Court Holds that FMLA Provision in Handbook May Create Employer Liability Despite Employee’s Ineligibility Under FMLA Statute

Robin Foret
August 4, 2008 — 2,740 views  
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The United States Seventh Circuit Court of Appeals in Peters v. Gilead Sciences, Inc., 2008 WL 2719579 (C.A. 7 (Ind.)), recently concluded that an employee may rely on language contained in an employee handbook to support his claim for family and medical leave benefits regardless of the employee’s actual ineligibility for such benefits under the Family and Medical Leave Act (“FMLA” or the “Act”).  As explained further, this decision highlights the importance of a carefully drafted employee handbook, as well as proper attention to detail when determining whether an employee is eligible for various company benefits.  Poorly drafted handbooks may increase liability by creating contractual obligations that would not otherwise exist.  Even without the existence of a contract, courts are sometimes inclined to enforce handbook provisions on the theory that such promises should be enforced in certain circumstances. 

 

The FMLA applies to employers with 50 or more employees, and allows eligible employees to take up to 12 weeks of unpaid leave (26 weeks for military personnel) for certain enumerated family-related situations, including a serious medical condition of the employee or a member of the employee’s immediate family.  To be eligible, an employee must have worked for his or her employer for at least 12 months and for at least 1,250 hours during the previous 12 month period.  In addition, an employee is generally not eligible if he or she does not work at a location that employs 50 or more employees within a 75 mile radius (sometimes called the 50/75 Rule). 

 

In Peters, it was undisputed that the employee was not eligible for FMLA benefits for failure to satisfy the 50/75 Rule.  Unfortunately, Gilead’s employee handbook did not explain this requirement, and instead, specified only the 12 month/1250 hour prerequisite to FMLA coverage.  Peters worked for Gilead Sciences, Inc. (“Gilead”), a pharmaceutical company, as a Therapeutic Specialist.  After working for the company more than a year, he reinjured his neck and shoulder, and required surgery.  He requested FMLA leave under the terms set forth in Gilead’s employee handbook.  Without realizing that Peters was ineligible for benefits, the company sent a letter to Peters confirming his eligibility status, and setting forth a return to work date.  Moreover, Gilead had calculated the return to work date incorrectly, and had requested that Peters return to work approximately one month before the expiration of the 12 weeks permitted under the FMLA.  When Peters failed to return to work in April of 2003 instead of the proper May date, the company replaced Peters with another employee.  The company then offered Peters an alternative position as a Senior Sales Analyst, which Peters declined to accept.  Peters sued Gilead for violation of his FMLA rights.

 

The court’s decision – the court concluded that although it was undisputed that Peters was not eligible for FMLA benefits under the Act, Peters could pursue an FMLA claim under either a “breach of contract” or a “promissory estoppel” theory.  Accordingly, Gilead’s argument that Peters had no claim for benefits because he was, in reality, ineligible under the Act was rejected.  The court explained that the handbook provision could have created a contractual obligation on the part of Gilead to provide family and medical leave benefits by neglecting to explain the 50/75 Rule requirement.  Even if no contract was created, the employee could rely on the theory of “promissory estoppel” to allow the court to enforce a promise that the employee has relied upon based on equitable principles (when it would be unjust not to enforce the promise). 

 

What happened –  the company made at least two critical mistakes: (1) the handbook did not explain that certain employees like Peters who worked at locations with less than 50 employees in a 75 mile radius were not eligible for FMLA benefits; and (2) the company failed to identify that Peters was not an eligible employee under the Act.  Instead, Gilead sent Peters a letter acknowledging FMLA leave and designating a return to work date .  These errors were then compounded when the employer miscalculated the employee’s required return date under the Act, which resulted in Peters being replaced by another employee before the allotted 12 week leave period had expired. 

 

Avoid the pitfalls – there are several precautions to avoid potential pitfalls that can cost a company significant time and money:

 

1.  The handbook – A well drafted employee handbook contains an introductory section explaining that nothing contained in the handbook shall create a contract, and that all provisions can be modified at the sole discretion of the employer, even without notice to employees.  Despite this caveat, however, it is still good practice to make sure that all handbook provisions are properly drafted to meet the specific needs of your particular business and its employees.  Remember that one size does not fit all!  Obtaining standard boilerplate language that may not be suitable for your industry, or which is not tailored to your business, can lead to serious problems. 

 

2.  Record keeping – The Peters case also highlights the importance of accurate record keeping.  When evaluating an employee’s request for company benefits, it is important to determine whether that employee is eligible.  For example, has the employee worked for the company a sufficient amount of time?  Is he or she otherwise qualified under other requirements such as the FMLA’s 50/75 Rule?

 

3.  Take responsibility – When mistakes occur, take responsibility for the error and correct the problem going forward.  In many instances, when it appears that an employer has not acted in good faith, the employer will be at a disadvantage in the lawsuit right from the beginning.  In Peters, the handbook was not the only problem.  The employer sent a letter to the employee confirming that the company had recognized his eligibility for benefits.  Moreover, the return to work date was miscalculated and the employee replaced by another worker prematurely.  With that many mistakes, Gilead should probably have acknowledged the mistake, paid the employee and taken measures to make sure the same mistake did not occur twice.  No doubt, this employer spend a large amount on attorney’s fees fighting this uphill battle, with poor results.  

 

 

The information contained in this article is not designed to address specific situations, and does not include rules and regulations that apply to all states.  If you have questions concerning this topic, you should consult with legal counsel of your choice to obtain advice on various fact specific matters.  

Robin Foret

The Foret Law Firm

Robin Foret practices in the areas of employment law, commercial litigation and specialty insurance defense claims. She handles a variety of employment matters such as theft of trade secrets, breach of employment agreements, non-competition agreements, wage and hour issues under the Fair Labor Standards Act (FLSA), discrimination and harassment issues under Title VII of the Civil Rights Act of 1964 (Title VII) and the Texas Commission on Human Rights Act (TCHRA), the Americans with Disabilities Act (ADA), Family Medical Leave Act (FMLA) issues, and the Sarbanes-Oxley Act (SOX). Robin has handled a wide variety of employment law matters for employers, as well as for executive-level employees, before agencies, and state and federal courts.