Termination After Return from Leave Does Not Violate CA Family Rights Act or Bonus Wage Requirements

October 19, 2006

An employee who was terminated for poor performance after 14 weeks of medical leave failed to prove the employer violated the California Family Rights Act.  Affirming a jury verdict in favor of the employer, the California Court of Appeal also found the employer had not violated the state Labor Code by failing to pay certain bonuses to the employee because she was not employed on the date of the bonus payment, a condition of the bonus plan. [Neisendorf v. Levi Strauss & Co., No. A109826 (Cal.Ct.App. Sept. 28, 2006).]

In 2000, the employee was hired as its Vice President, Worldwide Training and Development, the second highest human resources position in the company.  She received an annual salary and other benefits, including eligibility to participate in two bonus plans.  After two years, the employee's supervisor and subordinates voiced concerns about her performance, which concerns also were reflected in a mid-year review.  Although the employee met with her supervisor three times to address those issues, she refused to accept the criticism, blaming her boss and others.  After the third meeting, the employee offered to resign, requesting a separation package worth approximately $1.7 million, which the employer rejected.

The employee then took a medical leave, and the employer gave her notice of her rights and obligations under the CFRA and federal Family and Medical Leave Act.  After eight weeks of leave, her physicians cleared her to return to work with certain accommodations, including hiring a coach to help her with working with her supervisors.  Although the employer did not believe that the employee was legally disabled, it was willing to facilitate her return to work, provided she accepted and addressed the performance issues.  To that end, the parties met for several weeks, culminating in the employer again requesting that she address the prior issues and develop a corrective action plan.  The employee refused to do so, and the employer terminated her employment. 

The former employee subsequently sued the employer for age, gender, and disability discrimination; for retaliation for asserting her right to leave under the CFRA; for violations of the CFRA; and for unpaid bonus wages.  Although the trial court dismissed most of the claims, the disability discrimination, CFRA, and wage payment claims proceeded to trial.  Before going to the jury, the court dismissed the CFRA failure to reinstate claim and the claim for unpaid wages.  On the retaliation and disability discrimination claims, the jury entered a verdict for the employer, finding the employee was not disabled and there had been no retaliation. 

Although the employee appealed, she did not challenge the jury verdict.  Rather, she took issue with the rulings regarding her CFRA claim and wage payment claim, arguing that the employer violated the CFRA by failing to return her to work and violated the Labor Code by failing to pay her certain bonuses.

On appeal, the employer argued that, because the former employee was not released to work without accommodations at the end of the 12-week leave, there was no statutory duty under the CFRA to reinstate her to the same or an equivalent position.  Both the trial court and the appellate court agreed:  "There is no obligation under the CFRA [requiring an employer] to provide accommodations to any employee [other than]  . . . to allow the employee to return to work within the 12-week period."  The court further found that the former employee could not overcome the employer's legitimate reasons for her termination – presented at trial by the employer through "abundant testimony and documentation." 

Turning to the bonus, the appellate court again sided with the employer that the claims for payment were properly dismissed.  Although the former employee argued that she was entitled to certain bonuses under the employer's incentive plans, they specifically provided that, to be eligible for a bonus, the employee must "be an active employee . . . on the payment date."  Rejecting the characterization of the bonus payment as an entitlement, the court found that the employer made no specific promise to pay the bonus other than in accordance with its plans.  While the employer was obligated to follow its plans, it was not obligated to do more. 

As this case illustrates, employers doing business in Californiaare not prevented from terminating problem employees.  However, where employees have exercised statutory rights, such as leave with reinstatement under family and medical leave laws or filing fair employment practice charges, the administration of discipline or termination should be evaluated carefully in light of the potential for claims of retaliation and other unfair treatment.  Thorough documentation of performance issues will put the employer in the best position to defend against such claims.

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