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Employer Cannot Substitute Paid Leave for Unpaid Leave for an Employee on Disability Benefits

Published on: 5/18/2007

A federal appeals court recently held that an employee who is on paid disability leave can not be compelled by her employer to use accrued paid leave while she is on Family and Medical Leave. The rationale of and by the court was that because the disability benefits were received, the employee was not on “unpaid leave” status and therefore the employer could not require the employee to substitute accrued paid leave for the leave taken.

The employee had requested six weeks of leave for surgery and was granted FMLA leave for that period. She applied for and received temporary disability benefits in the amount of $300/week under the employer’s Lost Time Benefit Plan. Her employer notified her that would have to substitute paid leave for any unpaid FMLA leave. At the end of her leave, she was paid for five days of sick leave and two weeks of vacation leave.

The employee sued for damages, liquidated damages, and attorneys fees claiming that § 2612(d) (2) of the Family and Medical Leave Act and 29 C.F.R. §825.207(d)(1) were violated. The employer argued that under § 2612(d)(2)(B) “an employer may require the employee to substitute accrued paid leave, for FMLA leave.” 29 C.F.R. §825.207(a). The employee said “No” not when the employee is on disability leave that runs concurrently with the FMLA leave.

The court held that the employee was correct in that § 825.207(d)(1) creates an exception to this general rule. To reach this conclusion, the court said that § 825.207(d)(1) must be read in its entirety. Section 825.207(d)(1) provides:

Disability leave for the birth of a child would be considered FMLA leave for a serious health condition and counted in the 12 weeks of leave permitted under FMLA. Because the leave pursuant to a temporary disability benefit plan is not unpaid, the provision for substitution of paid leave is inapplicable. However, the employer may designate the leave as FMLA leave and count the leave as running concurrently for purposes of both the benefit plan and the FMLA Leave entitlement. If the requirements to qualify for payments pursuant to the employer’s temporary disability plant are more stringent than those of FMLA, the employee must meet the more stringent requirements of the plan and instead receive no payments from the plan and use unpaid FMLA leave or substitute available accrued paid leave. (emphasis added)

The court concluded that the plain reading of the second sentence applies to any serious health condition for which disability leave is provided by the employer and not just to maternity leave. The court noted that should a disability plan not provide full benefits, as were the facts in this case, the employee had the option of either receiving disability benefits or going on unpaid leave. If the employee is on unpaid leave, the employer could require the substitution of paid leave for the unpaid leave. Repa v. Roadway Express, Inc. 477 F. 3d. 938 (7th Cir. 2007)

For more information on this issue or employment law matters, please contact Phyllis Katz at (804) 783-7287 or PKatz@SandsAnderson.com.