Labor & Employment Law Daily Manager fired after discovery of inventory losses, not for FMLA leave
Tuesday, August 30, 2016

Manager fired after discovery of inventory losses, not for FMLA leave

By Cynthia L. Hackerott, J.D. The FMLA interference claim of a logistics company’s warehouse manager was properly dismissed on summary judgement because he was unable to rebut his former employer’s assertion that those involved in the decision to terminate him honestly believed problems at the warehouse were the manager’s fault, the Tenth Circuit ruled. There was, indeed, substantial, unchallenged evidence of his poor job performance and misconduct, including dishonesty about billing and lost inventory, that had been discovered while the manager was on medical leave. The court found that "[t]here are no holes, no conflicting statements, simply nothing that indicates inaccuracies in [the employer’s] story" (Olson v Penske Logistics, LLC, August 26, 2016, McKay, M.). Hired in 2002 as a dispatcher, the plaintiff became the Operations Manager of the company’s Denver warehouse in 2013. In this role, he supervised between 30 and 34 employees and was responsible for everything that went on at the warehouse, including hiring, financial records, moving and tracking inventory, regular inventory audits, and related duties. Although his performance seemed to be adequate initially, he received his first formal discipline in January 2014, a written warning reprimanding him for not firing a worker who had violated safety rules. The warning advised him that failure to properly follow procedures in the future would result in more severe disciplinary action up to and including discharge. In June, he was reprimanded for failure to follow instructions to hire more workers, resulting in the warehouse falling behind. His supervisor put him on a 60-day "action plan" and warned him that failure to meet and maintain all requirements would result in his immediate termination. Medical leave and inventory crisis. When he requested FMLA leave on July 9, the plaintiff seemed to have been progressing satisfactorily on the action plan, and his leave was approved on Friday, July 18, his last day at the warehouse. That day was also the first day of the inventory crisis that led to his termination. Every month, Whirlpool, his employer’s customer for whom he did nearly all the work, graded the warehouse on a scale from A to F, depending on how much of Whirlpool’s inventory had been lost. From January through May of 2014, Whirlpool gave the warehouse an A. On July 18, however, the plaintiff’s supervisor received Whirlpool’s grade for June, which was a D. The plaintiff’s supervisor asked a supervisor at another warehouse to travel to Denver to investigate. When the investigator arrived the following week, she discovered a crisis situation. The situation was so bad that the investigator could not estimate how great the expected inventory loss would be because there were "too many holes in the inventory." She determined that the situation was due to "a lack of processes and training" and everyone relying on the plaintiff "for everything." Dishonesty on top of mismanagement. Shortly thereafter, the supervisor learned that the plaintiff had lied to him about billing Whirlpool for several instances of extra work the warehouse had performed for Whirlpool. A week after receiving the investigator’s email about the warehouse situation, the supervisor sent HR a report summarizing the problems he had discovered, including the fact that the plaintiff had hidden inventory losses in a "ghost stow" – meaning that the plaintiff had created records for an imaginary storage location, and when he could not find inventory, he would assign it to the imaginary location so that Whirlpool would think it was still in the warehouse. The ghost stow had received its first "deliveries" in July of 2010; thus, it appeared the plaintiff had been using it to hide losses for four years. In addition, the plaintiff had directed his staff not to tell Whirlpool when inventory was missing, he told them to report the missing units as damaged instead. Termination recommendation. The supervisor recommended to HR that he be allowed to bring in a temporary replacement while the plaintiff was on medical leave, and then terminate the plaintiff on his first day back. The HR official responsible for approving all terminations at the company agreed because the plaintiff’s "numerous and substantial instances of poor performance were unacceptable and warranted termination." More misconduct uncovered. Another two weeks passed before the plaintiff was fired. During that time, a loss prevention team conducted a more thorough audit of the warehouse and submitted a report describing additional deficiencies in the plaintiff’s performance. The team discovered roughly 26 additional ghost stows. When his employees conducted inventory audits, the plaintiff—knowing he was violating company policy—instructed them to report errors to him, rather than Whirlpool. The plaintiff then would correct the inventory error before the auditors finished, giving Whirlpool the false impression that there had been no errors to begin with. The team also concluded that the plaintiff had failed to teach his employees basic inventory procedures, and instead handled all inventory problems brought to his attention himself. Auditing only the warehouse’s major appliances, the loss prevention team found more than $120,000 of errors in the warehouse’s records and wrote off more than $41,000 of inventory losses. The investigation also uncovered other performance deficiencies including: failure to train employees, failure to enforce attendance policies, and failure to return damaged items to Whirlpool. On August 20, the employer sent the plaintiff a letter informing him of his termination. The letter noted that an investigation has revealed several deficiencies and policy violations, but because the severity of these issues was not discovered until after he went out on leave of absence, the employer offered to allow him to continue on unpaid leave through October 19 (when he FMLA leave entitlement would be exhausted) and postpone his termination until that date. However, the plaintiff did not accept the offer and his was employment was terminated, effective August 18. Casual connection lacking. The Tenth Circuit affirmed the district court’s grant of summary judgment on the plaintiff’s FMLA interference claim because, simply put, the plaintiff offered no evidence to establish a causal connection between his medical leave and his termination. He argued that, if he had not taken leave, he would have been able to defend his job performance and persuade the employer not to terminate him. In addition, he asserted that he was actually fired for taking leave when he was urgently needed at work. Although seemingly plausible, neither of this arguments had any support in the record, the court concluded. First, he did not cite any evidence that he would have been allowed to defend himself, or that any defense could possibly have succeeded. In fact, the record suggested just the opposite. In particular, the court pointed out the unchallenged declarations of the plaintiff’s supervisor and the HR official that they were not aware of any employee who has been found to have the same level of unsatisfactory performance, but who was not discharged. Second, there was no evidence that his supervisor considered himself inconvenienced by the plaintiff’s absence, and even if he did there was no evidence that his inconvenience contributed to his recommendation to terminate. Moreover, even if any supposed inconvenience did contribute to the supervisor’s recommendation, there was no evidence that it contributed to the loss prevention team’s recommendation to terminate the plaintiff or to the HR official’s ultimate decision to fire him. Finally, the plaintiff failed to identify other company employees whom he claimed resented his absence and wanted him replaced.

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