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Sixth Circuit Approves Termination of Employee for FMLA Fraud Based on Employer's "Honest Belief"

    Client Alerts
  • May 18, 2012

On occasion, employers receive reports that an employee who is supposedly incapacitated due to a serious health condition, is observed engaging in recreational or other activities apparently inconsistent with the diagnosis used to justify Family and Medical leave. When can the employer conclude that the employee has defrauded the employer and take disciplinary action in response?

Last week in a split decision, the Sixth Circuit Court of Appeals adopted an employer-friendly test that approved a termination for supposed fraud, even where there were signs that the employer's conclusion was mistaken. In Seeger v. Cincinnati Bell Tel. Co., the plaintiff was on FMLA leave for a herniated lumbar disc that caused significant pain, and prevented him from standing, sitting or walking for prolonged periods of time. He was observed by a number of coworkers attending a local Oktoberfest event while on FMLA.

In response, the employer conducted an investigation, including interviews of the witnesses, and review of medical information from the plaintiff's doctor stating that his attendance at the festival was not inconsistent with the earlier diagnosis. The company eventually concluded that the plaintiff had engaged in fraud with regard to his collection of paid benefits while on leave, and terminated his employment. He sued, alleging retaliation under the Family and Medical Act.

In a 2-1 decision, the Sixth Circuit affirmed dismissal of the claim on summary judgment. In the majority opinion, the court acknowledged a number of weaknesses in the employer's investigation, including potential witness bias, and failure to contradict the medical information provided. However, the Sixth Circuit concluded that the employer's decision was based on an "honest belief" that the plaintiff had engaged in fraud. In order to avoid a retaliation claim under the FMLA, the employer's investigation does not have to be optimal. The employer only needs to demonstrate a reasonable belief that the employee engaged in the suspected conduct.

The dissenting judge noted that the deficiencies in the investigation should have led to a jury determination on the employer's motivations behind its ultimate decision. The majority opinion in this case is a very aggressive reading of the FMLA's anti-retaliation provisions, and one that may not be followed by other courts. Employers faced with allegations of fraud in connection with FMLA leave should conduct a thorough investigation, and be prepared to defend any final conclusions from claims that the decision was based on a retaliatory motive.