Tag: Regulatory

Employee Shareholders: It’s Happening, but What Does it Mean?

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New Growth and Infrastructure Act introduces employee shareholder provisions that are expected to come into force later this year.

On 25 April, the Growth and Infrastructure Act 2013[1] came into effect and, among other things, introduced employee shareholder or “rights for shares” provisions that are expected to take effect this autumn in the UK. Broadly speaking, these provisions amend the Employment Rights Act 1996 (the ERA) to allow employees to give up some of their employment rights in exchange for shares in their employer company. However, in the absence of any additional guidance, the practical scope and impact of these changes remains unclear.

What We Do Know

Any company with share capital can enter into an agreement with an employee to allow them to become an “employee shareholder”. An employee shareholder will receive fully paid-up company shares that have a value of no less than £2,000 on the day of issue.

In exchange, the employee shareholder will give up the right to

•    request to undertake study or training;

•    request flexible working;

•    not be unfairly dismissed; and

•    a redundancy payment.

Further, the notice that employee shareholders will need to give before returning to work after maternity, parental, paternity, or adoption leave will be increased to 16 weeks.

Employee shareholders cannot waive their right to claim unfair dismissal where their dismissal breaches the Equality Act 2010 or health and safety legislation or is automatically unfair under the ERA. However, employers can make a job offer contingent on an applicant agreeing to become an employee shareholder. If an applicant refuses to do so, the employer can simply withdraw the job offer.

Before becoming an employee shareholder, each employee (or applicant to whom a job has been offered) must receive independent legal advice paid for by the employer (up to a “reasonable” level). The employer must pay these legal costs whether or not an employee elects to become an employee shareholder. Employees and applicants will then be given a seven-day cooling-off period in which they can withdraw their agreement.

For any acceptance to be valid, the employer must have provided the employee with a statement of particulars that sets out, among other things, the following:

•    The rights the employee shareholder gives up

•    The rights attached to the shares, e.g., voting, dividend, and ability to participate in the distribution of any surplus assets on winding up

•    Whether there are any restrictions on the transferability of the shares

•    Whether the employee shares are subject to drag-along rights or tag-along rights

Finally, an employee must not suffer a detriment for refusing to accept an offer to become an employee shareholder. Moreover, the dismissal of an employee for refusing to become an employee shareholder will be regarded as unfair.

What We Do Not Know

Transfer of Undertakings (Protection of Employment) Regulations (TUPE) Transfers.

If employee shareholders transfer across to an employer who does not operate an employee shareholder scheme or does not have any share capital, there is no guidance as to whether that employee shareholder automatically regains their rights or if they must surrender their shares first.

Share Schemes.

It is not clear whether companies that operate share schemes can make it a precondition of future participation in any company share scheme that an employee becomes an employee shareholder.

Termination.

On termination of the employment contract, a company can buy back shares from an employee shareholder. However, the conditions that must be satisfied before an employer buys back an employee’s shares are still unknown.

Potential Impact on UK Employers

•    £2,000 seems a relatively small amount when weighed against the potential value of rights that would be forfeited by employee shareholders. Employers can give shares worth more than £2,000, and it is therefore possible that, once the provisions are in force, along with salary, the sticking point in contractual negotiations will be the value of the shares given. That said, any deviation from the £2,000 figure may give rise to significant tax complications.

•    The provisions could create a two-tier workforce of employee shareholders and non-employee shareholders, with the former potentially subject to enforced contractual changes and other less favourable treatment that would normally result in potential constructive unfair dismissal claims.

•    In theory, an employer undertaking a redundancy exercise could simply select employee shareholders as redundant to avoid any unfair dismissal risk and/or any need to make redundancy payments.

By making both job offers and participation in employee share schemes conditional upon an employee’s accepting employee shareholder status, it is possible that some employers could significantly reduce and ultimately eradicate the risk of “pure” (i.e., non-discriminatory or non-whistleblowing related) unfair dismissal claims and the flexible working rights of their workforce.

[1]. View the Growth and Infrastructure Bill here.

Travel Alert: Students and H-1B Visa Cap

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Now that the stress and anxiety of H-1B cap is over, F-1 students whose H-1B petitions have been selected and are pending (or even approved) are likely wondering if they can travel this summer. It appears that the answer to that question is ‘no’ for F-1 students who are relying on the cap-gap provision. The cap-gap provision automatically extends F-1 status and employment authorization until October 1, 2013 for those F-1 students whose H-1B cap petition was filed before their F-1 status expired.

Current USCIS guidance indicates that F-1 students will lose cap-gap benefits if they travel internationally during the cap-gap period. This means that if an F-1 student travels outside the United States during the cap-gap extension period, he or she will not be able to return to the United States in valid F-1 status and will need to wait until September 2013 to re-enter the United States in H-1B status.

Because an H-1B beneficiary may enter the United States up to 10 days prior to the start date of their approved H-1B visa period, F-1 visa holders who wish to travel may take a trip in September so that they can apply for the H-1B visa at a U.S. consular post abroad and return to the United States on or after September 20. However, it should also be noted that the earliest that the foreign national can start employment in H-1B status is October 1, 2013.

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Under Pressure: Unions Espouse New Organizing Models and Take Action

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Back in March, AFL-CIO President Richard Trumka summarized his view of the state of union representation in America: “To be blunt, our basic system of workplace representation is failing to meet the needs of America’s workers by every critical measure.” Last week in a Washington Post Op-Ed, this view was echoed by columnist and long-time advocate of big labor’s policies Harold Meyerson. Meyerson identified an “existential problem” facing unions, which are continuing to see membership numbers decline.

It is not difficult to understand the concern. Membership decline means one thing for unions: less dues. Measures that weakened public sector unions in Wisconsin and passage of right to work legislation in traditional union Midwest strongholds of Indiana and then Michigan, along with ever-shrinking private sector union membership, have forced labor into a place of critical self-evaluation. And what is emerging from this self-evaluation is a dedication to expanding the scope of union organizing.Union membership decline

In March, Trumka highlighted new targets of organizing that are being explored – non-traditional targets. Trumka noted home care workers, taxi drivers and others who don’t fit neatly into the traditional models of unionization will be targets. The point is: unions are increasingly setting their sights on individuals who “do not neatly fit the legal definition of an employee.” And businesses and employers who before may have not traditionally considered themselves targets for big labor should be paying attention.

Such efforts are not just anecdotal.  As we saw in Michigan with home health care unionization, these non-traditional unionization efforts can have a lot of upside for unions, even if they are not ultimately successful in keeping their representative status. SEIU collected $34 million in dues from more than 59,000 home health care workers in Michigan before it was ultimately forced to end its status as bargaining representative in 2012.

Meyerson also points out the recent one-day strikes of fast-food workers in New York and Chicago as evidence of a changing model. Workers in other cities, including St. Louis and then Detroit this past weekend, have followed suit. Employers will be mindful to pay attention to such trends.

Meyerson explains the AFL-CIO’s plan too. And, it starts with seeking more political power – not necessarily more dues paying members. As Meyerson explains: “The first part of this plan is to expand its Working America program, a door-to-door canvass that has mobilized nonunion members in swing-state working-class neighborhoods to back labor-endorsed candidates in elections in the past decade.”  Phase Two, according to Meyerson quoting Trumka, is “we’re asking academics, we’re asking our friends in other movements ‘What do we need to become?’” And Phase Three: “We’ll try a whole bunch of new forms of representation.  Some will work; some won’t, but we’ll be opening up the labor movement.”

Where all of this ends up is anyone’s guess – but this is clear: the model of unionization is changing.  Change means new challenges. The bottom line for employers: Be Prepared.

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Is Environmental Protection Agency (EPA) Setting Its Sights on Hydraulic Fracturing Compounds?

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Agency implements rule requiring companies to disclose information regarding the use of certain industrial chemical substances commonly used in natural gas and oil well drilling.

On May 9, the U.S. Environmental Protection Agency (EPA) issued a Direct Final Rule[1] identifying 15 chemical substances[2] that will require notice prior to manufacturing, importing, or processing for an activity designated as a significant new use. These chemicals were flagged pursuant to the Toxic Substances Control Act (TSCA) significant new use rules (SNURs). The notices, referred to as Significant New Use Notices (SNUNs), must be submitted to EPA 90 days before a listed chemical is manufactured, imported, or processed for an activity designated as a significant new use. EPA states that this will provide the agency with an opportunity to evaluate the intended use and determine whether it is necessary under TSCA to prohibit or limit the activity before it occurs.

While chemicals in the rule include those that can be employed in a broad range of uses, of particular interest is the listing of one compound[3] used in natural gas and oil well drilling and hydraulic fracturing to eliminate bacteria in the water that produce corrosive by-products. EPA included this compound due to its potential toxicity to aquatic life at concentrations above 11 parts per billion (ppb). Pursuant to the Direct Final Rule, 40 C.F.R. Part 721, Subpart E [Significant New Uses for Specific Chemical Substances] is expected to be amended to include section 721.10666, which would require reporting and associated recordkeeping obligations for the following significant new uses of this compound:

  • Industrial, commercial, and consumer activities other than as described in the original premanufacture notice (PMN) for this substance (PMN P-12-437)
  • Release to water resulting in surface water concentrations exceeding 11 ppb

EPA also recommended additional testing to help characterize the fate and environmental effects of the substance.

This is in line with EPA’s declared intent to use TSCA to require companies to disclose information regarding chemical substances and mixtures used in hydraulic fracturing. However, it has been nearly two years since the agency, partly in response to a petition filed by Earthjustice, stated that it would propose rules to require certain reporting requirements for chemicals used in hydraulic fracturing.

Under TSCA, SNUNs must contain the following:

  • Common or trade name of the chemical substance
  • The chemical identity and molecular structure of the chemical substance
  • The categories or proposed categories of use
  • The total amount of each chemical substance manufactured or processed per category or use
  • A description of by-products resulting from the manufacture, processing, use, or disposal of each such chemical substance or mixture
  • All existing data concerning the environmental and health effects of the substance
  • Estimates of the number of people exposed in their places of employment and the duration of such exposure
  • Changes in disposal methods
  • Any test data in the possession or control of the person giving the notice that is prescribed by EPA

Accordingly, while this rule does not implement a broad reporting requirement for hydraulic fracturing chemicals, it points to the likelihood of increased reporting for these substances. What is unclear, for the moment, is whether this new rule is a stopgap measure or a preview to a comprehensive proposal for TSCA reporting requirements for hydraulic fracturing chemicals.

The rule is effective on July 8, 2013, unless written “adverse or critical” comments on any of the SNURs, including potential alternatives and likely financial burdens, are received on or before June 10, 2013. Those chemical substance(s) and new use that receive comments or notice of intent to comment will be withdrawn before the effective date and a proposed SNUR for the specific chemical substance will be issued with a 30-day comment period. For purposes of judicial review, the rule is promulgated on May 23, 2013.

The rule highlights the need for firms using TSCA-listed chemicals for new and innovative technologies to bear in mind the PMN and SNUR implications for their applications. Additionally, the hydraulic fracturing industry should carefully watch for potential regulation of additional substances used in fracturing fluids.

[1]. View the Direct Final Rule here.

[2]. The chemical substances and associated PMNs subject to this Direct Final Rule are as follows:

  • Methylenebis[isocyanatobenzene], polymer with alkanedoic acid, alkylene glycols, alkoxylated alkanepolyol, and substituted trialkoxysilane (generic). PMN No. P-11-60.
  • Acetaldehyde, substituted-, reaction products with 2- butyne-1, 4-diol (generic). PMN No. P-11-204.
  • Functionalized multi-walled carbon nanotubes (generic). PMN No. P-12-44.
  • Alkenedioic acid dialkyl ester, reaction products with alkenoic acid alkyl esters and diamine (generic). PMN Nos. P-12-408, P-12-409, P-12-410, P-12-411, P-12-412, and P-12-413.
  • 2-Propenoic acid, (2- ethyl-2-methyl-1,3-dioxolan-4-yl)methyl ester. PMN No. P-12-414.
  • Quaternary ammonium compounds, bis(fattyalkyl) dimethyl, salts with tannins (generic). PMN No. P-12-437.
  • Slimes and sludges, aluminum and iron casting, wastewater treatment, and solid waste. PMN No. P-12-560.
  • Trisodium diethylene triaminepolycarboxylate (generic). PMN No. P-13-18
  • Tertiary amine alkyl ether (generic). PMN No. P-13-78.
  • Bromine, manufacture of, by-products from, distillation residues. PMN No. P-13-108.

A generic name was provided if the specific chemical substance named was claimed as confidential business information.

[3]. The “quaternary ammonium compounds, bis(fattyalkyl)dimethyl, salts with tannins (generic).”

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“Essential Functions” Under the Americans with Disabilities Act (ADA) Can Include Job Functions that are Infrequently Performed

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The Americans with Disabilities Act (ADA) requires covered employers generally to provide reasonable accommodations to qualified employees with disabilities. The ADA provides, however, that the employee must be able to perform the “essential functions” of the job with the accommodation, and that the accommodation cannot prove to be an “undue hardship” on the employer.

In the recent case of Knutson v. Schwan’s Home Service, the U.S. Court of Appeals for the Eighth Circuit held that a job requirement can be an “essential function,” even if the employee is not required to perform the function on a regular basis.

In this case, Mr. Knutson was a manager for Schwan’s Home Service, which delivers frozen food. Managers for Schwan’s are required to maintain DOT driving certification.  In March 2008, Mr. Knutson sustained an eye injury.  Because of the eye injury, Mr. Knutson was required to undergo a medical exam and be recertified.  In December 2008, an eye doctor refused to give Mr. Knutson a DOT certification or a waiver.  Schwan’s then gave Mr. Knutson 30 days to find a job within the company that did not require DOT driving certification.  Mr. Knutson was unable to find such a job within the company and was terminated by Schwan’s.

Following his termination, Mr. Knutson filed suit against Schwan’s pursuant to the ADA.  He argued that since he was able to successfully manage his terminal without driving a truck that maintaining the DOT certification was not an “essential function” of his position.  The evidence before the court showed that Mr. Knutson was DOT qualified at the time of his injury; he admitted to delivering product in his personal vehicle; and he testified that since November 2007 that he had driven a truck less than 50 times while working as a manager.

The court disagreed with Mr. Knutson and held that “essential functions” of a job are determined based on the written job description, the employer’s judgment, and the experience and expectations of all individuals working in the same position.  The Court of Appeals affirmed the trial court’s granting of summary judgment in favor of Schwan’s.

The court’s ruling in this case is good news for employers.  Employers should use this case as a reminder of the importance of having a carefully analyzed comprehensive written job description for all positions, clearly identifying essential functions of the position.  In addition, if essential functions of a position change over time, it is important to make appropriate revisions to the written job description for the position.

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Sixth Circuit Upholds Michigan Law Which Bars Schools from Collection Union Dues

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The 6th Circuit in Bailey v. Callahan, decided Thursday, May 9, has vacated an injunction entered by the District Court and has upheld Michigan’s Public Act 53 which prohibits Michigan’s public schools from assisting in the collection of dues and service fees for unions. The Court summarized the Union’s First Amendment challenge to the statute in this way:

“Unions engage in speech (among many other activities); they need membership dues to engage in speech; if the public schools do not collect the unions’ membership dues for them, the unions will have a hard time collecting the dues themselves; and thus Public Act 53 violates the unions’ right to free speech.”

The problem with that, according to the majority opinion, is that this argument has already been rejected by the U.S. Supreme Court in Ysursa v. Pocatello Education Association, 555 U.S. 353 (2009). Moreover, the Court determined that Public Act 53 does not restrict speech and is not designed to specifically suppress speech by teachers’ unions. Finally, the Court, in two paragraphs, rejected the plaintiff’s equal protection argument.

The opinion incited a lengthy dissent from Circuit Judge Jane Stranch who contended that the majority “mischaracterizes the First Amendment interests at stake, glosses over key distinctions the Supreme Court requires us to observe, and averts its gaze from Act 53’s blatant viewpoint discrimination.”

With a 2-1 decision and a lengthy dissent on a Constitutional claim, one would think this is headed for an en banc determination by the full Sixth Circuit.

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Second Circuit Certifies Smoking-Related Medical Monitoring Issue for Ruling by New York High Court

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In an effort to clarify the availability and scope of medical monitoring claims under New York law, the Second Circuit last week certified to the New York State Court of Appeals questions relating to whether smokers who have not been diagnosed with a smoking-related disease may bring a stand-alone claim against a tobacco company for medical monitoring. The Court of Appeals’ decision will likely have broad implications for toxic tort cases involving allegations of potential health effects.

The action was brought by long-term smokers who had not contracted lung cancer. They alleged that Defendant Philip Morris USA, Inc. knew that it was feasible to develop a less carcinogenic cigarette, but deliberately designed its product to deliver an excessive amount of carcinogens when smoked. As relief for their claims of negligence, strict liability and breach of warranty, the plaintiffs sought funding for a medical monitoring program to address their increased risk of lung cancer.

The Second Circuit affirmed Defendant’s motion to dismiss the smokers’ claims of negligence, strict liability and breach-of-warranty claims. Rather than dismiss the request for medical monitoring outright, however, the Circuit judges asked the Court of Appeals to consider whether, under New York law, a current or former heavy smoker not diagnosed with smoking-related disease may pursue an independent equitable cause of action for medical monitoring for such a disease. If the court determines that an independent cause of action for medical monitoring exists, the Second Circuit asked the court to then consider what the elements of that cause of action would be, what statute of limitations would apply, and when the cause of action would begin to accrue.

Although several New York courts have allowed medical monitoring damages as a remedy in connection with other claims, the Second Circuit noted that no New York court has directly addressed the questions it certified, and invited the Court of Appeals to expand on or alter those questions as it sees fit. Regardless of the result reached by the Court of Appeals, its decision in this matter will likely have far-reaching effects on the availability and scope of medical monitoring claims and remedies under New York law.

Circuit Court Upholds Michigan Public Act 53: Public Schools Prohibited from Collecting Union Dues

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Responding to a challenge to the constitutionality of Michigan Public Act 53, which prohibits public schools from collecting union dues from employees, the Sixth Circuit ruled that the act is constitutional. The result of this ruling is that, at this point, public schools are statutorily precluded from collecting dues for the union under any bargaining agreement that was entered into, renewed or extended after March 16, 2012.

The plaintiffs, who are school unions and union members, argued that the act violates their First Amendment and Equal Protection rights.  The district court, agreeing with the plaintiffs, had issued a preliminary injunction barring enforcement of the law.  The Sixth Circuit reversed the district court, dissolved the injunction and remanded the case “for further proceedings consistent with this opinion.”  It is unclear whether any viable challenge to the statute remains for the district court to address or whether dismissal of the claim is now in order.

The 6th Circuit ruled that Public Act 53 does not violate the First Amendment.  The plaintiffs argued that unions need membership dues to engage in speech and if the public schools don’t collect the union dues for them, the unions will have a hard time collecting the dues themselves.  Therefore, Public Act 53 violates the unions’ right to free speech.  The majority opinion stated that the First Amendment prohibits government from limiting the freedom of speech, but it does not give the right to use government payroll systems for the purpose of obtaining funds for speech.  The court concluded that Public Act 53 does not restrict speech.  It “merely directs one kind of public employer to use its resources for its core mission rather than for the collection of union dues.”

Similarly, the Court decided that the plaintiffs’ Equal Protection claim fails.  The plaintiffs argued that Public Act 53 violates the Equal Protection clause of the 14 Amendment because it applies only to unions that represent school employees and not to other public employers.  The court held that there is a legitimate interest in this classification.  That is, the Michigan legislature “could have concluded that it is more important for the public schools to conserve their limited resources for their core mission than it is for other state and local employers.”

It remains to be seen whether the Sixth Circuit’s opinion ends the debate or if there will be continued challenge.

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Timely Performance Management in Avoiding Family and Medical Leave Act (FMLA) Liability

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Managing the performance or conduct of an employee who has recently utilized leave under the Family and Medical Leave Act (FMLA) can be a legal minefield for employers.  If the poorly performing employee does not improve his or her performance upon return from FMLA leave, the employer may be hesitant to take further employment action against the employee for fear that the timing of the decision will create a risk of liability under state or federal leave laws.  A comparison of two recent court decisions serves as an important reminder that contemporaneously addressing and documenting performance or conduct issues as they occur can go a long way in protecting the employer from liability in a later FMLA retaliation claim.

In Benimovich v. Fieldston Operating, LLC, Case No. 11-CV-780 (S.D.N.Y 3-22-2013), the plaintiff, Galina Benimovich, took FMLA leave to undergo and recover from knee replacement surgery.  While on leave, the employer hired and trained a replacement.  When Benimovich learned that she had been replaced, she contacted the employer and offered to return from leave.  When the parties met a few days later to discuss the situation, the employer terminated Benimovich’s employment.

Benimovich subsequently filed a lawsuit against the employer alleging a variety of claims, including a claim that the employer had unlawfully terminated her in retaliation for exercising her FMLA rights.  The employer defended that its owners had actually decided to terminate Benimovich months before she took FMLA leave, but that they wanted to hire and train a replacement before firing her. The employer claimed its motivation to terminate Benimovich was poor performance, specifically inaccurate processing of payroll records, manipulation of time records, failure to issue accurate paychecks, and untimely payments to vendors.

The court denied the employer’s motion for summary judgment on the FMLA retaliation claim.  In allowing the case to go forward, the court noted that the temporal proximity between the leave and the termination was suspect.  However, the court also relied heavily on the fact that there was no written documentation substantiating Benimovich’s alleged performance problems or the owners’ decision to terminate Benimovich months earlier.  The court further noted that Benimovich’s performance was rarely, if ever, criticized.

Contrast the outcome in Benimovich with the analysis and decision of the Court of Appeals for the Eight Circuit in Brown v. City of Jacksonville, Case No. 12-1730 (8th Cir. 2013).  The plaintiff in Brown took FMLA leave from August 9, 2008 through October 18, 2008 to undergo hip replacement surgery.  A few months before going on leave, Brown received a written warning for insubordination.  Brown’s supervisors had also verbally counseled her regarding her performance on a number of occasions.

After returning from leave, Brown received another written warning for failure to perform her duties as purchasing manager.  Brown filed a complaint with the Equal Employment Opportunity Commission (EEOC), which led the City to conduct an internal investigation into Brown’s complaints.  The investigation revealed that Brown’s co-workers considered her to be a very negative presence in the workplace and felt they had to walk on “pins and needles” due to Brown’s attitude issues.  Additionally, the investigation revealed that Brown’s co-workers were able to adequately perform Brown’s purchasing duties during her absence.  The City concluded that Brown was creating a hostile work environment for her co-workers and terminated her employment for “failure in performance of duties” and “failure in personal conduct.”

Following her termination, Brown filed a lawsuit against the City alleging FMLA retaliation and a number of other discrimination claims.  On appeal, the Eighth Circuit approved of the lower court’s grant of summary judgment to the employer on Brown’s FMLA retaliation claim.  First, the court noted that the timing of Brown’s termination – eight months after returning from leave – did not raise an inference of discrimination.  Second, the court held that the undisputed evidence (which included written warnings) showed that Brown was warned about her poor performance prior to even going on leave.  Accordingly, the Court affirmed summary judgment in favor of the City.

There are a number of distinguishing factors that explain the differing outcomes in Benimovich and Brown – including the amount of time between the employee’s leave and termination.  Importantly, however, employers should also take note of the critical role that written warnings and performance counseling played in the Eight Circuit’s award of summary judgment to the employer.  The employer in Brown was able to justify its termination and avoid liability in a tricky situation because it had the written documentation and prior performance counseling to support its claim of poor performance.   Conversely, the employer in Benimovich was denied summary judgment because it had failed to document either the purported performance issues or the earlier decision to terminate.

No doubt, terminating or taking adverse employment action against an employee who has recently utilized legally protected leave rights is risky, and an employer should consult legal counsel before taking any such action.  However, these cases illustrate that proper documentation of performance and disciplinary issues is one of the most important preventative steps an employer can take now to reduce the risk of future liability.

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Seventh Circuit Addresses Obligations Regarding the Interactive Process under the Americans With Disabilities Act (ADA)

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A common scenario often faced by employers under the Americans with Disabilities Act (ADA) involves an employee’s request for time off as a reasonable accommodation. In Basden v. Professional Transportation, Inc., No. 11-2880 (7th Cir, May 8, 2013), the Seventh Circuit U.S. Court of Appeals provides guidance in this area. There, the court explained that the employer was not liable under the ADA, even though it failed to engage in the interactive process, because the employee failed to show that the requested accommodation (a 30-day leave) would have resulted in her ability to perform the essential functions of the job.

Employee Two Weeks Shy of Leave Entitlement

Professional Transportation, Inc. (PTI) provides 24-hour ground transportation services. Terri Basden was hired as a dispatcher in June, 2007. After numerous absences in 2007 and early 2008, she received a verbal warning for absences in March 2008 and a written warning for further absences in April 2008.

Basden provided doctors’ notes reflecting that she had been referred to a neurologist with a possible diagnosis of multiple sclerosis after emergency room tests showed brain abnormalities indicative of the disease. After several job transfers, Basden was granted a request for a part time position on May 1, 2008. She incurred additional absences in May which resulted in suspension. While on suspension, Basden submitted a request for a 30-day leave of absence due to “complications due to medical illness (MS).” PTI policy provides employees with one year of service may be eligible to take a 30-day, unpaid leave of absence. However, Basden had not been employed for one year. PTI denied her request for leave, and thereafter terminated Basden when she failed to return to work following her suspension.

Employee Could Not Show Leave Would Enable Her to Perform Essential Functions

Basden sued PTI, claiming that PTI violated the ADA by terminating her instead of accommodating her request for 30 days leave, that PTI failed to engage in the interactive accommodation process required by the ADA, and that PTI did not show that the requested leave was unreasonable. The district court granted summary judgment for PTI.

On appeal, the Seventh Circuit first observed that an employee’s request for an accommodation under the ADA requires the employer to engage in a flexible, interactive process to identify a reasonable accommodation. In this case, the employee requested a 30-day leave that, according to the employer’s policy, she would have been eligible for with two weeks’ additional seniority. The court noted that PTI’s response to this request, specifically, failing to engage in an interactive process, denying the leave, and terminating her, was not an appropriate employer response under the ADA.

However, the court held that PTI’s actions did not violate the ADA. The failure to engage in the interactive process is not an independent basis for liability under the statute, and in any event, such a failure is actionable only if it prevents identification of an appropriate accommodation. Thus, even if an employer fails to engage in the interactive process, that failure need not be considered if the employee fails to show that she was able to perform the essential functions of her job with an accommodation.

Here, PTI cited regular attendance as an essential function of Basden’s job. Yet, Basden did not demonstrate that she was able to come to work regularly at the time of her termination, or that her regular attendance could have been expected either following the requested leave or with any other accommodation. Therefore, the court held, summary judgment for PTI was appropriate on the ADA claim despite any shortcomings in PTI’s response to Basden’s request. (Basden also alleged violation of the Family and Medical Leave Act, which the court also affirmed summary judgment on because Basden had not worked for PTI for 12 months at the time of her leave request and thus was not eligible for leave under the statute.)

Identify and Document Essential Functions

Of course, employers should continue to comply with their obligations to engage in the interactive process. However, as this case suggests, the obligation to explore and provide accommodation does not necessarily extend to accommodations that are or would be futile and would not enable the employee to perform essential functions. This case highlights the importance of well-written job descriptions that clearly set forth essential job functions. An employer’s identification of and ability to prove essential functions of the job can be used to guide the interactive process and its obligations to provide accommodation under the ADA, and can play a key role in defending a lawsuit under the ADA.