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Legislation ALERTS

Out on Leave and Off Having Fun

This is not an uncommon predicament: An employer learns that an employee who is out on family or medical leave has been vacationing or engaged in activities that do not appear consistent with the approved leave.

The federal Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA)are designed to protect employees who need time off for a legitimate purpose, such as a medical problem. Unfortunately, some employees misuse this protected leave.

Under both the FMLA and the CFRA, an employee can take up to 12 weeks of leave during a 12-month period to care for his/her own serious illness or that of a parent, spouse or child.

Employers need to be able to detect leave abuse, make sure that leave is used for the proper purpose and, at the same time, not interfere with employees' rights to take protected leave.

Really Now

These cases shows how far some employees will go to misuse medical leave:

  • A Detroit nurse out on FMLA leave for a back and leg injury was fired after Facebook posts showed her vacationing in Mexico. Her doctor certified the need for her leave due to substantial lifting and mobility restrictions. But several Facebook posts showed the nurse in Mexico riding in a boat; lying on a bed holding up two bottles of beer; and standing and holding her grandchildren (one in each arm). The nurse eventually conceded she had been able to stand for 30 minutes while waiting in airport lines. She was terminated for violating a company policy on dishonesty and for misuse of FMLA leave. A federal court in Michigan upheld the termination (Lineberry v. Richards, 2013 WL 438689 (E.D. Mi. 2013)).
  • An activity director for a long-term care facility took extended FMLA leave to recover from shoulder surgery. He was even granted an additional extension of time after his FMLA leave expired. However, after his leave expired, the activity director was terminated for FMLA abuse. Why? The employer was made aware of social media posts showed the activity director vacationing in Florida and St. Barts, including swimming in the ocean, while he was supposed to be recuperating. A federal court found that he wasn't terminated out of retaliation for exercising his FMLA rights, but was terminated because he abused those FMLA rights (Jones v. Gulf Coast Health Care of Delaware d/b/a Accentia Health and Rehab of Tampa Bay, 2016 WL 659308 (M.D. FL 2016)).
  • An employee received approved FMLA leave to undergo a hysterectomy. Two weeks after her surgery, and while still on approved FMLA leave, the employee went to Cancun for vacation (not for any medical treatment). Company policy required employees on FMLA or sick leave to remain in the area unless traveling for medical treatment. The employee did not inform the company that she would be leaving the country or taking vacation. The company's decision to terminate her for taking a week-long vacation without notifying the company was not a violation of her FMLA rights (Pelligrino v. Communications Workers of America, 2011 WL 1930607 (W.D. Penn. 2011)).
  • An employee on approved intermittent FMLA leave for back pain that left her "completely incapacitated" was terminated for abuse of leave. While in the midst of requesting more leave for incapacitation, the employee and her friends posted numerous pictures of themselves (127!) attending a Polish heritage festival. That same weekend, the employee also called in and said she couldn't come to work on Monday because she was in pain. The employer conducted an investigation and allowed the employee to try and explain what was happening, but she didn't refute that her behavior was inconsistent with her claim of total incapacity. A court ruled that the termination was for dishonesty and was a non-retaliatory basis for the discharge (Jaszczyszyn v. Advantage Health Physician Network, 540 Fed.Appx.440 (6th Cir. 2012) (unpublished)).
  • An employee on approved family medical leave to care for his pregnant wife spent most of the time traveling between Seattle and Atlanta to pick up a car he owned. He checked in with his wife by phone but missed the birth of his child. He also missed his next scheduled work shift and the company could not reach him. He was terminated for an unexcused absence then filed a lawsuit against the company. The court ruled that his leave was not protected by the FMLA and upheld his termination for unexcused absence. Instead of staying with his wife and participating in her treatment, he left for almost four days on a cross-country trip (Tellis v. Alaska Airline, 414 F.3d 1045 (9th Cir. 2005)).
  • An employee informed her employer that she was taking FMLA leave because she was sick with a migraine headache and unable to physically move about. The employer later spotted the employee at the county fair, learned she had camped there all week and terminated her for dishonesty. A federal court upheld a jury verdict in favor of the company: The employee was terminated because of her dishonesty, not because she took FMLA leave; there was evidence that the employee lied when she was questioned about attending the fair; and the employee's physician said that if the employee was well enough to go to the fair, then she was well enough to work (Connel v. Hallmark Cards, Inc., 2002 WL 1461969 (D. Kan. 2002)).

What can you do when you learn that an employee who is out on family medical leave has been vacationing or engaged in activities that appear inconsistent with the approved leave?

Curbing Abuse

Employers can take several steps to help prevent fraudulent use of FMLA/CFRA leave. Employers may institute policies to prevent employee abuse of leave if the policies do not conflict with or diminish the rights provided by the FMLA/CFRA.

For instance, the CFRA specifically states that an employee "who fraudulently obtains or uses CFRA leave is not protected by CFRA's job restoration or maintenance of health benefits provisions."

FMLA/CFRA protections will not apply to situations where:

  • The employee fraudulently misrepresented the reason for the leave.
  • The reason for the leave expired.
  • The employee did not provide the required notices or certifications.

However, remember that you bear the burden of proving fraudulent use or abuse of leave, and you will want to proceed with caution before taking any action.

Don't make any rush decisions. Instead, conduct an investigation Give the employee an opportunity to explain any discrepancy between the information you learned and the request for leave because he/she was unable to perform the job. Be careful of any privacy issues - how did you learn this information?

If the time off is to care for a family member, consider issues regarding whether the care needed to be provided at home. For instance, if an employee is caring for a family member at home and the family member needs to travel, that basic care now may need to be provided at another location. "Care" under state and federal law is an expansive definition and can include both physical and psychological care. Consider consulting legal counsel before making a final decision.

Establish Consequences

Employers need clear policies that provide advance notice to employees of the consequences for misusing time off, including family and medical leave. Employers should state specifically that fraudulent use of leave is grounds for disciplinary measures, up to and including termination.

Do not ignore extenuating or unusual circumstances and consulting legal counsel may be warranted prior to disciplining an employee for misuse.

Other best practices include:

  • Post the required FMLA and CFRA notices in the workplace.
  • Give employees who request family and medical leave the required FMLA - Notice of Eligibility and Rights and Responsibilities. This notice details the specific expectations and obligations of the employee and explains consequences for failure to meet obligations.
  • Require employees to provide notice of the need for leave. If the need for family medical leave is foreseeable, the employee can be required to provide at least 30 days notice of the need for leave. For unforeseeable absences, notice to the employer must be given "as soon as practicable." You must consider extenuating and unusual circumstances, such as an illness affecting the ability to give notice.
  • Request medical certification or re-certification (when legally permissible).
  • Review certifications carefully and ensure they are timely, complete and sufficient.
  • Specify in employee handbooks that misuse of FMLA/CFRA time can result in discipline, including immediate termination.
  • Maintain complete documentation of use of FMLA time. This is especially important when handling intermittent leave. Also, requests for vacations can be compared with requests for FMLA leave to help detect potential abuse.
  • Create and maintain ongoing records of employees' written disciplinary warnings and oral warnings to help support your reasons for legitimately terminating a problem employee. Inform employees that misuse of FMLA/CFRA leave may result in disciplinary action, up to and including termination.
  • Be mindful of other leave protections and be careful that you do not interfere with those rights. For example, does the employee have protected paid sick leave (PSL)available?
The Problem With Unlimited Vacation Policies

Companies with unlimited vacation policies operate on an honor system where employees can take time off whenever, and as often, as they like.

What are Unlimited Vacation Policies?

In an unlimited policy, time off is generally not tracked and there is no accrual. The focus is on the successful completion of tasks, instead of the specific amount of time spent on a task.

Some prominent companies, such as LinkedIn and Netflix, have adopted these policies, but smaller companies with flexible work environments have also adopted the approach.

However, despite reports on the "trend," only a small percentage of companies have transitioned to unlimited paid vacation policies.

The question remains as to whether unlimited vacation policies are practical. Some types of jobs are ill-suited to unlimited vacation policies, such as:

  • Hourly nonexempt positions;
  • Positions where it is difficult to measure productivity;
  • Positions where staffing/coverage needs must be met (such as retail or restaurants);
  • Jobs requiring a great deal of face-to-face interaction; or
  • Jobs where the work pressures are intense and employees may feel like they can never actually take any time off.

Legal Risk #1: Can You Avoid Vacation Accrual?

In California, unlimited vacation policies do create legal risks.

Under California law, earned vacation time is considered wages, and vacation time is earned, or "vests," as work is performed. Vacation accrues as it is earned, cannot be forfeited (no "use it or lose it" policies), and must be paid out at time of termination (Suastez v. Plastic Dress-Up Co., 31 Cal. 3d 777, 781 (1982). Employers can place reasonable caps on vacation accruals that prevent an employee from earning vacation over a certain amount of hours.

Generally, the Labor Commissioner has taken the position that a reasonable cap is one that is no less than 1.5 times the annual accrual rate (e.g., if you offer 40 hours of vacation a year, you could put a cap of 60 hours on the total amount an employee can accrue).

Companies with unlimited vacation plans argue that there is no accrual and, therefore, no vesting and no vacation pay out at termination. But the California Labor Commissioner and California courts may see this as a subterfuge to avoid paying out accrued vacation.

There is an argument that unlimited vacation policies are more like "use it or lose it" policies and are, thus, unlawful:

  • If an employee chooses to work, the employee forfeits the vacation and also does not receive any payment for not using the days;
  • Employees may not have a fair opportunity to actually take any days off because of workload factors; and
  • There is never any balance of accrued time available.

Arguably, unlimited vacation does vest. If the vacation is unlimited, an employee might claim that he/she receives one usable vacation day for every day of employment. The open and untested question remains as to whether there is any vested benefit and subsequent forfeiture.

Courts may also look to see what is actually going on in practice. For example, despite the company's stated policy, is the unwritten practice really that employees are given two weeks of paid vacation? Do supervisors chastise employees if they take more than a certain amount? Do supervisors communicate "guidelines" or expectations regarding recommended usage?

If so, a court could say that the plan is not really an unlimited plan but, in practice, is a traditional accrual policy that may need to be paid out just like under any other type of vacation plan.

The other question to ask is whether your company would be comfortable telling employees that they can take unlimited time off without any prior approval. For instance, would your company be OK allowing an employee to take four weeks of vacation without asking anyone in advance?

If, under your unlimited vacation policy, you still tell employees they cannot take more than two weeks without prior approval, California agencies and courts will likely find that your employees have an entitlement to at least two weeks of vested vacation per year - if not more, depending on your company's practice. The same goes if you offer employees "guidance" about how much vacation would be appropriate.

Back in 1987, the Division of Labor Standards Enforcement (DLSE) issued an opinion letter calling out the policy of a company that, in the DLSE's opinion, was trying to avoid paying out vacation by saying that it is "unlimited" and nothing accrues or vests:

"To approve your policy, as written, would make Suastez a dead letter since every employer would tell employees they have unlimited vacation (though none is accruing or vesting), but can only take more than one or two or three weeks with approval."

One thing is certain: the Labor Commissioner takes the issue of wage theft seriously and may choose to focus on an employer who decides to do away with its vested vacation policy and switch to an unpaid vacation plan.

Legal Risk #2: Tracking Obligations

One of the supposed benefits of the unlimited vacation plan is to relieve the administrative burden of tracking time off. But employers in California have an obligation to keep track of time worked for nonexempt employees.

The dangers of unpaid vacation plans and non-tracking for nonexempt employees in California are substantial, including liability for unpaid overtime.

If you have an unlimited vacation policy for exempt employees, then you probably won't be tracking at all and cannot discipline an employee for abuse of the policy. If you choose to track the time, the result may again lead to arguments that the vacation is actually accrued and needs to be paid out.

Legal Risk #3: Unfair Treatment

Unlimited vacation policies also may lead to claims of unfair or discriminatory treatment. Employees may argue that the policy is applied inconsistently. There may be problems of favoritism or, the opposite, arbitrary denials or crack downs.

If your company wants unlimited vacation only for your top-level exempt employees or for a certain department, you should look closely at the demographics of that particular subset of employees. Examine whether there are racial or gender differences that may be perceived as discriminatory.

A standardized vacation benefit policy, instead of an unlimited policy, ensures that all employees are treated equally and reduces this risk.

Legal Risk #4: Coordination With Other Benefits

Unlimited vacation policies may conflict, or create coordination problems, with other paid and unpaid leave benefits, including, federal and state family and medical leave, pregnancy leave and military leave. For example:

  • Federal and state family and medical leave is unpaid, but employees can use any accrued vacation time during their unpaid leave of absence as a way to receive compensation during the time off. If an employer offers an unlimited vacation policy, the employee could argue that he/she is entitled to pay for the entire 12 weeks.
  • An employee has already exhausted four months of pregnancy disability leave but argues that she is entitled to stay out additional time under the unlimited vacation policy.
  • Coordination with other forms of wage replacement benefits, such as state disability insurance and paid family leave, will also be affected.

The confusion caused by the interaction of an unlimited vacation policy with other leave laws/policies may create more of a legal and administrative headache than any benefit the unlimited vacation policy could provide.

Problems of Abuse and Morale

Regardless of the legal minefields, there is also the general problem of abuse. Any attempt at an unlimited vacation policy would need to ensure that strong controls are in place. There will certainly be those employees who take undue advantage of the system.

Introducing the concept into your company can cause tension between those who end up taking off a lot of time for various personal reasons and those who do not. High performers who take little time off may begin to resent those who are frequently out of the office.

There is also the concern that employees will really see this as a "no vacation" policy, instead of an unlimited vacation policy. Without a pre-set amount of allotted vacation time available to them, employees may believe that the company is really just expecting them to take even less time off.

With more and more Americans reporting that they work during "vacation," this skepticism may not be unwarranted.

What Companies Should Do

Unlimited vacation policies for California employers pose many legal risks, even more than those outlined briefly here. Employers interested in such policies should consult with labor and employment counsel prior to implementation of any such policy.