We have an employee who told us she had cancer and went on leave. Her co-workers stepped up to help get all her work done. Then we found out that it was a fraud—she didn’t have cancer at all. Can we fire the lying employee, or might there be an Americans with Disabilities Act issue? Do we owe anything to the employees who pitched in?
—Sandra B., HR Manager in West Sacramento
Never a dull moment! The quick answer is that if your employee has truly perpetrated a fraud by wrongfully claiming medical leave when she in fact did not have a serious health condition, you may fire her for misconduct. The key issues, though, are how do you know she lied, and what proof do you have?
You should exercise caution before disciplining or terminating such an employee. Employees fired for leave abuse have sued their employers under a number of theories, including for violation of the federal Americans with Disabilities Act (ADA) and the California Fair Employment and Housing Act (FEHA); “interference” and retaliation under the federal Family and Medical Leave Act (FMLA) and its state equivalent, the California Family Rights Act (CFRA); and invasion of privacy.
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Ensuring the Right Course of Action
So, under which circumstances may you properly fire an employee you know or suspect has abused your medical leave policy? Under the ADA and the FEHA, an employer can defend a termination for medical leave abuse by showing that it based the termination on a “reasonable and good faith” belief that the employee was dishonest or acted fraudulently. An employer can generally meet this standard by showing that it conducted a reasonable investigation. An employer whose conclusion is incorrect can still avoid liability by showing that it based its termination decision on a good faith and reasonable belief that the employee engaged in wrongdoing.
However, the FMLA (which covers employers with 50 or more employees) may create a greater obstacle to firing an employee for leave abuse. Although some courts have held that employers may rightfully terminate an employee based on a “reasonable and honest belief” that the employee engaged in medical leave fraud or dishonesty, the Ninth Circuit Court of Appeals, which covers California, and other courts have applied a far more stringent standard, holding that what the employer believes to be true is immaterial to wrongful discharge claims under the FMLA. Rather, the pertinent test is an objective one, i.e., whether the employee actually had a serious health condition.
What this means, then, is that if you want to fire your employee for fraudulently taking leave, you may do so. But to safely avoid FMLA liability, you need to be right about the underlying facts. Your investigation must be thorough, and it has to accurately conclude that your employee did not have cancer or another serious health condition entitling her to the leave that she took. And, you need proof to back up your position.
Responding to Employees Who Pitched In to Help
As for whether you need to reimburse co-workers for time they spent “picking up the slack” for the employee on leave, the answer is that you must compensate nonexempt workers for any overtime worked while pitching in, but you do not need to compensate exempt workers.
Moving Forward
To prevent future incidents of employee leave fraud, your organization should adopt a comprehensive leave policy that contains safeguards consistent with those found in the FMLA and the CFRA.
For example, your policy should require employees seeking leave to provide medical certification of a serious health condition, and it should allow you to seek second—and even third—opinions if you doubt the validity of an employee’s certification. The policy should also require employees to submit ecertification for any ongoing serious health condition. Implementing a policy containing these protections can go a long way toward preventing rampant fraud and abuse.
You can also add a statement to your policy prohibiting dishonesty, making clear that employees may be subject to discipline, up to and including termination, for dishonesty in connection with procuring medical leave. (Indeed, FMLA regulations provide that an employee “who fraudulently obtains leave from an employer is not protected” by the law.)
In addition, in future situations in which you suspect fraud, you may want to apply the strict, objective standard of proof—whether the employee actually has a serious health condition—used by many courts in FMLA cases before you conclude that fraud has occurred.
Finally, before terminating an employee for dishonesty connected with medical leave, employers should ensure that they have subjected other dishonest employees to similar discipline in the past, to avoid allegations that the rationale for the termination—dishonesty—was merely a pretext for discrimination.
Points to Remember
In sum, many employers struggle with how to administer complex leave laws. To achieve a successful balance between protecting an employee’s right to leave and protecting your organization from fraud, you should:
- Adopt leave policies that require medical certification for serious health conditions and that explicitly prohibit dishonesty in connection with obtaining leaves.
- Conduct an appropriately rigorous investigation when fraud is suspected.
- Discipline employees only when solid evidence exists that fraud has occurred. If solid evidence is lacking or employees have engaged in no clear-cut dishonesty, employers are advised to tread very carefully.
Lindsay Harris, Esq., is senior counsel at Speer Associates/Workplace Counsel, an employment law and employee relations consulting firm in San Francisco.