Labor & Employment Law Daily Former CFO and ‘key’ employee, removed from job due to absences, avoids summary judgment on FMLA claims
Monday, September 30, 2019

Former CFO and ‘key’ employee, removed from job due to absences, avoids summary judgment on FMLA claims

By Robert Margolis, J.D.

The court found disputed factual issues on whether FMLA-protected absences were improperly considered as the removal letter specifically referred to absences as the basis for the decision.

The former CFO of Dreamdealers USA is entitled to have a jury resolve his claims for interference with and retaliation for exercising FMLA rights, a federal district court in Nevada has held. The employee’s claims arose out of his being told he would not be reinstated to his position after FMLA leave because of his “absences,” when no distinction was made between FMLA-protected absences and others. The court denied cross-motions for summary judgment on the employee’s claims (Douglas v. Dreamdealers USA, LLC, September 24, 2019, Gordon, A.).

FMLA leave. As CFO, the employee was responsible for, among other things, accounting, taxes, and ensuring that the employer’s books and records were kept in order. Sometime in 2015, the employer’s HR suggested that the employee apply for intermittent FMLA leave so he could take care of his wife, who was experiencing medical problems. He applied and the HR manager declared him eligible for the leave, and also designated him as a “key employee.” That designation meant the employer could refuse to restore him to employment following his leave on the ground that doing so would “cause it substantial and grievous economic harm.” The CEO testified that he had not performed any analysis to determine if in fact that was the case.

Audit. In late 2015, the Nevada Department of Taxation conducted a sales and use tax audit of a company related to the employer. According to the CEO, the employee did not notify him of this audit, and he found out about it second-hand. The CEO subsequently learned that the employee had stopped paying the taxes for the related entity, and the audit ultimately led to the entity having to pay the Department more than $70,000.

No reinstatement. In August 2016, the CEO determined that reinstating the employee to the CFO position after his leave would injure the company due to his poor performance relating to the audited entity and the employee’s absences. In the letter sent to the employee about the decision, only the absences were mentioned, however. Also, around that time, the HR manager informed the employee that his FMLA leave was expiring shortly and she put the forms to recertify on his desk. She also told him that he took 140 hours of FMLA leave in the prior year.

After receiving the letter, the employee had discussions with the CEO about a new position at the company, but the parties disputed whether such a job was actually offered and what he was told about it. He still is employed by the employer, though he has not worked there since August 2016.

Individual defendants. The court denied the summary judgment motion by the employer’s two CEOs, finding that they qualify as “employers” under the FMLA, as persons who exercise control over the employment relationship. One of the CEOs argued that there was no evidence he had any involvement in the FMLA decisions at issue and the other, though involved, argued he was not responsible for making those decisions. The court nonetheless found a reasonable jury could determine them to be employers. They were co-owners and co-CEOs, both of whom participated in the decision to hire the employee. One made the decision to remove the employee from the CFO position and was involved in the process of determining the new position that would be offered.

Interference. The employee alleged that the defendants interfered with his FMLA rights by using his absences while on FMLA leave as a negative factor in the decision to remove him from the CEO position. He pointed to the letter informing him of that decision, which only mentioned his “absences” and did not distinguish between FMLA leave and other absences. Any mention of performance-related issues would be pretextual, he argued, because he was never disciplined, and in any event consideration of FMLA leave as a factor is prohibited even if combined with other reasons. The employer countered these arguments, but the court found that disputed issues of fact precluded granting summary judgment to either side. As the court noted, the letter referred only to the employee’s absences, generally, and a reasonable jury could conclude that some of those were FMLA-protected absences.

Key employee. Disputed factual issues about the “key employee” designation, which could provide an exception to the employer’s obligation to reinstate the employee to his prior position, also precluded summary judgment on the interference claim. While there was no dispute that as CFO the employee was “key,” whether the employer properly invoked that exception was in dispute. The CEO testified that he had conducted no analysis to support the determination that reinstating the CFO to that position would cause substantial economic harm to the company. Moreover, the letter only identified the employee’s absences as reasons his reinstatement would cause harm and FMLA-protected absences are not a proper consideration, the court noted. On the other hand, a reasonable jury could have concluded that the employee’s performance failures leading to the audit of the related entity could justify the conclusion that his reinstatement could cause substantial harm to the company.

Recertification request. The employee contended that the employer did not respond to his 2016 application to renew his FMLA leave, which he claims led it to reclassify his leave as a personal leave of absence such that it stopped paying his health insurance premiums. The employer contended that those premiums continued to be paid, and the employee provided no evidence to counter that. Thus, even if his recertification request was ignored, he pointed to no damages from it. Thus, the court granted the employer’s summary judgment motion as to that claim.

Retaliation. The employee also brought a claim for retaliation, arising out of the alleged failure to act on the recertification request. The employee contended that the employer did so in retaliation for his retention of an attorney to communicate on his behalf. The court found that there was sufficient evidence to support the employee’s prima facie case—(1) if the attorney advised the employer that the employee believed he was being retaliated against for FMLA leave, that constituted protected activity; (2) failure to act on his recertification request constituted an adverse employment action; and (3) the temporal proximity of a matter of days between when the attorney contacted the employer and when the refusal to act could have begun satisfied the causation element.

Finally, genuine material fact issues as to whether the proffered reason for not acting on the request was pretextual—that the employee had stopped coming to work and had taken a personal leave of absence—precluded summary judgment.

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