In Ryl-Kuchar v. Care Centers, Inc., 2009 WL 1272078 (CA 7 (Ill.)), the Seventh Circuit Court of Appeals upheld jury verdict against employer who retroactively determined that employee was part-time worker immediately prior to taking FMLA leave and thus was not eligible for health insurance for all periods following commencement of part-time status.

Kathleen Ryl-Kuchar began working for Care Centers in 1985 as a part-time dishwasher. She was 15 years old when she began her employment there. She stayed on with Care Centers for another 18 years and worked her way up to the position of dietary consultant. Near the end of 2002, Ryl-Kuchar found out that she was pregnant. She later discovered that she was carrying triplets. Ryl-Kuchar informed an employee in the human resources department of her pregnancy who told her that she could take up to 12 weeks of FMLA leave as a result of her pregnancy.

Ryl-Kuchar did not take FMLA leave immediately but waited to do so until near the end of her pregnancy. She continued working her normal schedule until she was “too big to fit behind [the steering] wheel” of her car. At that point, she continued working from home and performed her normal duties. The Chief Operating Officer for Care Centers, Mark Steinberg, approved Ryl-Kuchar’s work from home arrangement. While working at home, her hours fell to below 35 per week.

On July 17, 2003, Ryl-Kuchar gave birth to three sons. She remained at the hospital for a short period of time and then returned home and continued working for Care Centers. She continued working and caring for her newborn sons through the end of July. It soon became apparent that she could not continue juggling all of these responsibilities. At this point, she commenced her FMLA leave with the intent to return to work in the fall. In September, she made the decision to resign her employment so that she could raise her sons. Ryl-Kuchar submitted her resignation to Care Centers effective October 1, 2003.


In mid-November 2003, Ryl-Kuchar’s health insurance was retroactively cancelled effective June 15, 2003. She did not realize this until sometime in early 2004 when she began receiving notices that her medical bills were not being paid. Care Centers used another company, CCS Veba, to manage its employee benefits program. CCS Veba had determined that Ryl-Kuchar became a part-time employee in June when she was working 35 hours a week from home. At that point in time, according to CCS Veba, Ryl-Kuchar lost her eligibility for health insurance.

Ryl-Kuchar later brought suit alleging that Care Centers had violated the FMLA by interfering with her FMLA rights and unlawfully retaliating against her through the retroactive termination of her health insurance benefits. Ryl-Kuchar argued that Care Centers and CCS Veba were not independent, separate organizations because the plan administrator for CCS Veba was married to the owner of Care Centers; CCS Veba was referred to as the “insurance department” of Care Centers; and the two organizations shared the same facilities.

Ryl-Kuchar claimed that Care Centers was motivated by rising health care costs. In fact, an article had been written about this in the company newsletter. She also argued that she never became a part-time employee despite the drop in hours as she was a salaried employee and her pay remained the same during this period of reduced working hours. It was only after she took FMLA leave that Care Centers audited her payroll records and found the mistake.

The matter went to trial where Ryl-Kuchar argued that Care Centers interfered with her FMLA rights to continued health insurance and did so in retaliation for her decision to take FMLA leave.

To carry the day at trial on her FMLA interference claim, Ryl-Kuchar had to demonstrate that: (1) she was eligible for FMLA protection; (2) Care Centers was covered by the FMLA; (3) she was entitled to FMLA leave; (4) she provided sufficient notice of her intent to take leave; and (5) Care Centers denied her benefits to which she was entitled (in this case, continued health insurance). As for retaliation under the FMLA, since she chose a direct method of proof, she was only required to show that Care Centers retroactively cancelled her health insurance “to punish her for requesting or taking FMLA leave.”

At the end of deliberations, the jury found that Ryl-Kuchar had carried her burden of proof on both claims and awarded her $30,000 in damages (which equalled her unpaid medical bills). Care Center moved for judgment notwithstanding the verdict. The trial court denied that motion and awarded Ryl-Kuchar prejudgment interest and liquidated damages of approximately $50,000.

Care Centers appealed the trial court’s decision denying its motion for judgment notwithstanding the verdict. The Seventh Circuit Court of Appeals reviewed the trial court’s decision with an eye towards “whether the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient
to support the verdict when viewed in a light most favorable to the party against whom the motion is directed,” Haley v. Gross, 86 F.3d 630, 632 (7th Cir.1996).

The court of appeals determined that sufficient evidence existed to conclude that CCS Veba was merely an arm of Care Centers and not a separate entity. Given this evidence, the jury properly used its discretion to impute CCS Veba’s motivation to Care Centers. The jury then had to have sufficient evidence before it to determine that that motive was retaliatory in nature. The appeals court found that the evidence of the timing of the decision, Care Centers’ concerns about rising health care costs and the inconsistencies concerning Ryl-Kuchar’s employment status met the preponderance of the evidence standard and were sufficient to support the jury’s finding of retaliation.

The appeals court made shorter shrift of the interference claim finding that a reasonable jury could have concluded that Ryl-Kuchar was a full-time employee until she took leave in August 2003 and thus entitled to health insurance through the date of her resignation.

Employers should take note of this decision and make all determinations concerning an employee’s employment status prior to approving FMLA leave rather than doing so after the fact and retroactively terminating benefits.

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