Jointly Employed Manager Covered By FMLA

Upholding a jury’s award of less than $50,000 to an employee who was fired by Trans States Airlines when he took Family and Medical Leave Act (FMLA) leave despite the company’s denial of his request, a Seventh Circuit U.S. Court of Appeals panel found that he was covered by the FMLA even though the airline employed only 33 employees at or within 75 miles of O’Hare airport where he worked because he was a joint employee of at least one other company. The Seventh Circuit also found that the district court did not abuse its discretion in awarding $325,000 in attorneys’ fees to the employee in light of the defendants’ conduct. The case is Cuff v. Trans States Holdings, Inc. (No. 13-1241).

Trans States Holdings (Holdings), the parent company of Trans States Airlines (Trans States), also owned GoJet Airlines, which employed 343employees at the time of the employee’s discharge. After the employee was fired, he sued both companies under the FMLA and the district court granted summary judgment in his favor on the issue of coverage. After a jury determined that he met the other standards of leave eligibility, it awarded him $28,800 in compensatory damages; the judge added $14,400 front pay in lieu of reinstatement. The court also awarded about $325,000 in attorneys’ fees and $6,000 in costs.

Muddy waters. Addressing the issue of whether the employee was covered by the FMLA, the Seventh Circuit first noted that pursuant to 29 C.F.R. Sec. 825.106(a), workers are covered by the FMLA when they are jointly employed by multiple firms that collectively have 50 or more workers. In addition, Sec. 825.104(c) provides that two or more firms may be treated as a single employer when they operate a joint business. Noting that the defendants “muddied the waters,” by directing much of their argument to the joint-business question, the court rejected their contention that the airlines were not joint employers because the National Mediation Board concluded that the pilots at Trans States and GoJet had to negotiate separately because the carriers did not conduct joint air operations. “The joint-employment inquiry under Sec. 825.106(a) is person-specific,” the court stated, noting that “it is possible for one person to be employed jointly by two firms that otherwise have distinct labor forces.”

Noting that Sec. 825.106(a) provides a list of factors to consider, and that the two lead factors are whether “there is an arrangement between employers to share an employee’s services” and whether “one employer acts directly or indirectly in the interest of the other employer in relation to the employee,” the court found that here, both questions “must be answered ‘yes.’” Specifically, the employee represented all three companies in their dealings with United Airlines and O’Hare; his business card bore the logos of all three firms; a Holdings vice president testified that the employee was hired to provide services to both Trans States and GoJet; and the internal directories of Holdings identified the employee as the person to contact with questions about how both airlines operated at O’Hare.

After-acquired evidence. The defendants next argued that after-acquired evidence of the employee’s misconduct limited its damages. Specifically, they contended that he had a sexual relationship with a subordinate, lied about it in an internal investigation, failed to report an arrest for driving while intoxicated, and was taking so many narcotic drugs for his medical conditions that he was not fit for work. Here, the appeals court first found that the Supreme Court’s decision in McKennon v. Nashville Banner Publishing Co., a case arising under the ADEA in which the Court found that after-acquired evidence of an employee’s misconduct can limit damages even if the evidence does not retroactively erase the violation, applies to the FMLA as well.

While the court found, however, that the trial court improperly excluded some evidence of misconduct, it noted that the defendants failed to make offers of proof regarding the excluded evidence. Noting that the defendants conceded that they had not made even one offer of proof at trial, the court found that this “scuttles a McKennon defense because without anyone in authority testifying that [the employee] would have been sacked when the truth came out (had he still been on the payroll), there was no basis to stop the running of damages.” Thus, the court upheld the jury’s verdict.

Attorneys’ fees. As to the award of attorneys’ fees, the defendants argued that an award of almost $325,000 was not reasonable in relation to the employee’s recovery. Noting that the ratio “certainly seems high,” and that “rational people do not set out to invest $325,000 in order to obtain $50,000,” the court observed that at each turn the defendants injected new issues and arguments into the case and the “defense was conducted in blunderbuss fashion.” For example, the court pointed out, the defendants contended that the employee was not qualified for FMLA leave because he was not taking all of the medications his physician prescribed. Observing that the defense did not cite any statute, regulation, or judicial decision in support of this argument, but rather thrust the burden of legal research on the employee’s lawyers (and the judge), the court pointed out that the employee’s lawyers “did the work and discovered that the defense argument was nothing but hot air.”

Further, the court pointed out, the defendants’ attempts to use McKennon required extensive discovery and a trial, and it was all a waste because they did not take a basic step such as making an offer of proof. “And so it goes for issue after issue after issue in this litigation,” the court stated, noting that the defendants did not argue that the number of hours the employee’s lawyers devoted to refuting their defenses was unreasonable; rather, they only contested the aggregate outlay. “Yet,” the court stated, “the high total is the expected result of the way the defense was conducted.” Accordingly, it found that the district court did not abuse its discretion in deeming the employee’s legal expenses reasonable.

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