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Can an employee be terminated for working another job while on medical leave?



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December 2012 Legal Update

Termination for Family Leave Abuse

By Christopher W. Olmsted

If you have reason to believe that an is employee working a side job while he’s supposed to be on a medical leave, all bets are off and you can refuse reinstatement, right? Not right. In a recent California case titled Richey v. AutoNation, Inc., the court set a fairly high standard for employers wishing to combat leave of absence abuse.

A Salesman With A Side Job

Avery Richey worked as a car salesman for a Toyota dealership. He was also part owner of a family business operating a seafood restaurant.

Mr. Richey took a medical leave for 2 1/2 months after he hurt his back at home. The dealership granted him time off under the California Family Rights Act (CFRA), which is similar to the federal FMLA.

During the leave, the company sent a letter to the employee reminding him that he was not allowed to accept other work, including self-employment, while on leave.

A company representative learned that Mr. Richey was working at his family restaurant during the leave. He was seen cleaning and repairing the restaurant. He was also seen taking orders and operating the cash register. Shortly after this discovery, the company terminated him for engaging in outside employment during the leave of absence.

Mr. Richey sued the dealership, alleging a violation of the family leave law. He alleged that it was illegal to terminate him, and not reinstate him, while he was on the leave. The company’s defense was that Mr. Richey abused his leave rights. If he could work, he should have worked at the dealership.

Testifying at the arbitration hearing, Richey acknowledged he had taken orders, handled payment and answered the telephone while at the restaurant but claimed he had only engaged in limited, light-duty tasks authorized by his doctor.

The case went to arbitration and the dealership won by using its abuse defense. Mr. Richey appealed.

Family Leave Basics

CFRA, which was enacted in 1991 as a state counterpart to FMLA, permits employees to take time off for family/medial reasons without jeopardizing job security.

CFRA makes it an unlawful employment practice for an employer of 50 or more persons to refuse to grant a request by a qualified employee to take up to 12 weeks in any 12-month period for family care or medical leave. Grounds for the leave include family needs such as the birth or adoption of a child, serious illness of a family member, or when an employee’s own serious health condition makes the employee unable to perform the functions of the position of that employee.

Honest Belief Of Abuse Insufficient

The appellate court reviewed the arbitrator’s ruling and determined that he misinterpreted the law. The arbitrator decided that where the company has an “honest belief” that the employee has engaged in medical leave abuse, it may terminate the employee. Whether or not the belief was correct is beside the point, according to the arbitrator, so long as the employer had a good faith honest belief of abuse.

The court evaluated prior cases in California and other jurisdictions. It decided that the leave law does not permit an employer to act merely on an honest belief.

The right to reinstatement is the “lynchpin” of family medical leave. Reinstatement should be automatic; it should be the default setting on any protected leave. If an employer wants to mess with that automatic result, a “belief” of abuse is not good enough. In a lawsuit the employer has the burden of producing evidence that the employee actually, in fact, abused his leave rights.

Thus the court rejected the dealer’s contention that “an employer may simply rely on an imprecisely worded and inconsistently applied company policy to terminate an employee on CFRA leave without adequately investigating and developing sufficient facts to establish the employee had actually engaged in misconduct warranting dismissal.”

The court explained that “the honest belief defense” is improper because it “relieves the employer of any obligation to establish its employee was, in fact, misusing authorized family leave and thus subverts the express statutory guarantee of the right to reinstatement, as well as the allocation of the burden of proof in an interference case.

Accordingly, the court vacated the arbitrator’s ruling and sent the case back for further proceedings, including a new arbitration hearing.

Practical Tips:

Reinstate. Employers already know that employees on protected CFRA/FMLA leaves should be reinstated. This case reiterates why that is always the best practice.

Measure Twice, Cut Once. If a company must terminate an employee on leave, the utmost of care must be taken. Such a termination is not illegal if done for a legitimate reason, but it is risky. If the termination is for leave abuse, gather solid evidence and clarify doctor’s restrictions where necessary. And by all means, call your attorney first. If the termination is for other reasons such as an inability to return to work, again be sure to gather the solid evidence such as a medical note.

Working Isn’t Always Abuse Just because the employee on leave is working somewhere else, it does not necessarily mean that they are abusing the leave. It is possible that while the employee is medically unfit to work for your company, she is fit to work under different circumstances. Explore these nuances and gather hard evidence before taking action.

This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2012 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.

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