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Payroll Case Roundup

Thomson Reuters Tax & Accounting  

· 5 minute read

Thomson Reuters Tax & Accounting  

· 5 minute read

Recently, federal appellate courts have weighed in on: (1) the Family and Medical Leave Act, (2) paid military leave, (3) worker status determination for withholding tax purposes, and (4) exemption from FLSA requirements.

Family and Medical Leave Act.

During the pandemic, an employee was working remotely due to the closure of her son’s school as well as his immune-compromised condition. When her son fell ill, she requested unpaid FMLA leave and was told to work from home. However, she received a termination letter for failing to come into work. The employee filed suit claiming her FMLA rights had been violated. The Court of Appeals found the district court erred by basing their ruling the employee was not entitled to leave. The federal appellate court explained that a FMLA retaliation claim arises when an employer takes an adverse employment action against the employee for exercising or attempting to exercise a right protected by the FMLA. Retaliation claims do not require that the employee be entitled to the leave [Milman v. Fieger & Fieger, PC et al., CA6, Dkt. No. 21-2685, 1/25/23].

A federal appellate court found that an employer retaliated against two employees who were married to each other when they terminated their employment due to honest suspicion of FMLA abuse for taking FMLA leave on the same dates and times. The court clarified that an employer is not required to conduct surveillance to establish an honest suspicion before disciplining an employee for FMLA leave abuse [Juday v. FCA US LLC, CA7, Dkt. No. 21-1414, 1/12/23].

Paid Military  Leave.

Casey Clarkson, a commercial airline pilot and military reservist, filed a class action suit against Alaska Airlines claiming violation of Uniformed Services Employment and Reemployment Rights Act (USERRA) for failure to provide paid military leave when the airline provided paid leave for other nonmilitary reasons. Under USERRA § 4316(b)(1), when a servicemember is on leave, the employee is “entitled to such other rights and benefits not determined by seniority as are generally provided by the employer.” Under 20 CFR 1002.150, if an employer provides paid leave, the employee must be given “the most favorable treatment accorded to any comparable form of leave when he or she performs service in the uniformed services.” The court found that short-term military leave, as opposed to long-term military leave, could be comparable to the other types of leave that the employer provided based on duration, purpose, and control. The case was returned to the district court to determine whether “pay during leave” was a benefit provided to any employee on leave under the collective bargaining agreement [Clarkson v. Alaska Airlines, Inc., et al, CA9, Dkt. No. 21-35473, 2/1/23].

Worker Status Determination

A nurse practitioner filed a complaint against, among others, the IRS, alleging that the IRS failed to process her Form SS-8 (Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding). She claimed that her due process rights were violated because IRS had a mandatory duty to process her Forms SS-8. The court found that processing of an SS-8 was discretionary and no such right exists. Further, the worker classification claim was outside of the Tax Court’s jurisdiction. Court clarified that petitioners can only be “the person for whom the services are performed,” and “not the person performing the services” [Mcbratnie v. Rettig, et al. , DC MI, 131 AFTR 2d ¶2023-369].

FLSA Exemption

The Court of Appeals for the First Circuit has ruled that dispatchers and controllers were not exempt from overtime requirements under the FLSA. The court found that the district court failed to properly evaluate whether the job duties met the second prong of the administrative exemption which examines: (1) whether the employee’s role relates to “running or servicing the business” and (2) the scope or “generality” of the employee’s role. The federal appellate court reversed the summary judgment decision and ordered that the court apply the required analysis [Walsh v. Unitil Service Corp., CA1, Dkt. No. 22-1070, 1/11/23].


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