United States: Second Circuit Holds That HR Director May Be Individually Liable Under the FMLA Based On "Economic Realities" Analysis

It may not be well-known that the Family Medical Leave Act ("FMLA") provides for individual, as well as corporate liability. Therefore, in a matter of importance to Human Resources personnel, supervisors, and their employers, the Second Circuit recently held in Graziadio v. Culinary Institute of America that a Director of Human Resources "may be" individually liable for violations of the FMLA based on the level of control the individual had over an employee's exercise of rights under the FMLA. In so holding, the Second Circuit joined the Third, Fifth, and Eleventh Circuits in adopting an "economic realities" analysis to determine when an individual exercises enough authority over matters related to FMLA decision-making so as to be subject to individual liability under the law.

In Graziadio, the former employee was terminated from her position as a payroll administrator at Culinary Institute of America ("CIA") while on leave to care for her two sons, who were experiencing medical issues.  The termination followed a protracted correspondence between the former employee and named-defendant Shaynan Garrioch, CIA's Director of Human Resources, regarding the medical documentation being requested to certify the leaves of absence under the FMLA and the timing of the former employee's return to work.  Following the former employee's failure to timely respond (via her counsel) to CIA's final request for a return to work date, CIA terminated the former employee for abandoning her position.

Acknowledging that this was the first time it was opining on the issue, the Second Circuit reversed the District Court's dismissal of Garrioch as a defendant, finding instead there was "substantial evidence from which a rational trier of fact could find that Garrioch was an 'employer' in economic reality and under the FMLA." Looking to the economic realities test utilized by courts in the context of the Fair Labor Standards Act, the Second Circuit held that courts should consider the following factors to determine whether the totality of the circumstances suggests that an individual defendant in fact possessed the power to "control[] in whole or in part plaintiff's rights under the FMLA":

  • Whether the individual had the power to hire and fire the employee;
  • Whether the individual supervised and controlled employee work schedules or conditions of employment;
  • Whether the individual determined the rate and method of payment for the employee; and
  • Whether the individual maintained employment records.

The court then analyzed these factors with regard to Garrioch and determined that, as to the first factor, she "appears to have played an important role in the decision to fire [the former employee]" given that, although a CIA Vice President had the ultimate authority over the decision to terminate, the Vice President conducted no independent investigation regarding the issues in question and therefore "a jury could reasonably conclude that, but for the substantial authority wielded by Garrioch, [the Vice President] would not have exercised his ultimate authority to fire" the former employee.

As to the second factor, the court found that "Garrioch, as Director of Human Resources, exercised control over [the former employee]'s schedule and conditions of employment, at least with respect to her return from FMLA leave," based on testimony that "Human Resources, and Human Resources alone, handled any employee's return to work after FMLA leave or that required work accommodations."

The court went on to find that there was no evidence on the record as to the third factor (determination of the rate and method of pay), and that the fourth factor regarding maintenance of employment records cut against individual liability, as "the routine administration of FMLA leave was handled by the payroll department." Nevertheless, the court concluded that:

on the overarching question of whether Garrioch "controlled plaintiff's rights under the FMLA," there seems to be ample evidence to support the conclusion that she did: deposition testimony and email exchanges demonstrate a) that Garrioch reviewed [the former employee]'s FMLA paperwork, b) that she determined its adequacy, c) that she controlled [the former employee]'s ability to return to work and under what conditions, and d) that she sent [the former employee] nearly every communication regarding her leave and employment (including the letter ultimately communicating her termination).

While, as noted above, this is not the first time a Circuit Court has found that individual liability may be available under the FMLA, the Graziadio decision is nevertheless likely to raise alarm bells for HR personnel, as well as supervisors or managers who exercise authority over FMLA administration and decision-making.  The opinion reinforces the importance for employers to provide proper training in handling leave requests and communications with employees out on leave to minimize the risk of liability down the road.  Employers should also consider reviewing their employment practices liability insurance to analyze whether coverage would be provided for an individual who may be liable in the event of an FMLA claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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