Terminating employees based on an ‘honest belief’ of fraud did not violate FMLA

August 5, 2023

A lower court’s determination that CSX Transportation violated no laws in terminating employees it suspected of fraud in seeking medical leave was recently unanimously upheld by the 4th U.S. Circuit of Appeals.

When CSXT issued furlough notices to employees in West Virginia, more than 65 of them submitted forms requesting to take medical leave based on minor soft-tissue injuries that they allegedly sustained off-duty. In an incredible coincidence, they all produced similar forms, signed by one of two chiropractors, and they all called for medical leaves of eight weeks or more.

The forms submitted were similar or identical in content, and one of the two chiropractors submitted 14 such forms on a single day.

Those employees availed themselves of a CSXT policy that allowed for providing health and welfare benefits for up to two years to employees who were furloughed while on medical leave. 

CSXT’s chief medical officer suspected that the employees were committing fraud. CSXT charged the employees with violating its workplace rule against dishonesty, and,  after disciplinary hearings, terminated them. Fifty-eight employees sued, contending that CSXT interfered with their rights under the Family Medical Leave Act and violated the West Virginia Human Rights Act, among other alleged violations.

The court reasoned that CSXT produced a legitimate and nondiscriminatory reason for the terminations, based on a “belief that the plaintiffs were seeking time off work on an illegitimate basis.” The employees failed to show that the proffered reason by CSXT was pretextual.

As to the FMLA, the appellate court agreed with the lower court that CSXT “honestly believed that the plaintiffs were seeking leave for an improper purpose” and, therefore, CSXT was not terminating them in order to interfere with their FMLA rights.

The court acknowledged that CSXT didn’t provide conclusive evidence of fraud, but only speculated that there was fraud. On this, the court held that CSXT terminated them based on “suspected dishonesty and fraud,” and since those were the real reasons, this was sufficient.

Citing other case law, the court concluded: “When an employer gives a legitimate, nondiscriminatory reason for terminating an employee, ‘it is not our province to decide whether the reason was wise, fair or even correct,’ so long as it was the genuine reason for the employment decision.”

The court acknowledged that it was not making a determination on whether the employees “actually engaged in dishonesty or fraud,” but instead, “the pattern of similar leave requests in the context of the furlough notices was certainly ample evidence to raise legitimate suspicions of benefits abuse, and therefore, we do conclude that the plaintiffs have failed adequately to challenge that suspected dishonesty was CSXT’s actual reason for terminating” the employees.

As to the “honest belief” defense, the court held: “An employer does not interfere with an employee’s exercise of FMLA rights when it terminates an employee based on the honest belief that the employee is not taking FMLA leave for an approved purpose, regardless of whether such belief is correct.”

To prove interference with FMLA, employees have to show:

  1. That they are entitled to an FMLA benefit.
  2. That their employer interfered with the provision of that benefit.
  3. That the interference caused them harm.

The court held: “In the circumstance of this case, where the plaintiffs sought and were granted two months of medical leave, during which they were fired for misconduct, we conclude that the plaintiffs have failed to establish the prejudice element of their FMLA interference claim.”

The court further held that providing FMLA notices to employees would not have prevented their loss of employment for dishonesty, citing case law that states that “‘the FMLA does not prevent an employer from terminating an employee for poor performance, misconduct or insubordinate behavior.’”

The court added, “The FMLA serves the important purpose of allowing employees to take leave for legitimate family needs and medical reasons, but it is not a right that can be fraudulently invoked with impunity. In order to maintain the integrity of the FMLA, employers must be able to investigate and address plausible allegations that employees have been dishonest in their medical leave claims.”

The FMLA provides up to 12 workweeks of protected unpaid leave for the serious health condition of an employee, or if the employee is needed to provide care for the serious health condition of a spouse, child or parent, or for any pregnancy-related condition or for bonding time after the birth of a child, adoption, or placement of a child with an employee for foster care, in addition to some military-related benefits.

The law provides the rights only to employees who work in a location with 50 or more employees in a 75-mile radius, and the employee has worked for the organization one year (cumulative, not consecutive) and has worked 1,250 hours in the previous 12 months.

Employers should be careful about denying FMLA benefits to employees based on the “honest belief” doctrine and should objectively investigate concerns of FMLA fraud before taking such action. Information on FMLA rights and obligations can be found at www.dol.gov.