During this meeting, Fishman confronted Johnson about a day on which she was absent in November. When Johnson said that she was at a doctor’s office, Fishman demanded that she provide the name and phone number of the doctor so that her claim could be verified. He warned her that if she was unable to do so by the end of the day, she would be terminated. According to the opinion, Johnson did not produce the information. Instead, she visited a medical provider claiming anxiety and, the next day, called in sick while seeking leave under the FMLA. Her leave was approved.

Fishman testified that he recommended that Johnson be terminated, but that his staff did not act on his recommendation because of Johnson’s FMLA leave.

‘Key Employee’ Status

In approving her FMLA leave, RHD advised Johnson that she was a “key employee” under the FMLA and “accordingly, if it is determined that there is a need to replace your functions during your absence, RHD is permitted to do so under the FMLA.”

Johnson’s duties were temporarily assumed by Arthur-Lewis’ assistant and Johnson’s replacement was hired in January, while Johnson remained on leave, Brody said.

No Return from FMLA Leave

In late February, Johnson visited RHD and advised that she was cleared to return to her employment. Richelle Gunter, Arthur-Lewis’ supervisor, told Johnson that she had been terminated and gave her a letter explaining that because she was a “key employee” RHD had not held her position and, therefore, she had been replaced. Johnson was also told that she was ineligible for rehire because of “‘behavioral issues in the months and days preceding your disability leave,’” the opinion said.

Johnson filed a three-count complaint. In addition to her FMLA claim, she alleged that she was terminated in violation of the Pennsylvania Whistleblower Law and wrongfully discharged for having complained of inappropriate behavior by a subordinate in 2004, five years before her termination. The court granted RHD’s motion for summary judgment on these state-law claims, finding that there was no evidence of a causal connection between the 2004 complaints and Johnson’s termination.

Johnson claimed both that RHD had interfered with her FMLA rights — that is, that she had been denied benefits under the act — and that she had been retaliated against for having invoked her FMLA rights. RHD’s defenses were that Johnson was a “key employee” who was not entitled to reinstatement and, alternatively, that Johnson would have been terminated even had she not taken FMLA leave.

Two-part test for No Reinstatement

The court began by noting that both of RHD’s defenses were “affirmative defenses” and that RHD bore the burden of establishing both.

Initially, with respect to the “key employee” exemption, the act provides, in relevant part, that employers may deny restoration to an employee who is “among the highest paid 10 percent of employees” employed by the employer within a 75 mile radius if (a) “such denial is necessary to prevent substantial and grievous economic injury to the operations of the employer and (b) the employer notifies the employee of [its intention] to deny restoration … at the time the employer determines that such injury would occur.” The court emphasized that the relevant inquiry is not whether the employee’s absence would cause injury, but whether restoration after the leave would cause “substantial and grievous economic injury.”

While there was no dispute that Johnson was properly classified as a key employee, the court found that there was no evidence that her reinstatement would have caused the type of injury required. Rather, RHD simply asserted that Johnson’s position was not available at the time she sought to return. In fact, Gunter, who notified Johnson of her termination, testified during discovery that she believed that Johnson had been terminated when she was advised of her status as a key employee. Summary judgment on this basis was, therefore, denied.

No Documentation of Termination ‘Decision’

The court then addressed RHD’s defense that Johnson was not entitled to reinstatement because she would have been fired earlier had she not taken FMLA leave. While RHD argued that Johnson’s supervisors had decided to terminate her concurrent with her FMLA request, the alleged performance issues in the months preceding Johnson’s leave were not documented — creating an issue of fact as to the argument that the decision to terminate Johnson was the culmination of RHD’s frustration with her performance. Moreover, while Fishman testified that he believed Johnson should have been terminated for lying about her November absence, Gunter actually terminated Johnson and she said that she was not instructed to do so.

The key employee exemption is one that is not litigated frequently, and the case serves as a reminder that the employer’s focus must be on the effect of the employee’s return, rather than his/her absence. From a management perspective, the case re-emphasizes the importance of documentation in making employment decisions.

Sid Steinberg is a partner in Post & Schell’s business law and litigation department. He concentrates his national litigation and consulting practice in the field of employment and employee relations law. He has lectured extensively on all aspects of employment law, including Title VII, the FMLA and the ADA.