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7th Circuit: Company Cannot Retroactively Terminate Benefits Following FMLA Leave

By Amy Onder  5/15/2009
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The 7th U.S. Circuit Court of Appeals recently affirmed an $85,453 judgment against an employer that violated the Family and Medical Leave Act (FMLA) by retroactively terminating the health benefits of an employee who took leave.

Kathleen Ryl-Kuchar worked as a dietary consultant for Care Centers. When she discovered that she was pregnant with triplets, she informed HR of the news. HR in turn told her that she was entitled to up to 12 weeks of FMLA leave. Ryl-Kuchar maintained her normal schedule until she was “too big to fit” behind the steering wheel of her car. At that time, she began to work from home with the blessing of the chief operating officer. Even though she was not on leave at that time, she was still working and continued to perform all of her usual duties. However, the number of hours she put in dipped below 35 hours per week.

After she gave birth to three boys, she returned to work immediately. One month later, she realized that caring for three infants was too much and she commenced her FMLA leave at that time, with the intent to resume work in the fall. At the end of the 12 weeks, she decided she needed much more time with the children and would have to sacrifice her job. So, she resigned.

The company then retroactively canceled her insurance benefits with the effective date being a month before she gave birth, which was naturally a time when the medical bills were piling up. The company argued that she became a part-time employee when she was working from home, thereby losing eligibility for health insurance.

Ryl-Kuchar sued, alleging both interference and retaliation claims. At trial, she demonstrated that the real reason for cancellation of her benefits was her decision to take FMLA leave. This was evidenced by inconsistencies in Care Centers’ explanations for its actions, the timing of the decision to terminate Ryl-Kuchar’s benefits and the company’s expressed concern about health care costs in an employee newsletter. The jury found that Ryl-Kuchar had carried her burden, and it awarded her just over $30,000 in damages (the total amount of her unpaid medical bills). After denying Care Centers’ motion for judgment notwithstanding the verdict, the district court awarded prejudgment interest and liquidated damages, bringing the total up to more than $85,000.

Care Centers appealed, but the 7th Circuit affirmed. On the retaliation claim, the court concluded that the inconsistencies, the timing of the decision and Care Centers’ concerns about rising health care costs provided reasonable grounds for the jury to infer retaliation. As for the interference claim, the court held that a reasonable jury could have found that Care Centers interfered with Ryl-Kuchar’s right to continued health insurance coverage.

Ryl-Kuchar v. Care Centers Inc., 7th Cir., Nos. 08-2688 & 08-2823 (May 12, 2009).

Professional Pointer: Family and medical leave issues continue to be among the most litigious, so continue to tread cautiously in this area to ensure that these sensitive issues aren’t mishandled.

Amy Onder is general counsel of iXP Corp.

Editor’s Note: This article should not be construed as legal advice.

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