In Peters v. Gilead Sciences, Inc., 533 F.3d 594 (CA 7 2008), the Seventh Circuit Court of Appeals held that an employer who offers FMLA-like leave benefits with less restrictive eligibility requirements than the FMLA may be sued under a promissory estoppel theory if the employer fails to honor those benefits.

In approximately July 2001, Steven Peters worked as a Therapeutic Specialist for Gilead Sciences, Inc., a pharmaceutical company. In that position, Peters worked out of his home in Indianapolis representing and marketing Gilead’s products to physicians and healthcare professions throughout Gilead’s Midwest region. Approximately five months into his employment, Peters suffered a work-related injury to his neck and right shoulder. Approximately one year later, Peters aggravated that injury and reported it to Gilead and filed a worker’s compensation claim. Peters’ physician imposed lifting restrictions for approximately one month until Peters could undergo surgery to address the shoulder injury. Peters scheduled what he believed to be FMLA leave from December 5 until December 16 to undergo surgery and recuperate.

On December 6, Peters received the following letter from Gilead:

The Federal Family and Medical Leave Act (“FMLA”) went into effect August 5, 1993.
The act grants eligible employees of covered employers up to twelve weeks of unpaid leave in a twelve month period to care for a newborn or adopted or foster child, to care for the seriously ill parent, child, or spouse of the employee, or to attend to the employee’s own serious health condition. To be eligible for FMLA benefits, an employee must have worked for a covered employer for a total of 12 months and have worked at least 1,250 hours over the previous twelve months.

You will retain your employee status during the period of your FMLA Leave. This includes accrual of tenure and vacation, in addition to continued health benefits coverage. You will be guaranteed reinstatement in your position, or equivalent position, if you return to work by the time your FMLA leave expires. In this case, since your leave began December 5, 2002, you will need to return to work by February 28, 2003 to be guaranteed such reinstatement.

Gilead’s employee handbook contains similar language regarding employee entitlement to family and medical leave. The handbook provides, under the bold heading “FAMILY AND MEDICAL CARE LEAVE” and the subheading “ELIGIBILITY”: “A request for family and medical care leave will be granted for all employees employed by the Company [Gilead] for at least twelve months and who have worked 1,250 hours during the twelve months preceding the commencement of leave.” The handbook and the letter both guaranteed 12 weeks of leave during a 12 month period and reinstatement to the same or to an equivalent position upon the employee’s return to work.

Peters returned to work on December 16 following his leave and worked under restrictions limiting him to left hand and arm work. On March 4, 2003, Peters took another leave after his doctors began treating him with Neurontin, a drug that causes substantial side effects. Peters’ second leave was to last until May 5, 2003. He received a letter similar to the one he received during his first leave from the company:

In this case, your original leave began December 5, 2002, and you returned to work as of January 26, 2003 (7 weeks and 4 days). Since you reestablished your leave as of March 4, 2004, you will need to return to work by April 4, 2003 (4 weeks and 3 days) to be guaranteed such reinstatement.

Someone in Human Resources made a mistake and claimed in the letter that his first leave of absence ended on January 26 when in reality it ended on December 16. As a result, the return to work deadline of April 4 was not correct. Peters had enough remaining leave to take off until May 9. Peters never received this letter despite Gilead’s sending of it via certified mail.

During Peters’ leave of absence, Gilead made the decision to replace him with another employee. On April 16, Peters’ doctor sent a letter to Frank Romeo, Gilead’s Associate Director of Human Resources, releasing Peters to return to work on May 5, 2003. Five days later, Gilead offered Peters’ position to an outside candidate who accepted and began employment on April 28. On April 25, Gilead informed Peters via U.S. mail that because Peters held a “key” position, it could not hold his job open. The letter informed Peters that his old position had been filled but offered him placement as a Senior Sales Analyst. Peters did not accept the offer and Gilead terminated his employment.

Unhappy with what had transpired, Peters sought remedy in federal district court alleging caused of action pursuant to Title VII, the FMLA, and the ADA. He also brought claims for retaliatory discharge and promissory estoppel under Indiana state law. After a period for discovery, Gilead moved for summary judgment. As to the FMLA claim, Gilead argued that Peters did not qualify as an eligible employee under the FMLA. Peters countered with a cross-motion for partial summary judgment arguing that Gilead was estopped from asserting a statutory ineligibility defense to the FMLA claim.

The district court granted summary judgment on the Title VII, ADA and retaliatory discharge claims. The FMLA count survived Gilead’s motion for summary judgment and the promissory estoppel claim was not addressed by the district court. Gilead filed a motion for reconsideration as to the FMLA claim. The court granted that motion and determined that Peters had not established the elements of an equitable estoppel defense. The court found that Peters had not presented evidence that he could have returned to work by April 4 in support of that defense. If Peters was unable to return to work then, according to the court, he could not have detrimentally relied on Gilead’s representations in deciding when to return to work.

On appeal, the parties agreed that Peters did not meet the FMLA eligibility requirements. He fell within the exception to the definition of “eligible employee” for employees at worksites for which the employer employs less than 50 employees “if the total number of employees employed by the employer within 75 miles of that worksite is less than 50.”

Gilead’s employee handbook and letters to Peters promised 12 weeks of family and medical leave eligibility to all employees who were employed with them for at least 12 months with a minimum of 1250 hours worked during the prior 12 months. No 50/75 exception was recited in any of these documents. Peters argued that that omission equitably estopped Gilead from asserting a defense of statutory ineligibility. Peters relied on the case of Dormeyer v. Comerica Bank-Illinois, 223 F.3d 579 (CA7 2000) in support of his argument.

In Dormeyer, the Seventh Circuit had suggested that “in an appropriate case” equitable estoppel “might” be applied to block the assertion of a statutory defense: “[A]n employer who by his silence misled an employee concerning the employee’s entitlement to family leave might, if the employee reasonably relied and was harmed as a result, be estopped to plead the defense of ineligibility to the employee’s claim to entitlement to family leave.” Dormeyer, 223 F.3d at 582. The facts in Dormeyer did not allow for the application of equitable estoppel.

The appeals court concluded that Peter’s case was not an appropriate one to apply the equitable estoppel argument either as Peters had brought a state claim for promissory estoppel based on his reliance on Gilead’s representations regarding his entitlement to medical leave. Under Indiana law, promissory estoppel is defined as “a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise.”

Gilead’s employee handbook and letters to Peters promised 12 weeks of medical leave if he had 12 months of previous employment with Gilead and had worked 1250 hours in the previous 12 months of employment. Indiana law permits enforcement of Gilead’s promises of medical leave to the extent of Peters’ reliance damages. Gilead’s promise of medical leave as set forth in the handbook and letters contained no exception based on the 50/75 FMLA exception; therefore, Gilead’s attempt to rely upon that exception and Peters’ attempt to block it via equitable estoppel were not relevant to the promissory estoppel claim. Employers can offer FMLA-like leave benefits with less restrictive eligibility requirements. If they do offer such benefits then they must honor them as written. The appeals court reversed and remanded the matter back to the lower court as Gilead’s leave provisions may be enforceable as a contract under Indiana law or as promises giving rise to recovery under promissory estoppel.

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