Section Review

Supreme Court Refuses to Enforce "No Retroactive Designation Rule" in Ragsdale v. Wolverine World Wide, Inc.

In Ragsdale v. Wolverine World Wide, Inc., 122 S.Ct. 1155 (2002), the U.S. Supreme Court held that section 700(a) of the U.S. Department of Labor's (DOL) regulations interpreting the Family and Medical Leave Act (FMLA or "the act") is unenforceable because it is contrary to the act and beyond the DOL's authority.1 The court's ruling effectively disposes of the regulation that previously prohibited employers from retroactively designating an employee's leave as FMLA leave and is, therefore, extremely favorable to employers.

The FMLA requires private employers of 50 or more employees within a 75-mile radius (and all public employers) to provide 12 weeks of job-protected leave to eligible employees for the birth or adoption of a child, the placement of child in foster care, an immediate family member's serious health condition or the employee's own serious health condition.2 The DOL, under the authority granted it by Congress pursuant to section 2654 of the act, promulgated regulations interpreting the act.3 Section 700(a) of the DOL's regulations provides in pertinent part, "If an employee takes paid or unpaid leave and the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee's FMLA entitlement."4 In holding that section 700(a) was not enforceable, the Supreme Court reasoned it established an "irrebuttable presumption" that an employee is interfered with, restrained or denied the exercise of his or her rights under the act and such presumption is inconsistent with the act's remedial provision, 29 U.S.C. 2617.5 Further, the court reasoned, section 700(a) has the result of requiring employers to provide employees with more than the 12 weeks of leave guaranteed under the act.6 Finally, the court found that section 700(a) would necessarily discourage employers from adopting policies that provide benefits greater than those required by the act, which was contrary to Congress' articulated intent.7

Ragsdale's claim for additional leave

Tracy Ragsdale began working for Wolverine World Wide, Inc. in 1995. In 1996, she was diagnosed with Hodgkins' disease. She was prescribed treatment involving surgery and months of radiation therapy. During her first 30 weeks of treatment, Ragsdale was placed on unpaid sick leave under a company leave policy. Ragsdale then requested an additional 30 days of leave. Wolverine advised Ragsdale that she had exhausted her leave under the company policy and terminated her employment. Ragsdale's 30 weeks of leave was never designated as FMLA leave.

Ragsdale then filed suit asserting that she had been denied her rights under the FMLA because Wolverine failed to designate any of her 30 weeks of leave as FMLA leave and, under section 700(a) of the DOL's regulations, this leave could not count against her annual 12-week leave entitlement. The District Court granted summary judgment in favor of Wolverine, finding that section 700(a) had the effect of requiring Wolverine to provide Ragsdale with more than 12 weeks of leave in one year. Ragsdale appealed to the 8th U.S. Circuit Court of Appeals, which affirmed the District Court's decision. Ragsdale appealed to the U.S. Supreme Court.

Supreme Court's analysis

To determine whether section 700(a) was enforceable, the Supreme Court set out to consider whether section 700(a) of the DOL's regulations was "arbitrary, capricious, or manifestly contrary to the" act.8

The act requires employers to post a general notice advising employees its pertinent provisions.9 Importantly, this is the only notice requirement in the act. Section 208(a) of the DOL's regulations, however, requires employers to provide eligible employees with an individualized notice when the employee's leave will be counted against his or her FMLA leave entitlement.10 The court did not address the validity of section 208(a), but rather focused solely on section 700(a), which, as stated above, prohibits an employer from counting an employee's leave as FMLA leave when the leave had not previously been designated as FMLA leave.11

The court held that the "categorical penalty" established by section 700(a) "is contrary to the act's remedial design" and "incompatible with the FMLA's comprehensive remedial mechanism."12 The remedial provision of the act, 29 U.S.C. § 2617, provides that an employee may bring suit if an employer interferes with, restrains or denies an employee the exercise of his or her rights under the FMLA.13 In addition, section 2617 of the act provides that the employee must demonstrate that he or she has been prejudiced by the employer's violation of the act.14 The court, therefore, concluded that the remedy for any violation must be tailored to the prejudice caused by the employer's violation.15

Section 700(a), the court found, created a penalty that was not tailored to an employer's individual violation, but rather created an "irrebuttable presumption" that an employee's exercise of his or her rights under the FMLA is impaired by an employer's failure to designate an employee's leave as FMLA leave and that the affected employee should automatically be guaranteed additional leave of up to 12 weeks.16 The court stated that section 700(a), in effect, relieved an employee of the statutory requirement set forth in section 2615 of the act to demonstrate that he or she has been interfered with, restrained or denied the rights afforded to the employee under the act.17

The court reasoned further that the effect of section 700(a) is to amend "the FMLA's most fundamental substantive guarantee, the employee's entitlement to a total of 12 work weeks of leave during any 12-month period."18 The court noted that the 12 weeks of leave was a Congressional compromise between the interests of employers that wanted fewer weeks of leave and the interests of employees. The court then concluded that section 700(a) subverts Congress' intent by guaranteeing certain employees more than 12 weeks of FMLA leave.19

Finally, the Supreme Court noted that section 2653 of the act provides that nothing in the act shall be interpreted to discourage employers from providing employees with more generous amounts of leave and found that section 700(a) was inconsistent with this policy.20 Employers may adopt policies that provide for greater amounts of leave, leave to otherwise ineligible employees or for reasons not covered by the act.21 The court recognized that when employers adopt more generous policies, it may not always be clear whether an employee's leave is FMLA leave because employers are not always careful to follow precisely the contours of the FMLA when granting leave under the more employee-friendly policies.22 The court, therefore, concluded that section 700(a) imposes too severe a penalty for an employer's well-intended but errant characterization of an employee's leave as non-FMLA leave and that such a result could reasonably cause employers not to offer more generous benefits, which is contrary to section 2653 of the act.23

For all of the above reasons, the Supreme Court held that section 700(a) "effects an impermissible alteration of the statutory framework and cannot be within the [DOL]'s power to issue regulations necessary to carry out the act under 2654."24

Post-Ragsdale notice
requirements

The Supreme Court expressly limited its decision to section 700(a). That is, the court held only that an employer that fails to designate an employee's leave as FMLA leave may count that leave as FMLA leave unless the employee can affirmatively demonstrate that his or her employer interfered with, restrained or denied the employee the exercise of his or her rights under the act. The court's ruling, however, does not address the individual notice requirement set forth in section 208(a) of the act. Employers, therefore, should continue to designate an employee's leave as FMLA leave when the employee first requests his or her leave.

Final thought

In Ragsdale, the Supreme Court reaffirmed the standard by which regulations promulgated by federal agencies will be analyzed. "A regulation cannot stand if it is arbitrary, capricious, or manifestly contrary to the statute."25 The court's holding is a reminder to all attorneys to carefully analyze regulatory provisions regarding any statute to ensure that the agency has not exceeded its authority. If the regulations appear to be contrary to the statute, they may be unenforceable.

End notes

1. Ragsdale v. Wolverine World Wide, Inc., 122 S. Ct. 1155 (2002) (Kennedy, J.).[back]

2. 29 U.S.C. §§ 2601 - 2654 (2000).[back]

3. 29 CFR §§ 825.100 - 825.800 (2001).[back]

4. 29 CFR § 825.700(a).[back]

5. Ragsdale, 122 S. Ct. at 1160 - 63.[back]

6. Id., at 1163 - 64.[back]

7. Id., at 1164 - 65. [back]

8. Id., at 1159 - 160, citing United States v. O'Hagan, 521 U.S. 642, 673 (1997); Chevron U.S.A. v. National Resources Defense Council Inc., 467 U.S. 837, 844 (1984).[back]

9. 29 U.S.C. § 2619.[back]

10. 825 CFR §§ 825.208(a); 825.301(c).[back]

11. Ragsdale, 122 S. Ct. at 1160.[back]

12. Id., at 1161.[back]

13. 29 U.S.C. § 2617.[back]

14. 29 U.S.C. § 2617.[back]

15. Ragsdale, 122 S. Ct. at 1161.[back]

16. Id., at 1162.[back]

17. Id. [back]

18. Id., at 1163 - 64.[back]

19. Id., at 1164.[back]

20. Ragsdale, 122 S. Ct. at 1164 - 65.[back]

21. 29 U.S.C. § 2653. See also Ragsdale, 122 S. Ct. at 1164 - 65.[back]

22. Ragsdale, 122 S. Ct. at 1164 - 65.[back]

23. Id., at 1165.[back]

24. Id.[back]

25. See cases cited supra note 8.[back]

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