7th Circuit prohibits mandatory exhaustion of paid leave benefits during paid FMLA leave

Most employers require employees who want to take family medical leave (FML) -- which is typically unpaid -- to use accrued paid leave (e.g., vacation and sick leave) benefits during the period of absence.  If an employee has not yet used his annual paid leave benefits, this requirement has the effect of limiting the amount of time employees can spend away from work each year.  Requiring the use of paid leave during an unpaid portion of FML is permissible under state and federal law.  However, an employer's ability to require the use of paid leave is not absolute.

In Repa v. Roadway Express, Inc., the 7th Circuit Court of Appeals recently found an employer in violation of the Family Medical Leave Act when it required an employee who was receiving disability pay (from a health and welfare benefit fund to which the employer contributed) to use her accrued sick and vacation leave benefits.  The court relied on a Department of Labor Regulation, 29 CFR 825.207(d), which provides that when an employee is receiving disability or workers compensation pay, the leave is not unpaid and the section of the regulation allowing for the substitution of paid leave is inapplicable.  Although Roadway argued that the regulation contravened Congressional intent and was therefore invalid because it allowed employees to take time off in excess of 12 weeks, the court refused to consider the argument because Roadway failed to assert it in the lower court.

As the federal regulation remains intact for now, Oregon employers who are subject to the Federal Family Medical Leave Act (those with 50 or more employees) are well advised to follow it.  However, employers who are only covered by the Oregon Family Leave Act (those with 25 to 49 employees), should be aware of the difference between state and federal law on the subject of exhaustion of paid leave benefits.  Under OFLA regulations, the employer, with the employee's consent, may make deductions from the employee's sick leave while the employee is receiving workers compensation, provided the sick leave payments make up for, but do not exceed, the employee's daily wage that is not covered by time loss benefits.  See OAR 839-009-0280(3) (citing ORS 656.240).  OFLA regulations do not otherwise limit an employer's ability to require employees to use paid leave benefits concurrently with other types of paid or unpaid leave.