Don’t get me wrong: Firing an employee while they are on a Family and Medical Leave Act (FMLA) absence is dicey. But, as a recent federal appeals court decision that covers Oklahoma employers demonstrates, there are circumstances when an employer should terminate the employee while on leave and can win a lawsuit brought by the fired employee.

Hiring, promotions and performance problems

Penske Logistics, a trucking and warehousing company, hired Kris Olson as a dispatcher. During the next 10 years, Penske promoted Olson three times. Eventually he held the position of operations manager for Penske’s Denver warehouse, where he supervised 30 to 34 employees and was responsible for hiring, financial records, moving and tracking inventory, and inventory audits. While operations manager, Olson received average or satisfactory performance reviews that typically noted some need for additional training and improvement.

In 2014, Olson’s performance issues became more pronounced. In January, his supervisor, Rick Elliott, issued Olson a written reprimand for failing to fire a warehouse employee who had clearly violated Penske’s safety rules. Elliot warned Olson he would be subject to more severe discipline, including termination, for future lapses.

In June, Elliott placed Olson on a 60-day “action plan” and directed him to hire more warehouse workers, process inventory more quickly, and respond to emails and calls more promptly. The 60-day action plan ended with the following statement: “Failure to meet and maintain all requirements will result in your immediate termination of employment.”

FMLA leave begins; problems discovered

On July 9, Olson requested Family and Medical Leave, which Penske approved. Olson’s last work day at the Denver warehouse before beginning his FMLA leave was July 18. Shortly after Olson began his leave, Penske discovered for the first time an “inventory crisis” at the Denver warehouse.

Olson was responsible for maintaining accurate inventory records and preventing inventory losses. Whirlpool was the Denver warehouse’s primary customer, and each week Olson provided Whirlpool with an inventory report. Once a month, Whirlpool graded the warehouse’s performance based upon the amount of inventory loss that had occurred. On July 18 – Olson’s last day before beginning his FMLA leave – Whirlpool gave the warehouse a “D” for the month of June. Because Olson was going to be absent, Elliott asked another warehouse supervisor, Nicki Brurs, to travel to Denver to look into the problem.

The warehouse was required to track any discrepancies between its records and its actual inventory and generate a reconciliation report. Brurs discovered the Denver warehouse’s reconciliation report “was 152 lines long” and listed discrepancies existing since June. Further, the warehouse was 567 inventory audits behind schedule. Brurs told Elliott that there was an enormous inventory loss, and that it resulted from a lack of processes and training for which Olson was responsible.

Brurs’ discovery caused Elliott to dig deeper. Ultimately, Penske sent a loss prevention team to audit the Denver warehouse. Among other things, Penske discovered that:

• Olson had been untruthful with Elliott about billing Whirlpool for extra work performed by the warehouse.
• Olson had created false records to conceal lost inventory.
• When inventory was discovered missing, Olson directed staff to falsely report to Whirlpool that the inventory was present but damaged.
• When inventory audits were performed and errors were discovered, Olson instructed staff to tell him, rather than report the problem to Whirlpool, so he could take steps to conceal the errors.
• Olson had failed to properly train employees.
• The warehouse did not enforce attendance policies.
• Olson and his employees did not return damaged inventory to Whirlpool as required.

The audit identified $120,000 in errors, which required Penske to write-off more than $41,000 of inventory losses.

While still on approved FMLA leave, Penske fired Olson for “a level of unsatisfactory job performance that cannot be tolerated.” Prior to termination, Penske never gave Olson a chance to tell his side of the story.

No go with Olson’s FMLA lawsuit

Olson sued Penske over his firing, claiming that the employer interfered with his exercise of FMLA rights and acted in retaliation for him taking medical leave. Olson was particularly critical of the fact he was fired while still on leave and without ever being given the opportunity to defend himself. Olson contended he could have shown that some of the problems discovered in the audit were the fault of others – not him. Olson also argued that the inventory errors resulted from instructions from his supervisor about inventory audits. Because Olson’s absence had caused Elliott and Brurs to travel to Denver to do his work, Olson theorized that this caused Elliott to resent the fact he was taking medical leave.

The Tenth Circuit Court of Appeals rejected Olson’s FMLA interference and retaliation claims and found in favor of his employer, Penske. Penske showed how it discovered the problems at the Denver warehouse and the careful steps it took to determine the nature and reasons for those errors. Notwithstanding his claims and theory, there was “substantial, unchallenged evidence of Mr. Olson’s poor job performance.” Nor could Olson offer any examples of other employees with the same level of poor performance who had not been fired.

Lessons learned

Hooray for Penske playing hardball with Olson, when it was justified by the situation. Because firing employees who are on FMLA leave (or have recently returned from leave) can be high risk, keep in mind how this employer made the Olson termination stick. Penske was able to show how the inventory issues were first brought to its attention after Olson’s leave began. There was no evidence these problems were somehow “manufactured” after the fact in response to his request for leave or his absence. Once the inventory errors were first brought to Elliott’s attention, Penske immediately began a thorough, fair and well-documented investigation to get to the bottom of the Denver warehouse issues. Like Penske’s experience, It is not unusual for employers to discover performance issues for the first time when an employee is absent for an extended period of time. In the case of Olson, he was able to conceal his conduct from Penske and his supervisor so long as he was at work. There is no requirement for an employer to wait until an employee returns from leave to investigate and address performance issues – particularly if those issues are significant.

Attorneys love using hindsight and telling employers what they should have done – so here’s my Monday Morning Quarterbacking to Penske (and other employers who find themselves in a similar situation): You should have given Olson the opportunity to defend himself. Fortunately, Olson’s misconduct was so egregious and well-documented that this missed step did not hurt Penske.

Any time an employer is considering discipline or termination, the employee should have the chance to tell their side of the story, and that concept applies to employees who are on FMLA leave. If you have discovered an issue while someone is on leave and are investigating that problem, advise the employee of that fact. Do not wait until they return from leave. Likewise, although they are on leave, if the issue and investigation is significant, it is perfectly fine to talk with the employee while they are on leave to obtain their response or explanation.

Olson v. Penske Logistics, LLC, Case No. 15 – 1380 (10th Cir. 8/26/16)