Court Report

Jul 1, 2005
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HR Magazine, July 2005FMLA miles measured by road miles;
enhanced severance promise yielded unexpected results;
employer’s request that employee take a polygraph test was unlawful.

FMLA Miles Measured By Driving Distance
Bellum v. PCE Constructors Inc., 5th Cir.,
No. 04-60409, April 25, 2005.

An employee was not protected under the Family and Medical Leave Act (FMLA) because his employer did not have at least 50 employees within 75 driving miles of the employee’s worksite, the 5th U.S. Circuit Court of Appeals ruled.

The employer, PCE Constructors Inc., was headquartered in Baton Rouge, La., but managed construction projects at customer sites across several southern states. Larry Bellum managed one such project for a PCE customer in Fernwood, Miss.

In late 2000, Bellum took a leave of absence to have open-heart surgery. After a few months, Bellum attempted to return to his job, but was told he was no longer needed and was formally terminated.

Bellum filed suit in Mississippi federal court against PCE, claiming that the FMLA guaranteed him the right to return to his job.

The FMLA applies only to companies that have 50 or more employees working at or within 75 miles of an affected employee’s worksite. PCE had only 41 employees at the Fernwood site, with an additional 14 employees working at the Baton Rouge headquarters.

The central issue in this case was whether PCE’s headquarters was located within 75 miles of the Fernwood site. If it was, PCE would have the required number of employees to be subject to the FMLA. The “straight line” distance between the Fernwood site and the Baton Rouge headquarters was less than 75 miles. But the driving distance between the two sites using established public roads was greater than 75 miles.

Thus, the only way Bellum could avail himself of the FMLA’s protections was if the court adopted the linear approach, not the driving approach. Unfortunately for Bellum, the district court adopted the driving approach, which left PCE with less than the required 50 employees, and the 5th Circuit affirmed that decision.

The court rejected Bellum’s argument to strike down a U.S. Department of Labor (DOL) regulation stating that the 75-mile distance was to be measured by surface miles, using surface transportation over public streets.

By Declan C. Leonard, an attorney with the law firm of Albo & Oblon in Arlington, Va.

Extra Severance Pledge Yields Surprise Results
Gresham v. Lumbermen’s Mutual Casualty Co., 4th Cir.,
No. 04-1868, April 13, 2005.

An employer’s failure to articulate payment conditions for an enhanced severance benefit that were consistent with those of its basic severance plan exposed the employer to unexpected contractual liability, according to the 4th U.S. Circuit Court of Appeals.

In December 1998, Thomas Gresham accepted a written offer to become a vice president in the professional liability division of Kemper Casualty Co. The offer letter (“1998 agreement”) provided that Kemper would pay Gresham one year’s base salary if it terminated him without cause.

At the time, Kemper offered a benefits plan that included one week’s severance pay for each year of service, and disallowed severance to any employee offered employment by a purchasing company. The terms of the basic plan were neither mentioned in nor incorporated into the 1998 agreement.

In January 2003, Kemper decided to shut down its professional liability division and began to seek a buyer.

On May 1, 2003, Gresham received a 60-day termination notice, and Kemper entered into an asset transfer agreement with The St. Paul Insurance Companies. As part of that agreement, St. Paul offered employment to Gresham, who accepted and continued to perform the same function at the same office, but with a different title and for a different company. He then asked Kemper for the promised severance benefit.

Kemper refused to pay, stating that the company’s plan precluded severance because of Gresham’s continued employment with St. Paul. Gresham then filed a lawsuit for breach of contract and violation of Maryland’s Wage Payment and Collection Law. The lower court ruled for Kemper, finding that Gresham had been terminated “for cause” under the terms of the 1998 agreement, based on his employment with St. Paul and, therefore, was not entitled to severance under the circumstances.

On appeal, the 4th Circuit reversed, finding that the 1998 agreement was not ambiguous and did not incorporate the terms of the general severance plan. Therefore, Gresham’s continued employment did not preclude the payment of severance. It further held that an employee is “terminated” for purposes of a severance agreement when the employer sells the business in which the employee works. Based on that rationale, the court determined that Gresham was not terminated “for cause” when his employment with Kemper ended.

By Maria Greco Danaher, an attorney with the firm of Dickie, McCamey & Chilcote in Pittsburgh.

Polygraph Test Request Unlawful
Polkey v. Transtecs Corp., 11th Cir.,
No. 04-14949, March 29, 2005.

An employer acted unlawfully when it asked an employee to submit to a polygraph test in the absence of reasonable suspicion that the employee was involved in a mail tampering incident, the 11th U.S. Circuit Court of Appeals held in a rare case under the federal Employee Polygraph Protection Act (EPPA).

The U.S. Department of Defense contracted with Transtecs Corp. to operate the mailroom at the Naval Air Station in Pensacola, Fla. Sabrina Polkey was the mailroom supervisor. One day, Polkey discovered 14 opened and undelivered Christmas cards in a wastebasket at the front desk.

Polkey contacted her supervisor, Carl Kirtley, and informed him that she suspected Ronnie Cole, who had been assigned to work the front desk that day, of tampering with the mail.

Kirtley also suspected that Cole was responsible, but arranged for all mailroom employees to take polygraph tests. Cole took the test that same day; his results indicated he was not truthful when he denied opening the mail.

Kirtley again asked the remaining employees to submit to polygraph examinations. Polkey and the other employees refused. Polkey was fired less than a week later.

Polkey sued under the EPPA, alleging that Transtecs unlawfully asked her to submit to a polygraph exam; she also challenged her termination. The trial court granted summary judgment in Polkey’s favor on the EPPA claim, and the termination claim was settled.

Transtecs appealed, arguing that the EPPA does not proscribe a mere request that an employee submit to a polygraph test if the test was never administered. Transtecs further claimed its request that Polkey submit to a test fell within either or both of the EPPA’s exceptions for national defense and security matters and for ongoing investigations.

The 11th Circuit found that the EPPA expressly prohibits a covered employer’s request or suggestion that an employee submit to a polygraph exam, whether or not the testing actually takes place.

The national defense and security exemption, by its own terms, applies only to the federal government and does not extend to defense contractors, the court also concluded.

Turning to the ongoing investigations exception, the court stated that Transtecs satisfied two of the four requirements: It was conducting an investigation into the mail tampering incident, and Polkey had access to the Christmas cards and the wastebasket where they were found. Under the circumstances, Transtecs did not have to meet the third requirement of providing written notice of the test because that rule applies only to examinees. Polkey never became an examinee.

Thus, Transtecs’ ability to rely on the ongoing investigations exception to avoid liability hinged on meeting the one remaining requirement: a reasonable suspicion of Polkey’s involvement in the mail tampering. Transtecs failed on this count because Kirtley conceded that at the time of his second request to submit to a polygraph test, he did not actually suspect Polkey. Moreover, the court noted that Transtecs had decided to test all the mailroom employees to clear itself of any liability, not to identify wrongdoers.

The 11th Circuit, therefore, affirmed the lower court’s judgment in Polkey’s favor.

By Lawrence Peikes and Meghan D. Burns, attorneys with the law firm of Wiggin and Dana LLP in Stamford, Conn., and New Haven, Conn., respectively.

Professional Pointers

The FMLA’s coverage threshold is quite a bit higher than those under the federal discrimination laws. Moreover, the FMLA has technical requirements as to which employees are protected, and there is relatively little case law to guide employers in complying with the 12-year-old statute. Furthermore, DOL regulations interpreting and implementing the law have been subject to much scrutiny and attack in the courts. For all these reasons, employers should exercise particular care in developing and applying FMLA policy.

Companies often attract high-level employees with offers of better benefits than those available to rank-and-file employees, but there are risks in entering into such agreements. If determined to be necessary, enhanced benefits agreements should be reviewed to ensure that their terms and business restrictions are consistent with those of basic plans—at least to the extent that the employer intends them to be so.

Employers rarely use polygraph testing as an investigatory tool, and this case provides a good illustration of why not. The EPPA generally prohibits a covered employer from requiring, requesting or suggesting that an employee submit to a polygraph exam, even where the test ultimately is not administered and no adverse employment action is taken as a consequence. An exception is made for “ongoing investigations,” but, as the defendant in this case came to learn, that exception is narrowly circumscribed.

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