Employers Face New Risks Including FMLA Claims In Their Releases

Patrick Hicks Esq. & Deborah L. Westbrook, Esq.
September 15, 2005 — 2,740 views  
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The common employer practice of including Family and Medical Leave Act (FMLA) claims in general releases is now in jeopardy after the Fourth Circuit’s recent decision in Taylor v. Progress Energy, No. 04-1525 (4th Cir. July 20, 2005). Although it is unclear whether other U.S. Courts of Appeals or the U.S. Supreme Court will follow Taylor, employers in the Fourth Circuit must now seek prior approval by the U.S. Department of Labor (DOL) or a court for a release of FMLA claims to be valid.

In May 2003, Barbara Taylor brought a lawsuit against her former employer, Progress Energy, alleging that the company violated the FMLA in connection with her termination in 2001. In a motion for summary judgment, Progress Energy argued that Taylor waived her FMLA claims when she signed a general release and severance agreement in exchange for a $12,000 severance package. Although the release did not mention the FMLA by name, it contained a catch-all provision purportedly releasing all claims arising under “any other federal, state or local law.”

Despite a DOL regulation that seemingly prohibits such releases, Progress Energy won on summary judgment. The regulation (29 C.F.R. § 825.220(d)) provides that “employees cannot waive, nor may employers induce employees to waive, their rights under [the] FMLA.” Progress Energy argued the regulation only prohibits the prospective waiver of substantive FMLA rights, namely, the employee’s right to take up to 12 weeks of unpaid leave or to work on a reduced schedule, as well as the right to reinstatement. Indeed, the Fifth Circuit had reached this conclusion in Faris v. Williams WPC-I, Inc., 332 F.3d 316 (5th Cir. 2003), holding that the regulation did not prohibit the waiver of damages claims under the FMLA.

On appeal, however, the Fourth Circuit concluded that FMLA claims, whether prospective or retrospective, can only be waived under DOL or court supervision. As support for its holding, the Taylor court noted that in the Preamble to the FMLA implementing regulations, the DOL had likened the FMLA to the Fair Labor Standards Act, the provisions of which cannot be waived without DOL or court approval. The court found that the plain language of the regulation prohibits the waiver or release of all FMLA claims, prospectively or retrospectively, including claims for damages. The court ultimately held that a requirement of supervised waivers was based on a permissible construction of the FMLA and was consistent with the regulatory scheme designed to guarantee family and medical leave to all covered employees.

Although this decision currently applies to employers in the Fourth Circuit –Maryland, Virginia, West Virginia, North Carolina and South Carolina – it is not yet clear what position the other Courts of Appeals will take on this issue and whether they will adopt the reasoning of Taylor or the Fifth Circuit in Faris1. As this type of Circuit split may need to be resolved by the Supreme Court, employers should be cautious when drafting releases. Currently, there is no definitive answer as to whether FMLA claims can or cannot be settled without prior approval by the DOL or a court.

In addition, although Taylor does not bar employers from including specific statutes in the release provisions of a severance agreement, employers must now be careful which statutes they include in these agreements. Employers should try to avoid the common catch-all used by the defendant in Taylor — “any other federal, state or local law” — and instead tailor the terms of the release to particular claims and individual jurisdictions. Some case law suggests that an employer that asks an employee to release claims that cannot be privately released may be guilty of fraud. With these considerations in mind, employers should carefully review and analyze their current release language.

The issue may be avoided by limiting the breadth of the release or including a statement that the agreement does not govern claims that cannot be released by private agreement. Similarly, employers should be aware of the inherent risks of listing various statutes in a release or waiver agreement. The inclusion of a laundry list of claims may be interpreted as excluding other statutes from its coverage. Because the wording of these clauses is fact specific and nuanced, employers should consult counsel before continuing to use general releases implicated by the Taylor decision. Finally, employers may want to encourage employees to file complaints with DOL or the courts, on the condition that an accompanying agreement and release will be approved. Of course, this risks disapproval or an exploration of other issues by the reviewing entity.

1 The Fifth Circuit includes Louisiana, Mississippi and Texas.

Patrick Hicks is the managing shareholder of the Las Vegas and Reno offices of Littler Mendelson, the nation’s largest labor and employment law firm exclusively representing management. Deborah Westbrook is an associate in the firm’s Las Vegas office. If you would like further information, you are encouraged to contact a Littler attorney at 1.888.LITTLER, [email protected], Mr. Hicks at [email protected] or Ms. Westbrook at [email protected]

Patrick Hicks Esq. & Deborah L. Westbrook, Esq.

Littler Mendelson, P.C.