In a decision that should send a chill down the spines of Human Resource professionals everywhere, the United States Court of Appeals for the Second Circuit recently found that a company’s Director of Human Resources could be individually liable for violating the Family and Medical Leave Act (FMLA). The decision, Cathleen Graziadio v. Culinary Institute of America et al., was decided by the Second Circuit on March 17, 2016 and is available here. (view as PDF)
The FMLA is rife with pitfalls and potential liability. Most employers are well aware that companies who run afoul of the FMLA’s requirements may find themselves in the crosshairs of a Department of Labor investigation or a lawsuit. What many employers may not know, however, is that individuals can also be liable for FMLA violations because the FMLA’s definition of “employer” includes “any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.”
Typically, this potential for individual liability is either ignored by plaintiffs or is used to try to pull an individual business owner or high-ranking company official into an FMLA lawsuit. Courts then apply an “economic reality” to determine if the individual is actually acting as an “employer” under the circumstances. The economic reality test includes an analysis of factors such as whether the individual: (1) had the power to hire and fire the employees; (2) supervised the employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.
In Graziadio, the former employee alleged, among other things, that her employer had interfered with her rights under the FMLA and had retaliated against her for exercising her FMLA rights. In her lawsuit, the former employee named her former employer and two individual employees--her immediate supervisor and the Director of Human Resources. At the trial court level, all of the former employee’s claims were dismissed. She then appealed that decision (as to her former employer and the Director of Human Resources only) to the Second Circuit, which overturned the trial court’s dismissal of the former employee’s FMLA claims, including her claim against the Director of Human Resources.
What were the allegations against the Director of Human Resources that could possibly have persuaded the Second Circuit that she could be individually liable for the alleged FMLA violations “in her individual capacity”? In short, in addition to an allegation that the employer violated the FMLA, it was alleged that the Director of Human Resources:
- exercised control over the employee’s return to work from FMLA leave; and
- played a role in the decision to terminate the employee’s employment (although she didn’t have ultimate authority for the termination).
This seems to set a rather low hurdle for individual liability. In this case, the Second Circuit considered the above-listed “economic reality” factors, but ultimately relied on a review of whether or not the Director of Human Resources “controlled in whole or in part” the employee’s FMLA rights. Plaintiffs’ attorneys could argue that many, if not all, employees with the responsibility to administer FMLA leave might meet this standard.
In this case, the former employee’s claims against the Director of Human Resources will now proceed to a trial, and if not settled, will be resolved by a jury. This is a prospect I’m sure the Director of Human Resources is not relishing, nor one she probably could have foreseen when she was handling the former employee’s initial FMLA request in 2012.
The lesson here for Human Resource professionals is yet another reminder of the importance of FMLA compliance--not just for your company’s sake, but for your own as well. The rules governing FMLA rights and administration are dense and often counterintuitive. To help ensure compliance, employers should:
- Confirm FMLA processes and forms are up to date;
- Consider conducting (or using counsel to conduct) an internal compliance audit;
- Consider periodic FMLA training for Human Resources and Supervisors; and
- Seek legal guidance before taking any adverse actions against employees requesting or using FMLA leave.
As recently illustrated in the Graziadio decision, these steps are not just prudent for employers, but also for Human Resource professionals, in their individual capacity.