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Employers Beware: Automatic Termination Following Medical Leave Is Risky

September 7, 2011

By Kathryn M. Hindman & Michael G. McClory


Most employers have written leave of absence policies published to employees, typically through a handbook. If covered by the Family and Medical Leave Act (FMLA) and/or its state counterpart, they have a written family medical leave policy. Many employers (particularly large and/or unionized employers) also have separate supplemental non-statutory leave policies providing additional personal or medical leave (e.g., leave beyond the FMLA-mandated 12 weeks of job-protected leave).

Many such supplemental leave policies also have a set maximum duration on the leave, regardless of the reasons for the leave (e.g., a maximum of 12 weeks, a maximum of 52 weeks, etc.) Under these so-called “neutral” policies, the idea is to treat all employees needing leave the same once the maximum level of time off work has been reached for whatever reason (whether through a combination of FMLA, personal leave for other reasons, or leave beyond the typical 12 weeks). Specifically, when the maximum leave time is reached, these policies call for the employee to be discharged. Beware. Although these maximum leave policies are facially neutral, it is becoming increasingly clear that automatically terminating an employee at the end of the employer’s maximum leave limit may result in a finding of liability under the Americans with Disabilities Act (ADA).

EEOC Takes Aggressive Stance Against Maximum Leave Policies

The ADA and its new amendments make clear that reasonable accommodation may include modification of policies, including leave policies. The EEOC has always interpreted this to mean that an employer’s reasonable accommodation obligation may include extending their medical or personal leave policies (including no-fault, neutral or maximum leave policies), so long as doing so does not create an undue hardship. Recently, however, the EEOC has bolstered its interpretation with active and aggressive litigation against employers with neutral or maximum leave policies.

The more active EEOC became evident in 2006 when the EEOC and JP Morgan Chase & Co. (Chase) entered into a $2.2 million settlement agreement, resolving an ADA claim initiated by the EEOC. In that case, Chase had a policy that permitted an employee who returned from medical leave within six months to return to the job held at the time of leave. An employee who required more than six months of medical leave, however, was not guaranteed to return to his/her previous position. If that position had been filled, an employee who was released to return to work after more than six months of medical leave had 30 days to find another position or be terminated. The EEOC maintained that the ADA requires employers to individually assess whether additional leave or other forms of accommodation will assist an employee in returning to work without placing an undue hardship on the company. The EEOC found that Chase’s blanket policy violated the ADA because it provided for termination in every case, rather than for a case-by-case determination of whether additional accommodation was possible.

There have been a number of other similar examples, including the following.
  • EEOC v. Denny’s, Inc. (D. Md., Case No. 06-2527): EEOC filed a class action, charging that Denny’s violated the ADA’s reasonable accommodation requirements by maintaining a maximum medical leave policy that automatically denied additional medical leave beyond a pre-determined limit, resulting in terminations instead.
  • EEOC v. UPS (N.D. Ill., Case No. 09-C-5291): EEOC brought suit against UPS, claiming that the company violated the ADA by failing to provide reasonable accommodation and instead terminating an administrative assistant with multiple sclerosis who needed additional leave beyond the company’s 12-month uniform leave policy. The employee needed the leave to deal with her medication side affects. The EEOC said that “policies like this one at UPS, which set arbitrary deadlines for returning to work after medical treatment, unfairly keep disabled employees from working.”
  • EEOC v. Princeton HealthCare Systems (D. NJ, Case No. 10-4126): EEOC sued Princeton HealthCare Systems, claiming it violated the ADA by failing to reasonably accommodate employees who needed medical leave. Instead, the employer’s policy by terminating employees unable to return to work after either seven (7) days, or, if eligible for FMLA, after 12 weeks.
  • EEOC v. Sears Roebuck Company (N.D. Ill., Case No. 04-C728): EEOC initiated a class action claiming that Sears violated the ADA by adopting a policy pursuant to which it terminated employees who needed medical leave due to workers’ compensation injuries in excess of company’s one-year maximum leave period. The policy did not leave room for the possibility that extended leave or returning to work in available positions that could be performed with or without reasonable accommodation. To resolve the lawsuit, Sears ultimately agreed to a consent decree calling for $6.2 million in monetary relief.

In the Sears case, the EEOC and Sears agreed to a consent decree that constituted one of the largest ever ADA settlements. Sears agreed to pay $6.2 million to resolve the EEOC class claims. Further, the consent decree also required Sears to notify employees in writing near the end of their maximum leave of their rights to request reasonable accommodation that may include modified duty, part-time work, reassignment to different positions, additional leave, assistive devices, and/or possible transfers to another store. Sears also agreed to send medical questionnaires to employees asking their physicians to identify how their medical conditions limited their ability to work and to suggest possible reasonable accommodations; where unresponsive, the consent decree required Sears to send a second letter providing the employee with another chance to cooperate and explaining the consequences for failing to do so (e.g., discipline up to and including discharge).

Although the ADA does not technically require an employer to affirmatively ask an employee whether s/he needs reasonable accommodation unless the employer “knows or has reason to know” that the disability prevents the employee from requesting reasonable accommodation (or if the employee with the known disability is having difficulty performing his or her job, and only then to discuss the possibility of reasonable accommodation), this enforcement position by the EEOC makes it clear that the agency believes it is the employer’s duty to proactively reach out to employees on leave to ask them if they need an extension of leave, or other accommodation.

In June 2011, the EEOC held a public meeting to examine the use of leave as a reasonable accommodation. It is in the process of gathering comments from the public and specialists before it issues an official position and provides guidance to employers. Until then, employers are on notice. Recently, for example, in announcing the EEOC’s $120,000 settlement with Pepsi, following the company’s termination of a driver for job abandonment when he failed to notify his supervisor that he could not finish his route because of his medical condition and needed leave, EEOC San Francisco Regional Attorney William Tamayo stated: “Medical leave is a widely recognized accommodation, and in Mr. Davis’s case, could easily have been granted, avoiding the loss of a valuable and experienced employee. Since the recent amendments to the ADA have broadened the definition of disability, forward-thinking employers may want to re-evaluate their policies on workplace accommodations.”

Practical Thoughts for Compliant Leave Management

With this in mind and in light of the more active EEOC enforcement policy, remember:
  1. Automatic termination upon the exhaustion of maximum leave of absence policy is too risky.
If you have a policy that provides 12 weeks of leave regardless of the reason (or 12 weeks of FMLA plus thirty days, or up to one or two years of leave, as some employer’s policies do), remember that automatically terminating employees once leave exceeds the designated maximum period of your policy will not satisfy the ADA. The ADA requires an individualized (case-by-case) assessment to evaluate whether that particular employee needs a limited extension of medical leave as a reasonable accommodation (and/or whether any other form of accommodation might be reasonable and available). Having a “blanket” uniform policy that treats everyone the same (i.e., a policy that requires all employees to return to work following the end of the maximum leave available under your particular leave of absence policy) is not the “individualized” assessment contemplated by ADA.
  1. If you know an employee needs more leave, enter into the interactive process.
Even the FMLA (and most state counterparts) requires an employer to contemplate whether ADA reasonable accommodation is a possibility upon exhaustion of the typical 12 weeks. A policy should call for an interactive process (dialogue between employer and employees) designed to determine whether the employee needs a limited, additional leave of absence beyond the company policy maximum, or whether the employee can come back to work with reasonable accommodation. Requiring employees returning from medical leaves to be released to “full duty” without restrictions likely violates the ADA since such a blanket policy implies that the employer will not accommodate work-related restrictions following leave, no matter what the limitations may be. Remember, employers do not have to provide “indefinite” leaves of absence nor do they have to create new jobs for a returning, work-restricted employee. An employer does, however, have to enter into an interactive process with employees to evaluate if and when they may return to their former position (with or without reasonable accommodation), which may include limited leave extensions, part-time work for a short duration, and/or reassignment to a different vacant position.
  1. The interactive process requires you to talk to the employee.
At a minimum, employers should be contacting an employee who is close to the end of a medical leave if the employer has reason to believe that the employee may need an extension of leave following the designated leave period. Actually talking to the employee about what he/she needs, and about possible reasonable accommodations, is key (ideally face-to-face, but communication by telephone or email will suffice if face-to-face is not feasible, such as because the employee is unable to come to the workplace because of his/her medical restrictions). Of course, the ADA does not require you to implement the employee’s preferences for returning to work; it just requires you to gather the employee’s preferences and suggestions and to provide reasonable accommodation where that is possible. Employers with unions may need to include the union representative in these discussions (particularly where a potential accommodation may conflict in any way with the terms of a collective bargaining agreement).
  1. Proactively managing the employee while on medical leave will help.
Do not wait until employees exhaust FMLA or other medical leave before talking to them. If you take full advantage of providing a job description to healthcare providers to ensure they understand the essential functions of the job, they may provide more information related to the need for leave at the commencement of the leave. Make sure you seek recertification of the need for leave at appropriate times to stay on top of the employee’s current need for leave. Remember that extended leave following exhaustion of FMLA leave is likely to be a “qualifying event” under COBRA if the employer’s obligation to pay for group health medical premiums ceases.
  1. Extending medical leave beyond the maximum policy limit is not the end of the world.
A present and individualized assessment of an employee’s need for an extension of leave for his/her disabling medical condition for a limited duration is an option many employers have used for a long time – even before the ADA came alive over two decades ago. The difference now is that the EEOC is looking for employers who stubbornly stand by their uniform maximum leave of absence policies “no matter what.” Such a hard line may attract the EEOC to your job site. You may be able to win if challenged, but it will be difficult. Moreover, you probably do not want to be a test case.

* For 2011 Kathryn Hindman is serving as the General Counsel to the Portland Human Resource Management Association Board of Directors. Among other things, Kathy will periodically be writing a “General Counsel Column” for News and Views, PHRMA’s monthly newsletter. This Bullard Alert, which Kathy co-authored with Michael McClory, appeared in the September 2011 News and Views and is reprinted here with permission from PHRMA.