Finding Fault with No Fault Policies Finding Fault with No Fault Policies

Finding Fault with No Fault Policies

No-fault attendance and leave of absence policies have become very popular. The typical no-fault attendance policy provides for automatic discipline, up to and including termination, after a specified number of absences, points or "occurrences" within a prescribed period of time, regardless of the reasons for the absences (except for some that legally cannot be counted, such as FMLA leave or jury duty). A no-fault leave of absence policy is one where there is typically a maximum amount of time allowed for a leave of absence (such as six months or one year) and which provides for automatic termination at the end of the leave of absence if the employee does not, or is unable to, return to work.

No-fault policies have become quite common because they are relatively easy to administer and they assure uniform application of the policies to all employees. But that does not mean that an employer can rigidly apply them without potential adverse legal consequences.
If an employee on a leave of absence has a "disability" within the meaning of the Americans with Disabilities Act ("ADA"), special considerations come into play. In its Enforcement Guidance: Reasonable Accommodation and Undue Hardship Under the Americans with Disabilities Act (issued in 1999 and revised in 2002), the Equal Employment Opportunity Commission ("EEOC") takes the position that an employer may not apply a no-fault leave of absence policy to an employee with a disability who needs additional leave beyond the amount of leave provided by the employer's policy unless the employer can show that providing the employee with additional leave would impose an undue hardship on the employer. Providing additional leave is a type of reasonable accommodation contemplated and required by the ADA.
EEOC also takes the position in the Enforcement Guidance that when an employee with a disability is granted additional leave as a reasonable accommodation, the employer must make the further accommodation of holding the employee's job open while the employee is on leave unless the employer can show that doing so would constitute an undue hardship on the employer.
There is no simple definition of what constitutes an "undue hardship." It depends on the facts and circumstances of each individual situation. Many factors are involved in the determination, including, but not limited to, the nature and cost of the accommodation, the financial and other resources available to the employer, and the effect or impact of the accommodation on the employer's operations. Most certainly, administrative inconvenience will not be sufficient to constitute an undue hardship. It must be something that involves substantial difficulty and/or expense.
While EEOC's position regarding application of a no-fault leave policy to an employee with a disability is not new, its focus on this issue has recently increased significantly. Because of the difficulty of determining when an extended leave would or would not be a reasonable accommodation, EEOC representatives have recently indicated that the agency may issue further guidance for employers on that issue in the near future. Regardless of whether such guidance is provided, employers are well advised to refrain from applying a no-fault leave of absence policy to an employee with a disability without first going through the undue hardship analysis outlined above.
For Indiana employers, the automatic application of no-fault attendance policies may cause a problem with respect to an employee's eligibility for unemployment compensation benefits. While the Indiana Unemployment Compensation Act provides that an individual is disqualified for unemployment benefits if he/she was discharged for "just cause," which is defined in the Act to include "knowing violation of a reasonable and uniformly enforced rule of an employer, including a rule regarding attendance; . . . ," the Indiana Court of Appeals recently upheld a decision of the Review Board that a no-fault attendance policy that did not include exceptions for extended personal illness or verified emergencies is not a reasonable policy. P.M.T., Inc. v. Review Board, 956 N.E.2d 764 (Nov. 1, 2011).
In P.M.T. the employer had an attendance policy which provided for termination if an employee had more than seven occurrences in a 12-month period. The only absences excused were consecutive days missed with a doctor's note and jury duty. The employee's last two occurrences were emergencies, one involving the employee's own health issues and the other when her son called her to tell her that her husband was unconscious on the floor in their home and the employee left work to be with him while he was hospitalized for tests. The Court agreed with the Review Board that since the employer's policy did not make exceptions for extended personal illness or verified emergencies, it was not a "reasonable" rule and, therefore, the employee's violation of the rule did not disqualify her from receiving unemployment benefits since the last two occurrences were beyond her control.
It is unknown at this time whether the court's decision in P.M.T. will be appealed. Even if the decision stands, it does not restrict or limit an employer's right to terminate an at-will employee for violation of a no-fault attendance policy. It does, however, mean that the termination of an employee for violation of such an attendance policy may result in the employee being eligible for unemployment benefits if some of the employee's absences resulted from extended personal illness or verified emergencies. This would bring Indiana in line with some other states, such as Ohio and Illinois, which consider employees terminated under a no-fault attendance policy eligible for unemployment benefits if the employee's absences were because of proven illness on the theory that the termination was not the "fault" of the employee or the result of the "willful and deliberate" violation of the employer's rule.
If you have any questions regarding this issue, please contact Byron Myers at (317) 236-2367 or or any member of Ice Miller LLP's Labor and Employment Group.
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.
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