U.S. Supreme Court Invalidates Labor Rule Penalizing Employers For Failing To Notify Employees That Medical Leave Counts Against Family Medical Leave Act Entitlement

In Ragsdale v. World Wide Wolverine, Inc., 122 S.Ct. 1155 (2002), the U.S. Supreme Court invalidated a federal labor regulation prohibiting employers from applying medical leave taken by an employee against the employee’s 12-week leave guaranteed by the Family and Medical Leave Act (FMLA) unless the employer specifically designated the leave as FMLA leave. The Court overturned a Department of Labor ruling requiring an employer to grant an additional 12 weeks of leave to an employee because the employer had not notified the employee that 12 of the 30 weeks of leave already taken by employee constituted her FMLA leave. The Court’s ruling does not affect labor regulations requiring employers to notify employees of their leave rights under the FMLA.

Background Facts

The FMLA guarantees 12 weeks of unpaid leave a year to qualifying employees, and places the burden on employers to notify employees of their FMLA rights. Among many regulations promulgated by the U.S. Department of Labor pursuant to the FMLA is 29 C.F.R. 825.700(a), which provides that an employee who takes leave that an employer has not designated as “FMLA leave” is not required to count the leave against the employee’s 12-week FMLA entitlement.

Plaintiff Tracy Ragsdale, a Wolverine World Wide, Inc. (Wolverine) employee in Arkansas, was diagnosed with cancer and required surgery and extensive radiation treatment. Wolverine’s leave plan allowed her seven months of unpaid leave, but did not specify that 12 weeks of the absence would count against her FMLA entitlement. Ragsdale took the full seven months of leave, during which Wolverine held her job open and otherwise complied with the Act. When Ragsdale requested additional leave because of her condition, however, Wolverine informed her she had exhausted all leave under the company plan. It terminated her when she did not return to work.

Relying on section 825.700(a), Ragsdale sued Wolverine in federal district court, claiming she was entitled to 12 weeks of FMLA leave in addition to the leave already taken. The company argued that, even though it had not notified Ragsdale that part of her leave counted as FMLA leave, it had complied with FMLA by granting more than twice the leave required by the Act. The district court agreed, and found the labor regulation invalid because it conflicted with the statute and effectively required Wolverine to grant Ragsdale more than 12 weeks of leave a year. The U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s decision, and Ragsdale sought review in the U.S. Supreme Court.

The U.S. Supreme Court’s Decision

The Supreme Court affirmed as well. Its analysis focused on three basic areas: (1) the FMLA’s “central provision” guaranteeing 12 weeks of leave a year to eligible employees; (2) limitations placed by the FMLA on an employee’s right of action; and (3) the Act’s underlying policy of encouraging employers to adopt more generous leave policies.

Even though the FMLA places the burden on employers to educate employees about leave rights under the Act, an employee seeking to sue under FMLA must prove he or she has been prejudiced by the employer’s violation of the law, the Court said. The penalty imposed by regulation 825.700(a), however, was “unconnected to any prejudice the employee might have suffered from the employer’s lapse.” Under the regulation as written, the Court said, an employee taking an undesignated leave of 12 weeks or more is

always entitled to 12 more weeks of leave that year, even if the employee would have acted the same way had notice been given. Ragsdale, for example, did not claim she would have acted any differently if she had received the required notice, and still would have taken the entire 30 weeks of leave granted by Wolverine.

By requiring Wolverine to grant yet another 12 weeks of leave, the regulation effected an “end run” around “important limitations of the FMLA’s remedial scheme,” the Court said. The regulation failed to recognize that an employee must show impairment of his or her rights. In addition, by categorically requiring an additional 12 weeks of leave, it essentially ignored the compromise time period Congress had reached in order to resolve the conflict between employers and employees when the FMLA was being drafted. Further, the Court noted, the “severe and across the board penalty” imposed by regulation 825.700(a) could have the unfavorable result of encouraging employers to discontinue voluntary programs that grant more leave than required by the FMLA. The regulation thus was in fundamental conflict with the statute it was intended to implement, and would not be allowed to stand, the Court said.

The Court specifically stated its decision invalidating the penalty imposed by 825.700(a) did not extend to the validity of the notice and designation requirements of the regulations as a whole, nor did the decision address whether other means of enforcing those requirements that might be consistent with the statute.