Human Resource Blog

FMLA Termination

An exective employee who is sixty-one years old has been terminated from his job at a small engineering firm that employs about 150 people.

He was informed of this termination via EMAIL while he is/was on FMLA leave after emergency open heart surgery, before the 12 weeks was up and before the employee was released by the doctor to return to work. The employer also terminated his health insurance.

Although he has been terminated, his attorney advised him to take the doctor’s release to the employer once he is released to return to work and inform the employer that he is ready to return to work. If the employer refuses him his job a law suit is then filed

In the email the employer stated his reasons for the termination as a reduction in the work load, but the employee has a previous email from the employer, recieved just before his illness, stating that business is good and that they are overloaded and must hold off on new customers until after the end of March.

As of today’s date the employee is still under the doctor’s care and has four weeks left of the twelve weeks allowed by FMLA.

Yesterday a new issue arose, the employer has now filed chapter 11. Those workers remaining are in shock as business has been good and it is widely thought that the owner is putting the company’s profits into another newly formed corporation.

My question is, does the filing of chapter 11 by this emlpoyer affect my FMLA case against him ? Does chapter 11 let this employer off the hook for FMLA violations ?

First, it’s not clear that the company has violated FMLA regulations. Many employees believe that they cannot be terminated  under any circumstances, while on FMLA. This is not true. According to the U.S. Department of Labor, an employer can terminate a worker on FMLA, if that worker would have been terminated anyway, had he not been on unpaid leave.

The U.S. DOL compliance guide on FMLA specifically says, “employers are not required to continue FMLA benefits or reinstate employees who would have been laid off or otherwise had their employment terminated had they continued to work during the FMLA leave period as, for example, due to a general layoff.”

The employee can’t be terminated BECAUSE he is on leave…but if he would have been terminated anyway, as a cost-saving measure or for almost any other reason, he can still be terminated while on FMLA.

In addition, certain executives are not required to be reinstated under FMLA. Under limited circumstances where restoration would cause “substantial and grievous economic injury” to its operations, an employer may refuse to reinstate certain highly-paid, salaried “key” employees.

In order to do so, the employer must notify the employee in writing of his/her status as a “key” employee (as defined by FMLA), the reasons for denying job restoration, and provide the employee a reasonable opportunity to return to work after so notifying the employee.

An excellent resource on FMLA is the U.S. DOL website here.

The argument that the company is financially healthy is belied by the fact that it is filing Chapter 11. Even if business is good, if the expenses exceed revenue, the company can be in financial trouble (as you surely know.) It’s also possible that the company stopped taking orders, not because business was so good, but because expenses were so high.

 Unless there is fraud or corporate malfeasance, it appears that the company is having real financial problems. Layoffs, especially of highly paid executives, would be a natural first result.

As you likely know, a company files for Chapter 11 bankruptcy to gain protection from creditors and reorganize operations.

When a company files for bankruptcy under Chapter 11, it may be unable to meet payroll obligations for a period. This includes paying employees for work already performed. Under those circumstances, the employees become creditors of the employer. Many courts grant the employee/creditors preferential status, but it can still take weeks or months for workers to get paid. In some extreme cases, workers may not receive payment for all the wages they are owed when an employer goes bankrupt (although this is more common under Chapter 7.)

Often under Chapter 11, employee benefit plans such as healthcare and pension plans are continued. However, sometimes they are drastically changed, or eliminated.

An employer who eliminates healthcare coverage for all workers under Chapter 11 or for another reason is under no obligation to continue healthcare for employees on FMLA, or to offer COBRA to workers who are terminated. (If the employer still has healthcare for current employers, they should offer COBRA coverage to the terminated worker.) 

More about bankruptcy and employee benefits from the U.S. DOL here.

So an employee who filed a lawsuit in this situation might not get his job back. Or, he might get his job back but suffer loss of wages and benefits or delay in payment. Only the employee and his attorney can determine if this is a battle worth fighting.