The threat of incurring personal liability is becoming an increasingly dangerous reality for managers, supervisors and human resources personnel. On March 17, 2016, in Graziadio v. Culinary Institute of America, the Second Circuit continued this trend and held that individual employees may fall within the definition of an “employer” under the FMLA (“Family and Medical Leave Act”) and be held personally liable for FMLA violations.
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The plaintiff in Graziadio was a former employee of the Culinary Institute of America (“CIA”) who first took leave under the FMLA to care for her son suffering from diabetes, and then took additional FMLA leave a few weeks later to care for a second son who had broken his leg. During the second FMLA leave, the CIA, through primarily its HR Director, took issue with the documentation that the plaintiff had provided in support of her leave and refused to allow her to return until she provided new documentation. An extended series of email exchanges followed between plaintiff and the HR Director regarding the documentation, including an effort to schedule a meeting about the documentation. The communication broke down and counsel for both parties became involved. No meeting ever took place. The CIA proceeded to terminate the plaintiff for purportedly abandoning her job.
The plaintiff filed suit in the Southern District of New York. The district court granted summary judgment to the HR Director and another supervisor finding that they did not qualify as an “employer” subject to liability under the FMLA.
Under the FMLA, an individual may only be held liable if he or she constitutes an “employer,” which is defined as including “any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.” Borrowing from the standard used to determine whether an employee qualifies as an employer under the Fair Labor Standards Act, the Second Circuit adopted the economic-reality test to determine whether an individual fell within this definition under the FMLA. The test considers nonexclusive and overlapping factors intended to “encompass the totality of the circumstances.” These factors include, but are not limited to, whether the employee against whom personal liability was sought:
- Had the power to hire and fire employees;
- Supervised and controlled employees’ work schedules or conditions of employment;
- Determined the rate and method of payment; and
- Maintained employment records
None of the four factors is, in and of itself, dispositive. Furthermore, the Second Circuit described the test as also requiring the court to consider the overarching question of whether the employee who is purported to be the employer under FMLA controlled in whole or in part the plaintiff’s rights under the statute.
Applying these factors to overturn summary judgment in favor of the HR Director, the Second Circuit first determined that a jury could reasonably conclude that the HR Director wielded “substantial authority” in relation to the decision to fire plaintiff and held “substantial power” over the termination decision. Second, the court held that the HR Director exercised control over the plaintiff’s schedules and conditions of employment, “at least with respect to her return from FMLA leave,” as the HR department alone handled any employee’s return to work after FMLA leave. Third, the Second Circuit did not address the determination of the rate and method of payment factor as neither party had offered any evidence on the issue during summary judgment. Fourth, the Second Circuit noted that the maintenance of employment records weighed against finding that the HR Director was an employer as it related to the FMLA leave itself (which records information was handled by the CIA’s payroll department).
However, on the overall question of whether the HR Director controlled plaintiff’s rights under the FMLA, the Second Circuit noted that that there was ample evidence that she did. The HR Director reviewed the plaintiff’s paperwork, determined its adequacy, controlled the plaintiff’s ability to return to work and under what conditions and that the HR Director was the recipient of virtually every communication from plaintiff on the subject of FMLA leave. Under these facts, the Second Circuit determined that a trier of fact could conclude, under the totality of the circumstances, that the HR Director exercised sufficient control over the plaintiff’s employment to subject to liability under the FMLA.
Takeaway for Employers:
Potential personal liability for employees under the FMLA is now a possibility in the Second Circuit and will be evaluated under the economic-reality test. The Graziadio decision particularly impacts supervisors, managers and HR personnel who have involvement in responding to FMLA leave requests. Employers are encouraged to ensure that persons that are handling FMLA leave are properly trained, and when difficult issues arise, to consult with employment counsel. Employers should develop consistent and well-defined processes for handling employee absences and requests for FMLA leave. Employers should also consider obtaining employment practices liability insurance to cover both the business as well as its management against FMLA and other employment-related claims.