Circuit Split Develops on FMLA Waivers

The FMLA: A Brief History

Congress passed the FMLA “to balance the demands of the workplace with the needs of families, to promote the stability and economic security of families, and to promote national interests in preserving family integrity.” Congress gave the DOL the authority to promulgate regulations under the FMLA. Many of these regulations have generated great controversy, with a number of courts finding that the DOL has, on occasion, overstepped its authority in implementing FMLA regulations.

In Ragsdale, the Supreme Court found that Section 825.700 of the regulations, which provided an employee with potentially well more than 12 weeks of leave if an employer forgot to tell the employee that leave was FMLA qualifying, was well beyond the scope of the Act and therefore not enforceable. In the aftermath of Ragsdale, the DOL has promised repeatedly that it will promulgate new regulations, but it has yet to do so.

Section 825.220 has also faced challenges. This Section includes a provision on how employees are protected when asserting their rights under the Act, and under what circumstances employees can waive their FMLA rights. Section 825.220(d) provides that “employees cannot waive, nor may employers induce employees to waive, their rights under FMLA.”

Federal courts have taken different approaches to the issue of whether FMLA rights can be waived. In unpublished decisions in Halvorson v. Boy Scouts of America, 2000 U.S. App. LEXIS 9648 (6th Cir. 2000) and Schoenwald v. Arco Alaska, Inc., 1999 U.S. App. LEXIS 20955 (9th Cir. 1999), courts found a release of FMLA rights effective when former employees had deposited severance checks before repudiating the agreements and pursuing legal action. The validity of Section 825.220(d) was not considered. In Bluitt v. Eval Co. of America, Inc., 222 F. Supp. 2d 1052 (N.D. Ill. 2002) and Dierlam v. Wesley Jessen Corp., 3 F. Supp. 2d 761 (S.D. Tex. 1998), courts upheld regulation, stating that its plain language provides that FMLA claims cannot be waived. Period. With this background, the Fifth Circuit and the Fourth Circuit addressed the issue head on.

The Fifth Circuit Decision

In Faris v. WPC-I, Inc, Faris had worked for Nextira for about 2 years. When she was fired for poor performance, Faris signed a release in exchange for severance pay that she would not otherwise get. After signing the release and depositing the check, Faris sued, alleging retaliatory discharge for asserting FMLA rights. The District Court denied Nextira's motion for summary judgment. On appeal, the Fifth Circuit reversed and held that the post-termination waiver of FMLA claims is enforceable. The court found that Section 825.220(d) permits post-termination waivers of substantive FMLA rights. The Fifth Circuit stated that it could conceive of no good reason “why the government would proscribe waiver for FMLA retaliation claims and yet favor waiver of claims for age discrimination under ADEA and for civil rights violations under Title VII.”

The Fourth Circuit Decision

In Taylor v. Progress Energy Inc., the Fourth Circuit took a different tack. After about seven years of work, Taylor began experiencing problems with her right leg, which required her to miss work for testing and treatment. She asked about taking FMLA leave, but was (incorrectly) told that since she was never absent from work for more than 5 consecutive days, she was not entitled to leave under the FMLA. In late 2000, tests showed an abnormal mass in Taylor's right leg. Surgery was required and Taylor was absent from work for 6 weeks.

In early 2001, Taylor received her performance evaluation, graded as poor “because of [her] health-related absences.” In March, Taylor learned that she would be laid off, along with other employees. She signed a severance agreement that contained a release of rights and, in return, received a check for nearly $12,000.

She then sued, alleging violation of her FMLA rights. The District Court (relying on Faris) granted summary judgment for Progress, holding that Section 825.220(d) did not make the release unenforceable. The Fourth Circuit reversed. Among other things, “the regulation's plain language,” said the court, “prohibits both the retrospective and prospective waiver or release of an employee's … FMLA rights, both substantive and proscriptive (the latter preventing discrimination and retaliation).”

The Fourth Circuit examined other DOL regulations and comments, which referred to the no-waiver provision as “sound public policy,” consistent with waiver requirements under the FLSA. This parallel with the FLSA, according to the court, indicated that the DOL intended waivers of FMLA claims — just like FLSA claims — to only be valid with prior DOL or court approval. The court then noted that “the district court's reliance on the Fifth Circuit's decision in Faris was misplaced.”

The court also found Section 825.220(d) consistent with the purpose of the FMLA. The Act was designed to balance the needs of job and family: if the regulation was struck down, employers “could systematically violate the FMLA and gain a competitive advantage by buying out FMLA claims at a discounted rate.”

Conclusion

The split between the Fourth and Fifth Circuits, two courts that traditionally follow the same conservative path in employment cases may be the beginning of an emerging split among appellate courts on the validity of FMLA waivers. What does this split mean for employers? It means, at least in the Fourth Circuit, you may not be buying the full release you want from an exiting employee when you say “don't go away mad, just go away.”

Almost any employer providing exit pay beyond that to which an employee is otherwise entitled expects a release of rights in return. Most waiver agreements cover claims that could be raised under Title VII, the ADA, the ADEA, the FMLA, as well as state anti-discrimination laws.

It just got harder to get a valid release of FMLA claims in the Fourth Circuit. In Taylor v. Progress Energy, Inc., 2005 U.S. App. LEXIS 14650 (4th Cir. 2005), the court held that any FMLA waiver, like waivers under the FLSA, have to be supervised and approved by the U.S. Department of Labor. In so doing, the court upheld the validity of Section 825.220(d) of the DOL's regulations regarding waivers.

The opinion also created a Circuit split by rejecting the Fifth Circuit's decision in Faris v. WPC-I, Inc. , 332 F.3d 316 (5th Cir. 2003), which held that retrospective waivers of the FMLA need not be supervised by the DOL. This significant difference of opinion on the validity of the DOL's regulation brings back memories of Ragsdale v. Wolverine Worldwide, Inc. , 535 U.S. 81(2002) and, like Ragsdale, it may take Supreme Court involvement to resolve this issue.

The FMLA: A Brief History

Congress passed the FMLA “to balance the demands of the workplace with the needs of families, to promote the stability and economic security of families, and to promote national interests in preserving family integrity.” Congress gave the DOL the authority to promulgate regulations under the FMLA. Many of these regulations have generated great controversy, with a number of courts finding that the DOL has, on occasion, overstepped its authority in implementing FMLA regulations.

In Ragsdale, the Supreme Court found that Section 825.700 of the regulations, which provided an employee with potentially well more than 12 weeks of leave if an employer forgot to tell the employee that leave was FMLA qualifying, was well beyond the scope of the Act and therefore not enforceable. In the aftermath of Ragsdale, the DOL has promised repeatedly that it will promulgate new regulations, but it has yet to do so.

Section 825.220 has also faced challenges. This Section includes a provision on how employees are protected when asserting their rights under the Act, and under what circumstances employees can waive their FMLA rights. Section 825.220(d) provides that “employees cannot waive, nor may employers induce employees to waive, their rights under FMLA.”

Federal courts have taken different approaches to the issue of whether FMLA rights can be waived. In unpublished decisions in Halvorson v. Boy Scouts of America, 2000 U.S. App. LEXIS 9648 (6th Cir. 2000) and Schoenwald v. Arco Alaska, Inc., 1999 U.S. App. LEXIS 20955 (9th Cir. 1999), courts found a release of FMLA rights effective when former employees had deposited severance checks before repudiating the agreements and pursuing legal action. The validity of Section 825.220(d) was not considered. In Bluitt v. Eval Co. of America, Inc. , 222 F. Supp. 2d 1052 (N.D. Ill. 2002) and Dierlam v. Wesley Jessen Corp. , 3 F. Supp. 2d 761 (S.D. Tex. 1998), courts upheld regulation, stating that its plain language provides that FMLA claims cannot be waived. Period. With this background, the Fifth Circuit and the Fourth Circuit addressed the issue head on.

The Fifth Circuit Decision

In Faris v. WPC-I, Inc, Faris had worked for Nextira for about 2 years. When she was fired for poor performance, Faris signed a release in exchange for severance pay that she would not otherwise get. After signing the release and depositing the check, Faris sued, alleging retaliatory discharge for asserting FMLA rights. The District Court denied Nextira's motion for summary judgment. On appeal, the Fifth Circuit reversed and held that the post-termination waiver of FMLA claims is enforceable. The court found that Section 825.220(d) permits post-termination waivers of substantive FMLA rights. The Fifth Circuit stated that it could conceive of no good reason “why the government would proscribe waiver for FMLA retaliation claims and yet favor waiver of claims for age discrimination under ADEA and for civil rights violations under Title VII.”

The Fourth Circuit Decision

In Taylor v. Progress Energy Inc., the Fourth Circuit took a different tack. After about seven years of work, Taylor began experiencing problems with her right leg, which required her to miss work for testing and treatment. She asked about taking FMLA leave, but was (incorrectly) told that since she was never absent from work for more than 5 consecutive days, she was not entitled to leave under the FMLA. In late 2000, tests showed an abnormal mass in Taylor's right leg. Surgery was required and Taylor was absent from work for 6 weeks.

In early 2001, Taylor received her performance evaluation, graded as poor “because of [her] health-related absences.” In March, Taylor learned that she would be laid off, along with other employees. She signed a severance agreement that contained a release of rights and, in return, received a check for nearly $12,000.

She then sued, alleging violation of her FMLA rights. The District Court (relying on Faris) granted summary judgment for Progress, holding that Section 825.220(d) did not make the release unenforceable. The Fourth Circuit reversed. Among other things, “the regulation's plain language,” said the court, “prohibits both the retrospective and prospective waiver or release of an employee's … FMLA rights, both substantive and proscriptive (the latter preventing discrimination and retaliation).”

The Fourth Circuit examined other DOL regulations and comments, which referred to the no-waiver provision as “sound public policy,” consistent with waiver requirements under the FLSA. This parallel with the FLSA, according to the court, indicated that the DOL intended waivers of FMLA claims — just like FLSA claims — to only be valid with prior DOL or court approval. The court then noted that “the district court's reliance on the Fifth Circuit's decision in Faris was misplaced.”

The court also found Section 825.220(d) consistent with the purpose of the FMLA. The Act was designed to balance the needs of job and family: if the regulation was struck down, employers “could systematically violate the FMLA and gain a competitive advantage by buying out FMLA claims at a discounted rate.”

Conclusion

The split between the Fourth and Fifth Circuits, two courts that traditionally follow the same conservative path in employment cases may be the beginning of an emerging split among appellate courts on the validity of FMLA waivers. What does this split mean for employers? It means, at least in the Fourth Circuit, you may not be buying the full release you want from an exiting employee when you say “don't go away mad, just go away.”