FMLA Leave May Not Preclude Unemployment Benefits

​An employee taking unpaid leave under the Family and Medical Leave Act (FMLA) may be deemed unemployed under the Texas Unemployment Compensation Act, although the employee's ultimate eligibility to receive benefits for a benefit period hinges on satisfaction of the other requirements specified in the Unemployment Act, according to the Supreme Court of Texas.

Wichita County employed an assistant emergency management coordinator who took FMLA leave from this position for anxiety and depression from Aug. 16, 2011, until Nov. 4, 2011. All but three days of the nearly 12-week FMLA leave were unpaid.

[SHRM members-only toolkit: Managing Family and Medical Leave]

On Oct. 2, 2011, while on FMLA leave, the plaintiff applied for benefits under the state Unemployment Act. The county opposed the application, arguing that the plaintiff did not qualify for benefits because she remained a county employee at all relevant times and continued to receive county-paid health insurance premiums during her leave. Rejecting this argument, the Texas Workforce Commission determined that the plaintiff was unemployed while on an unpaid leave of absence for a medically verifiable illness and that it could pay her benefits if she met all other requirements.

This triggered over six years of administrative and judicial appeals, culminating in the Texas Supreme Court agreeing to review the narrow question of whether the plaintiff met the definition of "unemployed" under the Unemployment Act.

The state high court stated that the answer turns on the interpretation of the state statute. The Unemployment Act provides that a worker may be eligible for benefits if "totally unemployed" or "partially unemployed." The purpose is to provide compensation for workers who are unemployed through no fault of their own.

The county urged the supreme court to adopt "the ordinary meaning of 'unemployed,' which connotes a formal severance of the employer-employee relationship." However, agreeing with the Texas Workforce Commission, the high court concluded that under the plain language of the statute, an individual who does not perform services for wages during a benefit period is unemployed and is not disqualified from receiving benefits solely because she is on FMLA leave.

The state supreme court offered no opinion on whether benefits should be awarded to the plaintiff. While it found her unemployed for purposes of the Unemployment Act, a benefits decision depended on her meeting the statute's eligibility requirements, such as whether she was able to, available for and actively seeking work during any particular benefit period. This was identical to the Workforce Commission's original 2011 holding.

Significantly, because the decision on an award of benefits to the plaintiff had not yet been made, the supreme court rejected a county argument based on the "absurdity" doctrine; pursuant to this doctrine, the plain language of a statute may be disregarded where following it would lead to a "patently nonsensical" result. The high court said it was premature to engage in that analysis before a benefits decision was made.

Texas Workforce Commission v. Wichita County, Texas, Supreme Court of Texas, No. 17-0130 (May 25, 2018).

Professional Pointer: There are at least three lessons for employers in this case. First, where both federal and state laws apply, employers must diligently comply with both. Second, a statutory leave is neither a termination nor a quit. Third, when deciding whether to contest an unemployment claim, employers should remember that the cost of contesting can be more expensive than the underlying claim.

Michael G. McClory is an attorney with Bullard Law, which is the Worklaw® Network member firm in Portland, Ore.