I. INTRODUCTION

That faint rushing sound you heard on March 19, 2002 was not a release from an Oklahoma pipeline relief valve. It was the collective sigh of relief breathed by employers, their attorneys, and HR professionals who learned of the U.S. Supreme Court's decision in Ragsdale v. Wolverine Worldwide, Inc. ("Ragsdale").1 Ragsdale is the Supreme Court's first decision interpreting the Family and Medical Leave Act of 1993 ("FMLA").2 At issue was the validity of a Department of Labor ("DOL") regulation that penalized employers who failed to comply with regulatory notice provisions.3 The Supreme Court struck down the DOL's penalty as an invalid exercise of the Secretary of Labor's ("Secretary") regulatory authority.4 As a result, an employer who fails to notify an employee that a leave of absence will be counted against the employee's 12 weeks of FMLA leave will not have to grant the employee an additional 12 weeks of leave.5 This note summarizes the law, facts, and rationale of Ragsdale, discusses implications, and suggests how employers should respond.

II. THE LAW AT ISSUE IN RAGSDALE

The Supreme Court overturned the DOL regulation, because it impermissibly altered the FMLA's statutory framework.6 The FMLA guarantees eligible employees of covered employers up to 12 weeks of leave each year.7 FMLA leave may be used for the birth of a child, placement of a child with adoptive or foster care, to care for relatives with serious health conditions, and when an employee suffers a serious health condition.8 The FMLA requires employers to maintain an employee's group health coverage during the leave.9 It obligates employers to restore an employee to the same or substantially equivalent position10 and provide notice of FMLA rights.11 The statute penalizes employers who fail to provide notice12 and includes remedies13 if an employer interferes with, restrains, or denies the exercise of FMLA rights.14 Lastly, it instructs the Secretary to issue regulations "necessary to carry out" the FMLA.15

Regulations issued by the Secretary address: coverage and eligibility;16 forms of leave;17 methods of informing employees of FMLA rights and obligations;18 enforcement mechanisms;19 record keeping;20 rules for school employees;21 and the interrelationship with other laws, employer practices, and collective bargaining agreements.22 Once an employer has sufficient information about a particular leave of absence, it must inform the employee if the leave is FMLA-qualifying and, therefore, will be deducted from the employee's FMLA leave allotment.23 The employer must notify the employee in two days absent, extenuating circumstances, that the leave is being treated as FMLA leave.24 To encourage compliance, the Secretary issued a regulation punishing employers that fail to give proper notice: "If ... the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee's FMLA entitlement."25 In Ragsdale, the Supreme Court declared this penalty invalid.

III. THE FACTS IN RAGSDALE

Ragsdale started with Wolverine in March 1995. She was diagnosed with cancer and requested medical leave in February 1996. Wolverine granted her request. Wolverine's policy allowed employees with six months of service to take leave in 30-day increments for up to seven months, which is far more generous than the FMLA. Ragsdale requested and Wolverine granted consecutive 30-day extensions until she exhausted seven months of leave. Because she was unable to return, she asked for more leave beyond the policy limit. Wolverine declined and terminated Ragsdale for failing to return to work. Wolverine never notified Ragsdale that her leave was FMLA-qualifying and would be counted against her 12 weeks of FMLA leave.26

Ragsdale sued Wolverine for not granting her an additional 12 weeks of FMLA leave as required by the penalty regulation. Both the District Court and the Eighth Circuit Court of Appeals agreed that the penalty regulation contravened the FMLA and was unenforceable.27

IV. THE SUPREME COURT'S DECISION AND RATIONALE

Courts generally give considerable weight and defer to DOL regulations, presuming they are designed circumspectly to carry out statutory intent without unreasonably exceeding it.28 If, however, a regulation is "arbitrary, capricious, or manifestly contrary to the statute," it is invalid.29 The Ragsdale Court declared the penalty regulation contrary to the FMLA and explained several reasons why.

First, the penalty was contrary to and altered impermissibly the remedial provisions of the FMLA, because the penalty was completely unconnected to whether the employee suffered any harm.30 The FMLA grants remedies only when the employee can prove harm. In contrast, the penalty for failing to notify an employee properly would be incurred even if the employee had been granted all the rights to which he or she would be entitled. This, the Court declared, amounted to "regulatory sleight of hand."31 Wolverine granted Ragsdale more leave than required by the FMLA, but would have been forced to grant 12 more weeks if the penalty provision were enforced blindly. The High Court concluded that the penalty was unjustifiably severe, especially when neither the Secretary nor the Plaintiff presented any empirical or logical basis for an irrebuttable presumption of employer liability.32

Second, because the penalty was designed to be imposed regardless of harm, it actually amended the FMLA's core provision by granting more than 12 weeks of leave in a year.33 At the heart of the FMLA was the Congressional compromise to guarantee a maximum of 12 weeks of leave. The Secretary exceeded its authority to "carry out" the FMLA by granting more leave than Congress plainly intended.

Third, not only did the penalty impermissibly expand the number of weeks of FMLA leave an employee could take, it also improperly augmented the FMLA's corresponding requirement that employer's maintain health insurance during the leave.34 Just as the Secretary lacked authority to grant more leave than Congress intended, the Secretary could not require employers to maintain insurance for absent employees longer than Congress intended.

Fourth, the regulatory penalty was patently disproportionate to the FMLA's sole penalty provision.35 The FMLA's notice provision requires employers to take certain steps to notify employees of their FMLA rights. The statute includes a penalty for noncompliance - a fine of $100 for each offense. The Supreme Court considered the regulation's penalty excessively harsh compared to the statute, and certainly much more costly to employers.

Lastly, the Court found the penalty inconsistent with the FMLA's intent to encourage employers to be more generous with their leave policies.36 The Court feared the severe penalty would discourage employers from being generous, particularly in light of cases like Ragsdale. Wolverine's policy was much more generous than the FMLA, yet the regulation would have forced Wolverine to grant 12 more weeks of leave notwithstanding the fact that the employee had not been harmed by Wolverine's failure to notify her that the leave was counted toward her FMLA allowance. The Court stated, "[t]he regulation imposes a high price for a good-faith but erroneous characterization of an absence as a non-FMLA leave, and employers like Wolverine might well conclude that the simpler, less generous route is the preferable one."37

V. THE IMPLICATIONS OF RAGSDALE AND SUGGESTIONS FOR EMPLOYERS

Ragsdale is a clear victory for employers with significant implications. First, employers will not be forced to grant more than 12 weeks of FMLA leave in a year, unless an employee can prove that such relief is appropriate based on actual harm suffered at the hands of poor employer leave practices. Though the Court left room for the Secretary to revise the regulation and exact some penalty, it will likely be tailored carefully to fit the crime. The ruling paves the way for challenging other FMLA regulations, as employers are now armed with a clearer analytical framework for evaluating the regulations and their policies, procedures, and practices.

Since the Court ignored the validity of the notice regulations, employers should continue to abide by them. Doing so is both legally prudent and the best HR practice. Ragsdale will certainly not forestall litigation regarding the reasonableness of employers' practices with respect to giving proper notice of FMLA rights and responsibilities. Poor communication can interfere with or restrain an employee's exercise of FMLA rights, thus subjecting employers to litigation and potential liability. Employers therefore should frequently reevaluate the effectiveness of their policies, procedures, and practices to mitigate exposure and continuously improve leave-benefits delivery systems. The following are some of the basic questions that employers should ask in conducting this evaluation:

o What must an employee do to request and secure approval for FMLA leave?
o Do employer forms secure all information necessary to respond timely and accurately?
o What processes are in place to ensure a timely response to leave requests?
o Who is responsible for auditing the timeliness and accuracy of responses?
o What processes are in place to ensure timely inquiry into and response to employee absences for which leave has not been explicitly requested?
o Does the employer's response to an FMLA-leave request contain all of the details required by the FMLA regulations? (A leave request form is available at the DOL's website, www.dol.gov).
o Does the employer's response address expectations regarding the employee's responsibilities under the employer's policies and procedures, such as providing a release to return work, obtaining and providing further medical certification, light duty programs, and any consequences of failing to follow the employer's policies and procedures?
o Have managers and supervisors been trained sufficiently regarding the employer's leave policies and procedures, and are they providing accurate guidance to employees?
o How often does the employer audit its leave policies, procedures, and, most importantly, its actual leave practices?

The best practice is to communicate leave policies and procedures clearly and timely to managers and employees. While doing so can be administratively challenging and time-consuming, it also can help both employer and employee improve planning and coordination.

1. 2002 WL 416011 (U.S. Mar. 19, 2002), 535 U.S. __ (2002).
2. 29 U.S.C. § 2601 et seq. (1994 ed. & Supp. V).
3. 29 CFR § 825.700(a) (preventing employers from counting a leave of absence against an employee's 12-week FMLA entitlement, when the employer failed to notify the employee that the prior leave period would be deducted from the 12 weeks).
4. Ragsdale, 2002 WL 416011 at *9.
5. Id.
6. Id.
7. 29 U.S.C. § 2612(a)(1).
8. 29 U.S.C. § 2612(a)(1).
9. 29 U.S.C. § 2614(c)(1).
10. 29 U.S.C. § 2614(a)(1).
11. 29 U.S.C. § 2619(a).
12. 29 U.S.C. § 2619(b).
13. 29 U.S.C. § 2617 (establishing employer liability for consequential damages and appropriate equitable relief).
14. 29 U.S.C. § 2615(a)(1).
15. 29 U.S.C. § 2654.
16. 29 CFR §§ 825.100-118 (Subpart A).
17. 29 CFR §§ 825.200-220 (Subpart B).
18. 29 CFR §§ 825.300-312 (Subpart C).
19. 29 CFR §§ 825.400-404 (Subpart D).
20. 29 CFR §§ 825.500 (Subpart E).
21. 29 CFR §§ 825.600-604 (Subpart F).
22. 29 CFR §§ 825.700-702 (Subpart G).
23. 29 CFR §§ 825.208(a) ("In all circumstances, it is the employer's responsibility to designate leave, paid or unpaid, as FMLA-qualifying, and to give notice of the designation to the employee ....").
24. 29 CFR §§ 825.208(b)(1).
25. 29 CFR §§ 825.700(a).
26. Ragsdale, 2002 WL 416011 at *3.
27. Id.
28. Id. at *4.
29. Id.
30. Id. at *5.
31. Id. at *6.
32. Id. at *5-6.
33. Id. at *8.
34. Id. at *8.
35. Id.
36. Id. at *9.
37. Id.