FMLA Protects Pre-Eligibility Request for Post-Eligibility Leave, Circuit Finds

March 31, 2012 | Appeals | Employment & Labor | Insurance Coverage

The plaintiff in this case began working at a senior living facility operated by Brookdale Senior Living Communities, Inc., in Pompano Beach, Florida, on October 5, 2008. She was terminated 11 months later, in September of 2009. In June 2009, the plaintiff advised Brookdale that she was pregnant and would be requesting leave under the Family and Medical Leave Act after the birth of her child on or about November 30, 2009. The plaintiff alleged that, prior to Brookdale learning about her pregnancy, she was a top employee. After learning about her pregnancy, the plaintiff alleged that Brookdale began harassing her, causing stress and other complications in her pregnancy. In addition, the plaintiff alleged that Brookdale’s management began denigrating her job performance and placed her on a performance improvement plan with unattainable goals.

The plaintiff alleged that after she was placed on the performance improvement plan, management began writing her up for taking accrued sick and personal leave to visit the doctor although other employees were not written up for taking the same. In August 2009, the plaintiff took a few days off, notifying Brookdale via e-mail. When she returned to work, she was again written up by management for not getting verbal authorization for her absence.

Later that same month, the plaintiff alleged that she was suffering pregnancy-related medical issues. She alleged that management told her she was eligible for non-FMLA leave, including the use of sick, personal, and vacation days. In early September, she again took time off after her physician instructed that she needed bed rest. She asserted that she left a message with the company’s executive director, but never heard back. Several days later, she was fired.

The plaintiff sued Brookdale, alleging claims for interference and retaliation under the FMLA. Brookdale moved to dismiss the plaintiff’s complaint. The district court granted Brookdale’s motion, holding that Brookdale could not have interfered with her FMLA rights because she was not entitled to FMLA leave at the time that she requested it since she had not yet worked for Brookdale for at least 12 months, and for at least 1,250 hours during the previous 12 month period, as required for eligibility under the FMLA. Moreover, the district court held that because the plaintiff was not eligible for FMLA leave, she could not have engaged in protected activity and Brookdale therefore could not have retaliated against her. The plaintiff appealed to the U.S. Court of Appeals for the Eleventh Circuit.

In its decision reversing the district court’s decision and remanding the case to the district court for further proceedings, the circuit court explained that to receive FMLA protections, an employee must be both eligible (meaning having worked the requisite hours) and entitled to leave (meaning an employee has experienced a triggering event, such as the birth of a child). In this case, the circuit court noted, it was undisputed that the plaintiff, at the time she had requested leave, was not yet eligible for FMLA protection because she had not worked the requisite hours and had not yet experienced a triggering event – the birth of her child. It also was undisputed that she would have been entitled to FMLA protection by the time she gave birth and began her requested leave if she had not been terminated.

The circuit court then declared that allowing the district court’s ruling to stand would “violate the purposes for which the FMLA was enacted.” It held that because the FMLA requires notice in advance of future leave, “employees are protected from interference prior to the occurrence of a triggering event, such as the birth of a child.” The FMLA notice period was meant as protection for employers to provide them with sufficient notice of extended absences, the circuit court explained. It stated that it would be “illogical” to interpret the notice requirement “in a way that requires employees to disclose requests for leave which would, in turn, expose them to retaliation, or interference, for which they have no remedy.”

The Eleventh Circuit added that if it were to hold that the plaintiff had no cause of action for interference because she had not yet been employed the full 1,250 hours during a 12 month period, or given birth to her child, then she should not be required to give her employer any advance notice of impending leave. Thus, the circuit court decided, because the FMLA contemplates notice of leave in advance of becoming eligible, i.e., giving birth to a child, the FMLA regulatory scheme “must necessarily protect pre-eligible employees such as [the plaintiff], who put their employers on notice of a post-eligibility leave request.”

The circuit court reached the same conclusion with respect to the plaintiff’s claim for FMLA retaliation, holding that a pre-eligible request for post-eligible leave was protected activity because the FMLA aims to support both employees in the process of exercising their FMLA rights and employers in planning for the absence of employees on FMLA leave. Protecting both reflects that the FMLA should be executed “in a manner that accommodates the legitimate interest of employers” without abusing the interests of employees, the circuit court stated. [Pereda v. Brookdale Senior Living Communities, Inc., 2012 U.S. App. Lexis 492 (11th Cir. Jan. 10, 2012).]

Action for ERISA Benefits Barred by State’s “Borrowing Statute”

The plaintiffs in this case, residents of Pennsylvania, were former employees of Westinghouse Electric Corp. who worked for the company in Pittsburgh in the 1990s. During that time, the company offered its employees a pension plan regulated by ERISA. The Westinghouse plan entitled participants to accrue pension benefits, but provided that the accrued benefits were vulnerable to forfeiture until the participants had achieved five years of “credited service.” Neither of the plaintiffs in this case had accrued five years of credited service before December 1998, when their employment with Westinghouse ended.

The plaintiffs’ terminations occurred during a series of layoffs and business divestitures implemented by Westinghouse from 1994 through 2000. According to the plaintiffs, Westinghouse’s elimination of a significant number of Westinghouse plan participants created a substantial funding surplus that increased after the Westinghouse plan’s merger in 2000 with the CBS combined pension plan, reaching a level that would have been sufficient to fund the pensions of all those whose employment was terminated between 1994 and 2000. The plaintiffs contended that “[t]he elimination of a significant number or percentage of Westinghouse Plan participants through layoffs and/or divestitures … constituted a partial termination” of the CBS plan under both the terms of the CBS plan and ERISA and, accordingly, that their accrued benefits became nonforfeitable to the extent funded by Westinghouse.

The plaintiffs sued CBS, as successor to Westinghouse, and the successor CBS plan for benefits under the partial termination theory in a putative class action in 2000 in the U.S. District Court for the Western District of Pennsylvania. In 2001, that court awarded summary judgment to the defendants on the ground that the plaintiffs had failed to exhaust their CBS plan remedies before bringing suit. In 2002, the Third Circuit affirmed.

In 2003, the plaintiffs sought to exhaust their administrative remedies, sending correspondence regarding their claims in April and September of that year. These two pieces of correspondence were each addressed to the CBS plan administrator at a CBS broadcast center in New York City, even though the summary plan description identified postal addresses for CBS plan administrative offices only in Pennsylvania (for the plan administrator) and Florida (for the plan benefits access center) and directed that appeals be addressed to the plan administrator in Pittsburgh.

In April 2009, more than a decade after Westinghouse had terminated their employment and more than five years after they had sent their 2003 letters, the plaintiffs sued CBS in the U.S. District Court for the Southern District of New York. They again sought a judgment declaring that CBS had effected a partial termination of the CBS plan and awarding plaintiffs accrued benefits on that basis. The defendants moved to dismiss the complaint, arguing that the plaintiffs’ claims were barred by the applicable statute of limitations. The district court granted the defendants’ motion to dismiss, and the plaintiffs appealed to the Second Circuit.

In affirming the district court’s decision, the Second Circuit explained that ERISA does not establish a limitations period for actions in which former plan participants seek benefits under 29 U.S.C. § 1132(a)(1)(B) and (a)(3). Therefore, the circuit court stated, the applicable limitations period in this action was the limitations period specified in the most nearly analogous limitations statute of the forum state – which in this case was New York.

Under New York law, a claim for breach of contract must be filed within six years of when the claim accrues, the circuit court noted. Under the six year rule, it continued, the plaintiffs’ claims would be timely. But New York has a “borrowing” statute that provides that when a nonresident plaintiff sues on a cause of action that arose outside of New York, the court must apply the shorter limitations period of either New York or the state where the cause of action accrued. The circuit court noted that one of the key policies underlying New York’s borrowing statute is to prevent forum shopping by nonresidents attempting to take advantage of a more favorable statute of limitations in New York.

The circuit court then applied the New York borrowing statute to the plaintiffs’ claims. It first found that, in accordance with the summary plan description, plaintiffs’ claims accrued at latest in early 2004, 120 days after the plaintiffs sent their September 2003 letter to the CBS broadcast center in New York. Because the plaintiffs resided in Pennsylvania, the circuit court continued, the New York borrowing statute required that the circuit court determine where their cause of action accrued – a question of New York law. The Second Circuit explained that New York law locates the cause of action for breach of contract causing financial harm at “the place of injury,” which usually was where the plaintiff resided and sustained the economic impact of the loss. That place, the circuit pointed out, was Pennsylvania. It then noted that Pennsylvania imposed a four year limitations period for breach of contract actions; because that was shorter than the analogous New York period, the Second Circuit stated that it had to apply the Pennsylvania statute. Accordingly, it concluded that the statute of limitations ran early in 2008 and thus barred the plaintiffs’ suit, which had been filed in 2009. [Muto v. CBS Corp., 2012 U.S. App. Lexis 1869 (2d Cir. Feb. 1, 2012).]

Beneficiary Charged With Murder Of Insured May Not Collect Benefits While Criminal Case Is Pending

The mother of the plaintiff in this case was accused of killing the plaintiff’s father. The plaintiff’s father was a participant in a life insurance and accidental death plan through his employer, United Airways. The plan was issued by MetLife and provided for $149,000 in total coverage. The plaintiff’s mother was named as primary beneficiary and the plaintiff was named as contingent beneficiary.

On April 20, 2011, the plaintiff’s mother appeared in court to discuss the status of her counsel for her pending homicide trial. The plaintiff informed the court that his mother was in the process of disclaiming her rights to the proceeds of the life insurance policy and that the plaintiff, as contingent beneficiary, planned to gift a portion of the proceeds to his mother so that she could retain a private criminal defense attorney. The estate of the deceased wrote to MetLife objecting to this plan and, in response, MetLife put an “administrative hold” on the disbursement of the proceeds.

The dispute over the life insurance proceeds went to court. The plaintiff moved for summary judgment, asserting that he was entitled to receive the proceeds payable under the insurance policy pursuant to the provision of ERISA that requires the administrator of a plan to distribute benefits in accordance with “plan documents.” The plaintiff contended that his mother had disclaimed her interest as primary beneficiary of the policy and thus, because the plan designated him as contingent beneficiary, MetLife should be ordered to turn the proceeds over to him. The plaintiff’s father’s estate disagreed and argued that distribution of the proceeds to the plaintiff would violate both ERISA and the Pennsylvania’s “Slayer’s Act,” which provides that “[n]o slayer shall in any way acquire any property or receive any benefit as the result of the death of the decedent,” because the plaintiff and his mother had “conspired” to use the proceeds to fund her defense on criminal homicide charges.

The court first found that the estate, on behalf of the plaintiff’s deceased father, had alegally protected interest in seeing that the insurance proceeds were not delivered in a manner that would violate ERISA or the terms of the plan. In the court’s view, the alleged invasion of this protected interest was “concrete and particularized,” as it affected the estate in “a personal and individual way,” and was “actual or imminent,” given the plaintiff’s mother’s attempt to disclaim her interest in the policy and the plaintiff’s statement in court that he intended to use a portion of the insurance proceeds to fund his mother’s criminal defense.

The court then found that the principles underlying the Slayer’s Act and ERISA precluded distribution of the insurance proceeds to the plaintiff at this time.  The court found that the arrangement between the plaintiff and his mother “clearly circumvents the principles of Pennsylvania’s Slayer’s Act and the federal common law developed under ERISA.” These principles, the court continued, dictated that individuals convicted of murdering another may not receive financial benefits from the victim’s death. This longstanding rule would have little effect if, after being charged with homicide, the plaintiff’s mother could “disclaim” her interest in the victim’s life insurance policy and effectively collect the proceeds from the plaintiff prior to a judicial determination as to her “slayer” status.

Simply stated, the court found that if the plaintiff’s mother were convicted of the murder of her husband, she should not be entitled to the proceeds of his life insurance policy. In the court’s view, permitting the plaintiff’s mother to “disclaim” her interest in these proceeds before her culpability could be determined and allowing the distribution of these proceeds to a third party who had clear intentions to transfer part of these proceeds to her undermined the principles underlying the Slayer’s Act and federal common law. The court thus concluded that MetLife should continue to hold the insurance proceeds pending final resolution of the plaintiff’s mother’s homicide trial. [Estate of Burkland v. Burkland, 2012 U.S. Dist. Lexis 419 (E.D. Pa. Jan. 3, 2012).]

Risk Of Future Disability Alone Does Not Guarantee Benefits, Court Rules

Between June 2007 and September 2008, the plaintiff in this case worked as a regional sales manager for Worthington Stairs, LLC. According to the plaintiff, during his employment with Worthington, he was away from home for 93 days; he took 39 trips with 27 of those trips requiring overnight stays. On September 11, 2008, he was diagnosed with Type I Insulin-Dependent Diabetes Mellitus.

The plaintiff filed a claim with Principal Life under Worthington’s disability income plan, stating that his last day worked was September 10, 2008. The claim form also included an attending physician statement that noted that the plaintiff’s restrictions and limitations were to avoid travel, changing time zones, and irregular meal times. The physician also stated that the plaintiff could begin full time trial employment in any other job immediately. On November 17, 2008, the plaintiff informed the plan administrator by phone that when he saw his primary care doctor on September 11, 2008, his sugar was approaching “coma levels.” The plaintiff’s sugar levels later stabilized and were within a normal range. The plan administrator also was informed that the plaintiff logged his sugars and was compliant with his doctor’s recommendations of diet, medications, and exercise, and that by November 13, 2008, he was “Feeling well – Normal.” Based on this evidence, the plan administrator approved short term disability benefits for the plaintiff from September 11, 2008, through November 13, 2008, but also determined that the plaintiff was not eligible for short term benefits beyond November 13, 2008.

After the plaintiff requested reconsideration and the plan administrator affirmed its prior denial, the plaintiff went to court. The plaintiff relied on reports both from his treating physician and Principal Life’s consulting physician, who both opined that that his return to work in his own occupation would significantly raise his risk of disability in the future. In turn, the plan administrator claimed that because both doctors believed that the plaintiff was presently able to work in his own occupation, it was entitled to summary judgment. As the court explained, “[t]he ability to work presently versus the risk of future disability is the central issue in this case.”

The court then decided that the risk of future disability alone did not guarantee benefits. In particular, it explained that whether risk of future effects created a present disability depended on the probability of the future risk’s occurrence. In this case, it continued, the facts favored the plan administrator’s position with respect to the plaintiff’s short term disability claims.

The court noted that both doctors were in substantial agreement regarding the impact of the plaintiff’s return to work on his long term health, and both agreed that he was presently able to work in his own occupation. It added, however, that both doctors also opined that although the plaintiff was presently capable of returning to work, resumption of full time duties ultimately would “put him at substantial risk of future disability.” They agreed that the plaintiff’s diabetes would be under better control in the long run if he did not work at his job “with its hectic and long hours.”

The court then granted the plan administrator’s motion for summary judgment on the plaintiff’s short term disability claims, deciding that the plan administrator’s decision had not been arbitrary and capricious. [Rhodes v. Principal Financial Group, Inc., 2011 U.S. Dist. Lexis 150011(M.D. Pa. Dec. 30, 2011).]

Circuit Court Rejects Former Employees’ Claim For Attorney’s Fees

In the fall of 2005, DSM Pharma Chemicals North America, Inc., decided to close its South Haven, Michigan manufacturing facility. At the time, DSM stated to its employees that it intended to clean and demolish the site, and that there was no opportunity to sell the facility to another operator.

DSM provided two different programs for its employees at the South Haven facility in the wake of the intended shut-down. First, DSM offered a severance plan for all employees terminated as a result of the facility shut-down, which provided for 12 to 26 weeks of base pay after the shut-down of the facility, based on length of service. In addition, DSM offered 15 employees a retention bonus, as set out in an individualized retention letter provided to each employee. Under the terms of the retention letter, the targeted employees would receive a bonus of one year of base salary “provided that you are still employed by the Company in your [DSM] assignment until your employment is terminated on a date chosen by the Company as a result of the shutdown of the Company’s South Haven facility.” The purpose behind the retention letter was to encourage key employees to remain with DSM through the shut-down phase. All 15 of the employees offered retention letters agreed to the terms.

Contrary to expectations, DSM began negotiations with a potential buyer for the South Haven facility in June 2006. On September 19, 2006, the South Haven facility was sold to the Albermarle Company. As part of this sale, Albermarle agreed “to offer employment to at least 92 percent of the active employees effective on the closing date.” Included in that offer of employment were eight employees who had received and agreed to the retention letter. These employees accepted employment with Albermarle. DSM paid each employee who had signed a retention letter a pro-rated retention bonus, reflecting the amount of time that employees stayed on with DSM prior to the transition to Albermarle. DSM took the position, however, that as the South Haven facility was never shut down, it was not liable for the full amount of the bonus described in the retention letter.

The eight employees who had accepted employment with Albermarle sued DSM in Michigan state court for breach of contract, arguing that DSM was liable for the full amount of the bonus described in the retention letter. DSM removed the case to federal court, alleging both diversity of citizenship and that the retention letter constituted an employee benefit plan subject to ERISA. Prior to trial, DSM moved to voluntarily dismiss its counterclaims, including its claim that ERISA governed the retention letter. The plaintiffs consented to the dismissal of the claims, but argued that they were entitled to attorney’s fees under ERISA for filing a frivolous claim. The magistrate judge issued a report recommending denying the plaintiffs’ request for attorney’s fees, and the district court adopted the recommendation and denied the award of attorney’s fees.

The plaintiffs’ case proceeded to a jury trial. The jury returned verdicts in favor of DSM with regard to each of the plaintiffs. The plaintiffs appealed, challenging both the jury verdict and the ruling that they were not entitled to attorney’s fees stemming from the dismissal of the ERISA claim.

In affirming the denial of the plaintiffs’ request for attorney’s fees, the circuit court explained that to determine if attorney’s fees were appropriate, it had to consider the following factors:

  1. the degree of the opposing party’s culpability or bad faith;
  2. the opposing party’s ability to satisfy an award of attorney’s fees;
  3. the deterrent effect of an award on other persons under similar circumstances;
  4. whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and
  5. the relative merits of the parties’ positions.

These factors, the court ruled, did not support an award of attorney’s fees in this case. It noted that the plaintiffs focused on the “degree of culpability or bad faith” factor, and argued that fees were warranted because the DSM’s ERISA claims allegedly were made in bad faith and with an intent to force the plaintiffs to spend money unnecessarily. The court pointed out, however, that the magistrate judge had concluded that DSM’s ERISA claims were not vexatious, and the court found nothing in the record that would suggest that the magistrate judge was incorrect. Instead, the court stated, DSM’s original position that ERISA applied to the claim appeared “no more devoid of merit than that of any other losing litigant.” According to the court, simply making a losing legal argument was not enough to trigger the obligation to pay fees under ERISA § 1132(g)(1). The court added that the absence of any evidence of deliberate misconduct or improper motives by DSM also meant that the relative positions of the parties were no different than any other case where one party advanced a claim that was ultimately rejected by the district court, and that there would be no deterrent effect on DSM. Although the court stated that it was true that DSM could pay the fees if ordered to do so, prior cases have considered this factor “more for exclusionary than for inclusionary purposes.” Thus, the circuit court concluded, there was no basis for awarding fees under these factors, and the district court did not abuse its discretion. [Warner v. DSM Pharma Chemicals North America, Inc., 2011 U.S. App. Lexis 25927 (6th Cir. Dec. 27, 2011).]

90 Day Period To Bring Employment Discrimination Claim Begins When Right-To-Sue Letter Is First Received Either By Claimant Or Counsel

In this case, the plaintiff was hired by Allergy Asthma Immunology of Rochester, P.C. (“AAIR”) as an “RN-Infusion Nurse” in June 2007. She was fired from her position on May 12, 2010, following accusations that she had unlawfully gained access to the medical charts of other employees and had “falsely order[ed] prescriptions.” The plaintiff subsequently filed a disability discrimination charge with the New York State Division of the Human Rights and the Equal Employment Opportunity Commission, and the EEOC issued a right-to-sue letter on November 24, 2010. The right-to-sue letter was mailed to the plaintiff, with copies to AAIR and to the plaintiff’s counsel.

The plaintiff brought suit by filing a complaint in federal district court on February 28, 2011, 96 days after the right-to-sue letter had been issued. The district court dismissed as untimely the plaintiff’s claim, which had been filed under the Americans with Disability Act, and the plaintiff appealed.

In affirming the district court’s decision, the U.S. Court of Appeals for the Second Circuit explained that to be timely, a claim under the ADA must be filed in federal district court within 90 days of the claimant’s receipt of a right-to-sue letter from the EEOC. The circuit court pointed out that the law presumes that a notice provided by a government agency was mailed on the date shown on the notice, and that a mailed document is received three days after its mailing. The Second Circuit then held that the 90 day limitations period “begins to run on the date that a right-to-sue letter is first received either by the claimant or by counsel, whichever is earlier.” Even though that plaintiff claimed that her attorney had not received the right-to-sue letter until November 29, 2010, the three day receipt of mail presumption applied to the plaintiff and she was presumed to have received the right-to-sue letter on November 27, 2010. The circuit court then concluded that because the plaintiff had initiated her action on February 28, 2011 – 93 days after her presumptive receipt of the right-to-sue letter – the district court had properly determined that her claim was time-barred. [Tiberio v. Allergy Asthma Immunology of Rochester, 664 F.3d 35 (2d Cir. 2011).]

Reprinted with permission from the April 2012 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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