March 12, 2002 
No. 2002-04

Employers should be wary of denying legally mandated benefits to employees who appear to fall just short of satisfying statutory eligibility criteria. Creative plaintiffs' lawyers and receptive courts can tip the scales in favor of coverage or find an issue of fact that a jury should decide. Two recent cases illustrate this problem:

A New York employer denied a worker reinstatement rights under the federal Family and Medical Leave Act (FMLA) because she had not worked the 1250 hours in the past year required for coverage under the FMLA. The worker sued, claiming she was covered. In addition to time paid, she claimed to have worked, but was improperly denied pay of 15 minutes each day and for time spent at employer-required continuing education classes. The unpaid time worked totaled 63.5 hours and was sufficient when combined with paid time to satisfy FMLA's eligibility criteria. The U.S. Court of Appeals for the Second Circuit decided that this created a material issue of fact requiring a jury to decide and returned the case for a trial. Kosakow v. New Rochelle Radiology.

In another case, the U.S. Court of Appeals for the Ninth Circuit, which oversees Oregon and Washington, counted four physician-shareholders of a medical practice as employees. With the physicians counted, the medical practice had a sufficient number of employees to be a covered employer under the Americans with Disabilities Act. Wells v. Clackamas Gastroentrology Associates.

In so holding, the Ninth Circuit reversed the federal trial court in Oregon, which had concluded that there were not sufficient employees to warrant coverage. The Ninth Circuit rejected the "economic reality" test adopted by some other courts by which shareholder-employees of professional corporations are not counted as employees.

In reviewing eligibility or coverage criteria, do not assume that the court will follow a strict reading of the law or take a narrow view of the facts. In applying "remedial" legislation, which includes employment laws, courts are directed to "liberally construe" statutory provisions in favor of coverage.

Our recommendation:

If coverage is in question, the safest bet may be to err on the side of inclusion or coverage and extend benefits in questionable situations or when an employee challenges a denial of benefits. If you decide to deny coverage, understand the risks beforehand and be sure the costs of a fight are worth it.

Also, when reviewing coverage questions, be sure to consider both state and federal laws. Typically, state law covers a broader range of employers. In addition, when the benefits differ under state and federal law, employers must usually provide the more generous benefit available.

If you have any questions about coverage or eligibility, please contact us.

Jeff Chicoine jchicoine@nsslaw.com 
Wayne Landsverk wlandsverk@nsslaw.com 
Verne Newcomb newcomb@nsslaw.com 
Jack Schwartz schwartz@nsslaw.com 
Rick S. Pope rpope@nsslaw.com 
Brent H. Hall bhall@nsslaw.com 
Thomas Bahrman tbahrman@nsslaw.com

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