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October 16, 2000
Employers Beware: Substituting Accrued Paid Leave for FMLA
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m FMLA Policy, Practice & Legal Update

Many of our readers tell us that one of the most confusing and troublesome areas of FMLA leave administration is the coordination of paid leave policies with FMLA requirements. And no wonder, since the statute and regulations are not clear on this issue, and case law is in conflict. Yet, despite the less than crystal-clear guidance available to employers, making an effort to understand and comply with the rules on paid/unpaid leave coordination is critical to effective FMLA administration. Failing to do so may have the unfortunate and disruptive result of allowing employees to exhaust all their paid leave for the year and still claim eligibility for additional time off under FMLA.

Section 2612(d)(2)(A) of FMLA defines certain situations in which an employer is allowed to require an employee seeking an FMLA leave to use accrued paid leave (such as vacation leave, personal leave, medical leave, or sick leave) as a substitute for unpaid FMLA leave. In such cases, the paid leave and the FMLA leave run concurrently, and the time taken off is counted against both. The intent of Section 2612 is to recognize that employers who voluntarily offer paid leave sufficient to meet employees' needs should not be compelled by the FMLA to offer still more time off. Unfortunately, Section 2612 is silent as to what kind of notice an employer must give to the employee when the employer decides that accrued paid leave will be counted as part of the employee's FMLA leave.

The troublesome regulation giving notice is key

The Department of Labor (DOL) attempted to address this deficiency of Section 2612 in its regulations implementing the FMLA. In so doing, however, DOL placed an obligation on employers that surprised and alarmed many employers. Under DOL's regulation, "it is the employer's responsibility to designate leave, paid or unpaid, as FMLA-qualifying leave and to give notice of this designation to the employee" (29 CFR 825.208(a)). An employer wishing to count paid leave against the 12-week minimum must so inform the employee within two days of learning of the employee's FMLA-qualifying reason for requesting leave (29 CFR 825.208(b)). If the employer fails to give notice to the employee within this period of time, the employer may not designate the leave as FMLA leave retrospectively; only that portion of the leave following notification by the employer may be designated as FMLA leave and counted against the 12-week entitlement (29 CFR 825.208(c)). In other words, if an employer knows on Monday morning that John Doe's paid leave commencing that day is for FMLA reasons, the employer must make the designation by Wednesday morning. If the employer waits until the following Monday to make an FMLA designation, the leave taken the prior week does not count as FMLA, and John begins his second week of leave with a full 12 weeks of FMLA eligibility remaining.

4th Circuit supports regulation in Wal-Mart case

The 4th Circuit Court of Appeals gave full credence to this regulation in its decision in Cline v. Wal-Mart Stores, Inc., 144 F.3d 294 (4th Cir. 1998). The court held that "although an employer has the option of requiring an employee to designate vacation or other leave as FMLA leave, that option is waived if the employer fails to give proper notice of its intention. & [I]f 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 (29 CFR 825.700(a)).

At issue in Cline was whether the request-for-leave-of-absence form that Cline signed prior to the commencement of his leave gave Cline proper notice. Did it make mention of vacation leave or contain any other language that would have reasonably put Cline on notice that the five vacation days accrued to him were to be designated as part of his 12 weeks of FMLA leave? In other words, could Cline stay out for 12 weeks plus five days, or did he just have 12 weeks?

The court held that Cline did not get proper notice. Therefore, "Cline was entitled to 12 weeks of FMLA leave plus five days of paid vacation leave, for a total of almost 13 weeks away from work. Because Cline returned from work before expiration of that period, Wal-Mart violated the FMLA when it failed to restore him to his prior position."

11th Circuit declares DOL reg invalid Employer wins one

In the case of McGregor v. Autozone, Inc., 180 F. 3d 1305 (11th Cir, 1999), Alicia Cox, a former supervisor in one of Autozone, Inc.'s, stores, took 15 weeks off when she gave birth. Upon her return to work, she was demoted. She brought suit and claimed, among other things, that the employer was obligated, under FMLA, to restore her to her prior or an equivalent position.

Cox claimed that she had been entitled to 13 weeks of employer-provided paid disability leave plus 12 weeks of unpaid FMLA leave. Since she had come back after 15 weeks, she still had 10 more weeks of FMLA leave coming to her, and so she had not lost any FMLA rights.

The employer argued that its intention was that the two leaves the 13-week paid disability leave and the 12-week unpaid FMLA leave run concurrently. Therefore, she was entitled to only the 13 weeks of paid leave, 12 of which counted as FMLA leave. Since she stayed out for 15 weeks, two more weeks than she should have, she lost her right, under FMLA, to be restored to her prior or a similar position.

Cox argued that the employer did not comply with the DOL regs; he did not give her notice that the two leaves would run concurrently. Cox would seem to have the better argument, but the court declared DOL's regs to be invalid. The court reasoned that FMLA requires a 12-week leave and no extension. But the DOL reg converts the statute's 12-week minimum & "into an entitlement to an additional 12 weeks of leave unless the employer specifically and prospectively notifies the employee that she is using her FMLA leave." The court held that "Because defendant [employer] exercised its statutory right to require plaintiff [employee] to substitute her accrued paid leave for her 12-week FMLA leave, & and plaintiff was absent for more than the protected period of time, she did not have a right to be restored to her prior or similar position."

6th Circuit declares reg to be valid

In the case of Plant v. Morton, International, Inc., 212 F. 3d 929 (6th Cir. 2000), Morton, the employer, never informed Plant, the employee, that it was counting his paid absence against the statutory FMLA allowance. The court held that the employer had violated the DOL regs, and the regs were valid.

"We believe that Section 825.208 evinces a reasonable understanding of the FMLA, reflecting Congress' concern with providing ample notice to employees of their rights under the statute. We do not believe that Section 825.208 is inconsistent with legislative intent merely because it creates the possibility that employees could end up receiving more than 12 weeks of leave in one 12-month period due to an employer's failure to notify them that the clock has started to run on their allotted period of leave. We conclude that the regulations are valid and forbid employers from retroactively designating FMLA leave if they have not given proper notice to their employees that their statutory entitlement period has begun to run."


The cases mentioned above, and others, raise conflicting points that may ultimately go to the U.S. Supreme Court for a resolution. Until that happens, or until the statute and regulations are clarified, employers should do their best to comply with the two-day rule. Although the burden of compliance may be considerable, the consequences of noncompliance are more so.

FMLA Questions?

FMLA Policy, Practice & Legal Update is the quarterly newsletter companion to BLR's practical Family & Medical Leave Act Compliance Guide. For a Free 30 day trial click on this link or call 800 727-5257.

This article reprinted with permission by the publisher Business and Legal Reports, Copyright 2000, BLR.

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