Skip to main content

Municipal Technical Advisory Service (MTAS)

Original Author: Hemsley, Sid
Date of Material: 05/22/2009

Personnel--Laws and regulations
Personnel--Fair Labor Standards Act

Changing an Employee's Employment Status

Reviewed Date: 04/23/2021
MTAS analyzed several questions related to legal implications associated with changing a certain employee's employment status.

May 22, 2009

Dear City Attorney:

You have the following question: Can the city do one of two things with respect to a full- time salaried employee:

1. Make the employee a part-time hourly worker by giving him light duty?

2 . Lay off the employee?

The employee in question is the utilities superintendent, who is 57, and has filed a workers compensation claim. The employee was on sick leave for much of 2008. The city does not have the funds to continue to pay both the employee as it has done in the past, and another 50 year old employee who has been handling the duties of the superintendent.

Those are questions that are difficult to address, if for no other reasons than that they implicate several laws

- The Fair Labor Standards Act(FLSA),

- The law governing retaliatory discharge under Tennessee's Workers Compensation Law,

- The Americans With Disabilities Act (ADA).

I will address the FLSA first because some 2004 changes to that law may provide a solution to your budgetary problem.

I have been unable to find a single case after the extension of the FLSA to local governments was made in 1985, involving the question of whether making an exempt employeeposition a non-exempt employee position violates any provision of the FLSA, . In Blanton v. City of Murfreesboro, 856 F.2d 731 (6th Cir. 1988), the Sixth Circuit held that the city's " downward adjustment of the base wage rates of its firefighters so as to offset the recently imposed cost of including such employees within the benefit provisions of the Fair Labor Standards Act" violated that Act, even though the city defended its action based on economic necessity. In Anderson v. City of Bristol, 6 F.3d 1168 (6th Acir. 1993), the Sixth Circuit held that recomputing the hourly wage rate of firefighters was not a violation of the FLSA, under different facts than applied in Blanton v. City of Murfreesboro. But I am uncertain as to whether either case can be generalized to apply to changing exempt employees to nonexempt employee, which in your city's case would undoubtedly reduce what had been the" salary" of the presently exempt employee in question. It does seem to me that a city could change an exempt position to a nonexempt position when there is a vacancy in the exempt position, I have misgiving about whether it can do that when the position is filled.

However, 2004 changes in the FLSA might apply to your question. Prior to 2004, governments were generally locked into paying exempt employees their full salaries under most circumstances. But among the 2004 changes were some that authorized employers to deduct from exempt employees compensation that would have otherwise have had to pay for their absences for various reasons. As to sick employees, 29 C.F.R. '541.602(b) provides that:

(b) Exceptions. The prohibition against deductions from pay in the salary basis requirement is subject to the following exceptions:
(2) Deductions from pay may be made for absences of one or more full days occasioned by sickness or disability (including work related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability. The employer is not required to pay any portion of the employee' s salary for full- day absence in which the employee received compensation under the plan, policy or practice. Deductions for such full-day absences also can be made before the employee has qualified under the plan, policy or practice, and after the employee has exhausted the leave allowance thereunder. Thus, for example, if an employer maintains a short-term disability insurance plan providing salary replacement for 12 weeks starting on the fourth day of absence, the employer may make deductions from pay for the three days of absence before the employee qualifies for benefits under the plan; for the twelve weeks in which the employee receives the salary replacement benefits under the plan; and for absences after the employee has exhausted the 12 weeks of salary replacement. Similarly, an employer may make deductions from pay for absences of one or more full days if salary replacement benefits are provided under a State disability insurance law or under a State workers'compensation law.

If the employee in question is receiving, or it is anticipated that he will shortly be receiving, workers'compensation, the city is entitled to deduct from his salary " for full-day absences for which the employee receives compensation under the plan, policy or practice." It does not appear to me that the employee's salary reduction for such absences only be equivalent to his workers'compensation pay.

With respect to any retaliatory discharge claim, the Tennessee courts have held that the act of retaliatory discharge is an intentional tort, for which local governments are immune from suit under the Tennessee Governmental Tort Liability Act (TGTLA). That rule has also been held to apply to both the municipality at issue and the municipal employee who is responsible for the retaliatory discharge. [See in particular, Montgomery v. City of Covington, 778 S.W.2d 444 (Tenn. Ct. App. 1989); Williams v. Williamson County Bd. Educ., 890 S.W.2d 778 (Tenn. Ct. App. 1994); Baines v. Wilson County, 86 S.W.3d 575 (Tenn. Ct. App. 2002.]

Even if were possible to sue the city for retaliatory discharge, it appears that only the second option (Lay off the employee) would be implicated. Probably the best and most recent case on what it takes to make a case of retaliatory discharge is Cooper v. Wyndam Vacation Resorts, 570 F.Supp.2d 981 (M.D. Tenn. 2008). There the court, applying the Tennessee law on that subject, declared that in order to make a prima facie case of retaliatory discharge, the employee must be able to prove that:

(1) He or she was an employee of the defendant at the time of the discharge;
(2) He or she had made a claim for workers'compensation benefits;
(3) The employer terminated his or her employment;
(4) The claim for workers'compensation benefits was a substantial factor in the employer's motivation to terminate his or her employment.

The employee in your case could satisfy (1), (2) and (3), but his satisfaction of (4) would be much more difficult. Under Tennessee law, declared the Court, " In order to meet the substantial factor requirement, a plaintiff must show either direct or 'compelling circumstantial'evidence of a casual connection between the workers'compensation claim and the termination, not just the fact that the latter followed the former." [At 986] In sorting out the Tennessee cases on (4), the Court pointed to Birchett v. Nashville Co., No. M1999B0207 WL 640895 (Tenn. Ct. App. May 19, 2000), in which it was held that a plaintiff who had worked for the company for 30 years could not prove a casual connection because she had missed 32 days of work in the previous two months. The missed 32 days were " overwhelming evidence that the plaintiff was not performing her job satisfactorily." [At 968]

Frankly, the ADA is a nightmare for employers; there is no more generous way to put it. Common sense would tell both an employer and an employee that if the employee is absent from work for a long period of time, and has exhausted all his vacation and sick leave, he is not eligible to continue his job. They will find that under the ADA that is not necessarily true. In addition, many employers, in an effort to be kind to their employees make exceptions to their vacation and sick leave policies to accommodate certain employees, only to find that they have created vacation and sick leave models they will be forced to follow for other employees alleging disabilities.

Under the ADA, employers are required to make " reasonable accommodations" for their employees who have medical problems. What is--and is not--a reasonable accommodation, is resolved on a case-by-case basis. Needless to say, it is almost impossible to find any consistency in how the courts do that.

But in the Sixth Circuit, the issue of " excessive" leave, or leave that opens the question of whether the employee in question is able to perform the specific functions of his or her job, is governed by Monette v. Electronic Data Systems Corporation, 90 F.3d 1173 (1996). There a customer service representative, part of whose duties was to deliver audio and visual equipment to various areas in the office in which he worked, was injured on the job. Ordinarily, I would not quote the facts in most cases, but the court's own words in this one are interesting because they reflect the Court's picture of the plaintiff:

Monette requested, an indefinite medical leave, and received full pay and benefits for the next seven months. During that time Monette submitted several medical reports from various physicians detailing his inability to return to work. In August, 1993, Monette filed for long-term disability benefits claiming that he was completely incapacitated and unable to perform the necessary functions to return to his old job. Electronic Data Systems denied Monette's application for long-term disability benefits and Montette's full pay and benefits ceased on September 15.

Monette recovered from his total incapacitation soon thereafter, showing up for work unannounced and with a note from his doctor on October 11. Unfortunately, Monette's position at Electronic

Data Systems had been filled during his eight months absence. No other customer service representative positions were available.

Over the next thirty-seven days, during which Monette was placed on unpaid personal leave, Monette's supervisor Laura Frizzell conducted a job search in an attempt to find Monette another position with the company.... [At 1177]

The Court went on to say that Monette either refused to interview with other offices in the company, or did not receive an offer after interviews, because he lacked requisite computer skills or was less than enthusiastic during the interviews. Electronic Data Systems permanently terminated Monette's employment in November, 1993. The district court awarded summary judgment to Electronic Data Systems on Monette's state and federal disability discrimination claims. The district court had concluded that it was unnecessary to determine whether Monette had established a prima facie case of discrimination under the ADA, apparently on the grounds that Electronic Data Systems had filled Monette's position while he was on medical leave and " was informing the defendant that he was unable to perform his job under any circumstances," and that requiring Electronic Data Systems to hold Monette's position open indefinitely, when it had no way of knowing whether or when Monette would return to work, " would work an undue hardship on Electronic Data Systems." [At 1177]

The Sixth Circuit acknowledged that it had proven difficult to define and apply an appropriate framework for analyzing disability discrimination claims, which difficulty appears to me to relate to a debate over which party has the burden of proof in various stages of disability discrimination cases. However, I will concentrate on the way the Sixth Circuit has handled that debate.

The Sixth Circuit applies two different (yet similar in some ways) tests in disability discrimination cases (I have omitted most of the quotation marks):

First Test: [I]f the plaintiff has direct evidence that the employer relied on his or her disability in making an adverse employment decision, or if the employer admits reliance on the handicap:

1) The plaintiff bears the burden of establishing that he or she is disabled.

2) The plaintiff bears the burden of establishing that he or she is otherwise qualified for the position despite his or her disability: a) without accommodation from the employer; b) with an alleged " essential" job requirement eliminated; or c) with a proposed reasonable accommodation.

3) The employer will bear the burden of providing that a challenged job criterion is essential, and therefore a business necessity, or that proposed accommodation will impose an undue burden upon the employer.

In connection with this test, the Court said in Footnote 12 that:

When an employee seeks a reasonable accommodation, she must establish that a " reasonable" accommodation is possible, and bears a traditional burden of proof that she is qualified for the position with such reasonable accommodation. If the plaintiff establishes that a reasonable accommodation is possible, the employer bears the burden of providing that such reasonable accommodation would impose an undue hardship.... [At 1186] [Citation omitted by me.]

Second Test: If the plaintiff seeks to establish his or her case indirectly, without direct proof of discrimination, the plaintiff may establish a prima facie case of discrimination by showing that:

1) he or she is disabled;

2) otherwise qualified for the position, with or without reasonable accommodation;

3) suffered an adverse employment decision;

4) the employer knew or had reason to know of the plaintiff's disability; and

5) the position remained open while the employer sought other applicants or the disabled individual was replaced.

The defendant must then offer a legitimate reason for its action. If the defendant satisfies this burden of production, the plaintiff must introduce evidence showing that the proffered explanation is pretextual. Under this scheme, the plaintiff retains the ultimate burden of persuasion at all times.

The district court, said the Sixth Circuit:

assumed as established the elements of Monette's prima facie case and held that Monette had failed to show that Electronic Data Systems'proffered reasons for its action were pretextual.... However, we believe this approach to be inappropriate on the facts of this case. The defendant's explanation for the decision to replace Monette was that Monette was on medical leave, unable to perform the job under any circumstances, and that, because only one customer representative was employed in the building, the need to replace Monette was urgent. Viewed properly, all of these reasons are related to Monette's handicap. In other words, the defendant's own explanation for its action established that it relied on Monette's disabled status to replace him. [At 1187]

But, the Sixth Circuit continued:

This is not to say, however, that the district court improperly awarded summary judgment to the defendant. Under the approach outlined above, Monette is required to show that he is otherwise qualified to perform the essential functions of the job, with or without a reasonable accommodation for the defendant, and Monette bears the initial burden of establishing that the accommodation he seeks is " reasonable." Monette proposes as a possible accommodation (which he claims is reasonable) a requirement that the defendant should have kept him on unpaid medical leave indefinitely until another customer service representative or receptionist position opened up. While it is true that employers may be required, as a reasonable accommodation, to transfer a disabled employee to a vacant position for which he or she is qualified, employers are under no duty to keep employees on unpaid leave indefinitely until such position opens up. Cf.42 U.S.C. '1211(9)(A)-(B) (defining a " reasonable accommodation" to include " job restructuring, part-time or modified work schedules, [and] reassignment to vacant position." (emphasis added [by court])... However, employers simply are not required to keep an employee on staff indefinitely in the hope that some position may become available sometime in the future. Moreover, employees are not required to create new positions for disabled employees in order to reasonably accommodate the disabled individual. [Citation omitted.] Accordingly, Monette has failed to establish that his proposed accommodation is a " reasonable" one under the statute. [At 1187]

It appears to me that your city's employee in question would also fall within the first test; the city knows that he has been absent from work for a long period due to medical reasons. For that reason, any employment action it would take against him would reflect direct evidence of " discrimination." Moreover, the employer appears to be in a position similar to Monette's: with respect to his request for a " reasonable accommodation," he has the burden of proving it reasonable, and if it involves another extended absence, it seems likely such an accommodation would be unreasonable.

But if that accommodation got past that part of the test, the city has the opportunity to show that such an accommodation would pose an undue burden on the city. I am not familiar with the finances of the city, but in this day of tight budgets for virtually every city, the requirement to essentially pay two utility superintendents would appears to produce an undue hardship.

Note also that the Sixth Circuit also said that employers were not required to create positions for disabled employees. But caution must be exercised in carrying that statement very
far. If the city has had a practice of creating light duty positions in the past for employees with various disabilities it may be forced on the penalty of confronting a charge of discriminatory treatment, to do the same for all employees.

In Walsh v. United Parcel Service, 201 F.3d 718 (Sixth Cir. 2000), the Sixth Circuit, also considered the case of a pilot for UPS, who had been on paid medical leave for a year, and unpaid medical leave for 5 months before he was terminated following an automobile accident in which he was injured. The pilot could show no end in sight for the medical leave, could produce no sign of what other jobs he could do, or what accommodations he might require. While conceding that the question of how long a medical leave was allowed under the ADA required an individualized inquiry, the Court declared that:

Our review of case law in this and other circuits disclosed no cases where an employer was required to allow an employee to take a leave of absence well in excess of a year( let alone indefinitely) as a reasonable accommodation to the employee's disability. This suggests that it would be very unlikely for a request for medical leave exceeding a year and a half in length to be reasonable... [At 727]

But in the individualized inquiry in this case, the Court's response to the pilot's argument that he needed ninety days for an additional evaluation, was that he had " made no credible showing why the nearly year and a half leave defendant gave him was somehow an inadequate period for him to obtain an evaluation." Where the requested accommodation, continued the Court, has no reasonable prospect of allowing the individual to work in the identifiable future, it is objectively lt an accommodation that the employee should be required to provide. [pointing to cases in Footnote 4.] We therefore hold that when as here, an employer has already provided a substantial leave, an additional period of significant duration, with no clear prospects for recovery is an objectively unreasonable accommodation. [At 727-28] [Citation omitted by me.]

But Walsh v. United Parcel Service, lends support to the Sixth Circuit's statement earlier in Monette that what test to use in disability discrimination cases is difficult to define and apply. In Walsh, the Court declared that it was " not entirely clear whether plaintiff's ADA claim is based on direct or indirect evidence. Defendant claims to have fired plaintiff not because he was disabled, but rather because he failed to produce the medical documentation which UPS required for additional leave." [At 624] The Court appears to have scooted around that question by deciding that whichever test is used, the plaintiff's claim failed: " As the Monette Court stated, the plaintiff bears the initial burden of establishing that the accommodation he or she seeks is reasonable...." [At 725]

I hope this letter gives you some guidance on which way to go on the employee question you have before you. If you have further questions on any of the possible approaches to that question presented here, I will be glad to discuss them, and to try to analyze with you the ramifications of any course the city might select based on discreet and detailed facts of the city's situation.


Sidney D. Hemsley
Senior Law Consultant