More and more employers are recognizing the wisdom of obtaining a full and complete release of potential employment-related claims when severance is paid to a departing employee. Typical of such release agreements is one which lists the claims waived under certain named laws, such as the Family and Medical Leave Act (FMLA). However, a recent federal court decision has resulted in a conflict of the law on the issue of whether past FMLA claims can be waived in release agreements. The importance of this is that an employee, under that new holding, could obtain a substantial severance from the company, and even though the signed release agreement said that he or she had waived their FMLA claims, could initiate a lawsuit, using the severance pay to finance it.
The heart of the issue decided by the Fourth Circuit Court of Appeals in Taylor v. Progress Energy, Inc. was a broad release which had been signed by the Plaintiff in exchange for severance pay. Taylor then sought to sue her previous employer alleging FMLA violations. The company moved to dismiss on the basis of the signed release.
A specific regulation which implemented the provisions of the FMLA contained the following language:
Employees cannot waive, nor may employers induce employees to waive, their rights under FMLA.
Interestingly enough, the Department of Labor (“DOL”) filed a brief in the case and contended that the language cited above only barred future waivers of FMLA rights so that an employer could not, for example, hire an employee and get them to waive any rights they might have to request leave under the FMLA during their future employment. While admitting that the DOL’s interpretation of its own regulation is controlling unless plainly erroneous or inconsistent with the regulation, the court noted that the DOL had taken different positions on that particular language in the past and, additionally, found that its interpretation was not consistent with the plain language of the regulation.
More specifically, the court found that there was nothing in the text of that regulation that permitted the distinction between the waiver of future or past rights, so that the language prohibiting a waiver of rights necessarily included both future rights and past claims.
The Fourth Circuit then noted, in passing, that another court of appeals had taken a contrary position and held that the regulation quoted above prohibits only the future waiver of substantive claims under the Act. In the case of Faris v. Williams WPC-I, Inc., the Fifth Circuit noted that the term “rights” was used under the FMLA to refer to statutory rights and to leave, including certain conditions on that leave and the requirement of restoration to previous employment on conclusion of the leave. By way of contrast, it said that the statute never referred to a past claim as a “right” under the FMLA. It further noted that examples of non-waivability described in the regulations exclusively applied to the waiver of future rights. Finally, it also found that public policy supported its decision.
Each decision establishes the law in that particular circuit. The issue has not yet been considered in the other circuits. Whether other circuits will adopt the conservative position in Faris that past claims can be waived, or will adopt the Taylor holding that the past rights under the FMLA cannot be waived remains to be seen. Employers should understand that an issue does exist as to whether such a waiver would be effective, but should continue to include the FMLA in the list of the laws under which claims are considered to be waived in the release.070