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County Worker on FMLA Leave Deemed “Unemployed” Under Texas Unemployment Compensation Act

The Texas Supreme Court recently concluded that a county employee on unpaid medical leave was “unemployed” within the meaning of the Texas unemployment compensation statute.

The court’s ruling is surprising, because it appears to create a right to unemployment benefits for workers who are not actually unemployed as most understand the term. However, all unemployed workers are not entitled to unemployment benefits. They must also meet the Unemployment Act’s numerous eligibility criteria. The court was careful to point out that it was not ruling on the separate issue of eligibility.

Employee Sought Benefits During Unpaid Leave
The employee in this case worked for the Wichita County government as an assistant emergency management coordinator. Suffering from anxiety and depression, she took several months’ leave under the Family and Medical Leave Act. When her paid leave ran out, she converted to unpaid leave and subsequently made a claim for unemployment benefits.

The Texas Workforce Commission concluded that the county worker was unemployed while on unpaid leave of absence for a medically verifiable illness and that it could pay unemployment benefits if the worker “met all other requirements.”

Wichita County appealed. The case eventually arrived at the Texas Supreme Court, where the high court agreed with the Texas Workforce Commission. As Justice Debra H. Lehrmann observed in a unanimous opinion, the Texas Unemployment Compensation Act’s definition of “unemployed” does not require that an employee be terminated from employment.

An individual is considered unemployed if the individual meets the act’s definition of “totally unemployed” or “partially unemployed.” Those terms are defined, at §§ 201.091(a) and (b) of the Unemployment Act, by income thresholds: the individual did not earn more than $5 of 25 percent of the benefit amount during the relevant benefit period.
“Pursuant to these provisions, an individual qualifies as ‘unemployed’ so long as her wages are low enough,” Justice Lehrmann wrote. “Nothing in these definitions contemplates a formal severance of the employer–employee relationship.”

The Texas high court rejected both the county’s contention that this reading of the Unemployment Act defied a common-sense understanding of the word “unemployed,” and the Texas Court of Appeals’ somewhat related view that giving the Unemployment Act a plain language interpretation would lead to absurd results.

The Unemployment Act, § 207.021(a)(1)–(5), (8) supplies a long list of criteria to be met before an individual is eligible to obtain unemployment benefits. The individual must:

  • have registered for work at an employment office and continued to report to the office as required by applicable Commission rules;
  • have made a claim for benefits;
  • be able to work;
  • be available for work;
  • be actively seeking work in accordance with Commission rules; and
  • have been “totally or partially unemployed for a waiting period of at least seven consecutive days.”

In order to receive unemployment benefits, an individual must be “unemployed” and “eligible” and not otherwise statutorily excepted or disqualified from receiving benefits. Justice Lehrmann wrote that the court was not deciding whether the county worker met the eligibility criteria. She surmised that it was not likely that a worker could qualify for FMLA leave and also be eligible for unemployment benefits.

Going forward, it will be important for employers in Texas to test the court’s assumptions. Employers should take a hard look at their employment policies to see if there are any loopholes that would allow employees on unpaid leave to meet the Unemployment Act’s eligibility criteria. These should be closed up immediately; otherwise employers could face unforeseen exposure for employment benefits.

The case is Texas Workforce Commission v. Wichita County, No. 17-0130 (Texas, decided May 25, 2018).

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