Breaking Up is Hard to Do: Court Invalidates FMLA Release

A recent decision of the Fourth Circuit Court of Appeals has made it more difficult for employers to avoid being sued by former employees. In Taylor v. Progress Energy, Inc., No. 04-1525 (4^th Cir. July 3, 2007), the Fourth Circuit held that all waivers of rights under the Family and Medical Leave Act ("FMLA") are unenforceable unless supervised by a court or the Department of Labor ("DOL"). The Fourth Circuit is not the only court to come to this conclusion. For example, the U.S. District Court for the Northern District of Illinois (located in the Seventh Circuit, which includes both Indiana and Illinois) has also held that waivers of FMLA rights are unenforceable. Dierlam v. Wesley Jessen Corp., 222 F.Supp.2d 1052 (N.D. Ill. 2002). Practically speaking, this could mean that, even if an employee has signed a general release or severance agreement stating that he or she waives any existing FMLA claims against the employer, he or she may still be able to file a lawsuit for violations of the FMLA!

Barbara Taylor was terminated from her employment with Progress Energy. At the time, Taylor was told that she would receive monetary compensation if she would sign a general release and severance agreement. Taylor signed the agreement—which provided for a waiver of all rights for relief under any "federal law"—and received $12,000. Without first returning the money, Taylor later filed a lawsuit alleging that Progress Energy had violated the FMLA in a number of ways during her employment. On appeal, the Fourth Circuit held that—as to FMLA claims—the general release and severance agreement were unenforceable.

In reaching its decision, the Fourth Circuit relied on a regulation issued by the DOL. 29 C.F.R. § 825.220(d) provides: "Employees cannot waive, nor may employers induce employees to waive, their rights under FMLA." The Fourth Circuit held that this regulation unambiguously forbids all waivers of FMLA rights. The court came to this conclusion even though the DOL itself filed an amicus curiae brief in the case arguing that the regulation is only intended to apply to prospective waivers of FMLA rights and does not forbid settlement of already-existing FMLA claims. Despite the high level of deference extended to an agency's interpretation of its own regulation, the Fourth Circuit rejected this argument and found that the DOL's interpretation was plainly erroneous.

The employer in Taylor thus finds itself in an unenviable position: Having already paid $12,000 to a former employee, it also must defend itself against her FMLA lawsuit. The predicament of the Taylor employer highlights the peril associated with general release and severance agreements. Unwary employers may find themselves subject to lawsuits under a variety of federal statutes even though their former employees have signed releases and received monetary compensation for them. To make things worse, one court has found that, simply by asking an employee to sign a release agreement that contained objectionable terms, a company committed unlawful retaliation in violation of Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act. See EEOC v. Lockheed Martin, 444 F.Supp.2d 414 (D. Md. 2006).

Although all courts do not agree with the rationale of the Fourth Circuit, the Northern District of Illinois, and the District of Maryland, decisions such as these make it clear that all employers should proceed with great caution and be aware of the risks before asking employees to sign general release and severance agreements. To find out if your general release and severance agreements comply with the law and can be enforced, contact one of Ice Miller's labor and employment attorneys.

Please contact Tami Earnhart at tami.earnhart@icemiller.com or Susannah Pieper at susannah.pieper@icemiller.com with any questions you have on the new leave requirement.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.