In a case of first impression, Texas’s Second Court of Appeals recently examined the issue of whether an employee who is taking leave under the federal Family and Medical Leave Act (FMLA) may obtain unemployment benefits under the Texas Labor Code. In a win for Texas employers, the court determined that such a person may not simultaneously enjoy the benefits of both statutes. Texas Workforce Commission v. Wichita County, Texas, 02-15-00215-CV (December 8, 2016).

Background

A Wichita County, Texas, employee, Julia White, went on FMLA leave on August 16, 2011. After three days, her accrued paid leave ran out and she went on unpaid leave. On October 2, 2011, she applied to the Texas Workforce Commission (TWC) seeking unemployment benefits. The county contested her claim on the basis that White had never been unemployed. In support of this position, the county cited the fact that it was still paying for her health insurance and her position was being held open for her while she was out on leave.

The TWC reached an initial decision that White was entitled to receive unemployment benefits. It determined that while she was on an unpaid leave of absence, she was considered unemployed. The county disputed this finding, but subsequently lost every level of appeal with the TWC on the issue. In its opinion affirming the prior decisions that the Texas Unemployment Compensation Act entitled White to benefits, the Appeal Tribunal stated that White “was separated from her last employment when she went on medical leave and the employer could not make any accommodations based on the claimant’s restrictions.” The TWC commissioners adopted the findings of fact and conclusions of law of the Appeal Tribunal and affirmed the decision.

The county appealed the TWC’s final administrative decision to a Texas civil court and moved for summary judgment. The county contended that:

• since White was never unemployed, she was ineligible to receive unemployment benefits;

• receiving paid insurance premiums from an employer and having a position held open are facts inconsistent with a person’s being “unemployed”; and

• going on FMLA leave does not mean that a person is unemployed since the employee is eligible to return the same position once they return from leave.

The TWC also filed a motion for summary judgment. The basis for its motion was premised on the fact that since White had not performed services for wages while on FMLA leave, she could not be considered unemployed under the definition of the Texas Labor Code.

The trial court found for the county and reversed the TWC’s decision to grant unemployment benefits. The TWC appealed the decision.

The Second Court of Appeals’ Decision

On appeal, the court analyzed the purposes of the two competing laws at play in this case: the FMLA, which is designed to protect employees’ positions while they take leave for serious medical conditions, and the Texas Labor Code, which provides unemployment benefits to employees who are not receiving wages as temporary support while they look for jobs.

The court also addressed the inherent tension between the application of the laws. First, the FMLA states that an employee may take leave when a “serious health condition . . . makes the employee unable to perform the functions of the position.” However, to be eligible for unemployment benefits, the Texas Labor Code requires a person be able to work, available to work, registered to work, and actively seeking work.

Furthermore, by statute FMLA leave can be paid or unpaid. Allowing an employee to receive unemployment benefits while on FLMA leave would, in effect, turn the FMLA into a paid-leave statute. Additionally, the court noted that if an employee were allowed to receive unemployment benefits during their leave, “such a conclusion would thwart the employment-stability purposes of federal and state law by encouraging an individual with protected employment to seek new employment as a condition of obtaining unemployment benefits.”

Taking this all into consideration, the court held that although White did not perform services and did not receive wages during her FMLA leave, under the Texas Labor Code’s definition of “unemployed,” she was not qualified to receive unemployment benefits.

Key Takeaways

Employees who are on FMLA leave are not eligible to receive unemployment benefits in Texas. However, as this is a case of first impression, we may not have heard the last from the TWC on the issue. The case may be appealed to the Supreme Court of Texas. Notably, the court of appeals declined to address the broader question of whether, and to what extent, the termination of an employment relationship is needed for the receipt of unemployment benefits. Employers should remember that despite this ruling, employees may still be eligible to receive partial unemployment benefits under certain circumstances.