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LABOR & EMPLOYMENT LAW — 8/20/08

Handbook may have created leave rights for FMLA ineligible employee

An employee who was approved for leave under the Family and Medical Leave of 1990 (FMLA), replaced with another employee before his 12 weeks of leave expired and later found “statutorily ineligible” for leave under the FMLA may have a contractual right to the leave based on the eligibility representations for family and medical care leave contained in his employee handbook, held the Seventh Circuit Court of Appeals. However, should the handbook not be contractually enforceable, found the circuit court, the employee may have a promissory estoppel cause of action under Indiana law based on his reasonable reliance on the employer’s representations regarding his entitlement to medical leave. (Peters v Gilead Sciences, Inc, 7thCir, 91 EPD ¶43,264)

After reaggravating a shoulder injury, the employee underwent corrective surgery in December 2002. At that time, he took what he thought was 12 days of FMLA leave. The day after beginning his leave, the employee received a letter from his employer stating the terms of his leave and informing him of his right to reinstatement after the leave expired. The letter’s language mirrored what was set forth in the company’s employee handbook regarding employees’ entitlement to family and medical care leave. The handbook stated that an employee was eligible for family and medical leave once that employee worked at least 1,250 hours during the previous 12-month period. Neither the handbook, nor the letter, included the statutory FMLA requirement that the employer employ at least 50 employees working within 75-miles of the worksite (the “50 employee/75-mile” rule). It was undisputed that the employer did not have 50 employees within a 75 mile radius. Shortly after the employee took another leave in March 2003 for his shoulder, his employer designated him as a “key” employee and replaced him with another employee before his leave expired. Though he was offered an alternative position, the employee declined. His employment was terminated.

Filing suit, the employee alleged, among other claims, that his discharge violated the FMLA. He also brought a state law promissory estoppel claim. While dismissing the employee’s FMLA claim, the district court did not specifically address the promissory estoppel claim. Instead, the court allowed it to be recharacterized as an “equitable estoppel” claim and held that the employee failed to establish that he should be deemed eligible for leave based on the representations of his employer. Ultimately, the employee conceded on appeal that he was statutorily ineligible for leave under the FMLA. He appealed his equitable estoppel claim.

Even though the district court recharacterized it as an equitable estoppel claim, the employee clearly brought a promissory estoppel claim, held the Seventh Circuit. “Indiana recognizes this cause of action in the employment context,” wrote the circuit court, and requires proof that a promise was made with the expectation that the promisee would reasonably rely on it, that the promise induced reasonable reliance by the promise of a definite and substantial nature and that injustice can be avoided by enforcing the promise. The handbook promised 12 weeks of medical leave—the equivalent of the leave guaranteed by the FMLA—without the Act’s restrictive 50 employee/75-mile rule and the employer repeated those promises in its letters to the employee. While “it is not clear whether this is sufficient to establish a binding contract under Indiana law,” held the Seventh Circuit, the handbook and the letters “are promises giving rise to recovery under promissory estoppel.” The “undisputed evidence” establishes the first four elements of the promissory estoppel cause of action, found the circuit court. The fifth element, which relates to scope of the remedy, can be proven on remand. On remand, the district court must also consider whether the handbook and the letters were sufficient enough to establish a binding contract under Indiana law, determined the Seventh Circuit.

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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