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May 2018
23
May 23, 2018

Court of Appeals May Have Opened Door for Employees Fired for Timecard Falsification

Imagine terminating an employee for timecard falsification. The employee denies falsifying his or her time records, but you terminate anyway. Have you just possibly violated the Michigan Payment of Wages and Fringe Benefits Act? According to a recent Michigan Court of Appeals decision, the answer might be “yes.”'

The Payment of Wages and Fringe Benefits Act regulates such things as the timing of wage payments and deductions from wages and fringe benefits. Section 3(1) of the Act also prohibits employers from taking adverse action against employees who engage in certain protected activities:

An employer shall not discharge an employee or discriminate against an employee because the employee filed a complaint, instituted or caused to be instituted a proceeding under or regulated by this act, testified or is about to testify in a proceeding, or because of the exercise by the employee on behalf of an employee or others of a right afforded by this act.

It was the underlined language in this provision of the Act that was at issue in Ramos v. Intercare Community Health Network, No. 335061 (January 30, 2018). Mr. Ramos was terminated by Intercare based on its belief that he had falsified his timesheet. Although Intercare paid Mr. Ramos for the hours he reported, he nevertheless filed a complaint with the Michigan Wage & Hour Program claiming that he had correctly filled out his timesheet and that he was illegally discharged for doing so. Relying on a prior Court of Appeals decision, Reo v. Lane Bryant, Inc., 211 Mich. App. 364 (1995), his complaint was dismissed by the Wage & Hour Program and the trial court. They held that under Reo, Section 3(1) only protects employees who engage in protected activities on behalf of another. Exercising a right on one’s own behalf is not protected. 

On appeal, Mr. Ramos argued that dismissal of his complaint was in error because by exercising a right on his own behalf, he was exercising a right on behalf of “an employee” which the Act clearly protects. Acknowledging that it was bound to follow Reo, the Court of Appeals denied his appeal. It went on to state, however, that Reo had been wrongly decided. As the Court read section 3(1), it was clear. Nowhere do the words “another” or “a different” employee appear in the statute, and the Reo court’s reading of those words or concepts into Section 3(1) was error. The Court therefore called for a “conflict panel” to review and decide the issue. 

One judge dissented from the Court’s holding, reasoning that the phrase “on behalf of” plainly indicates that the employee must be acting in support of another or in furtherance of another employee’s claim.

The Ramos Court’s request for a conflict panel was ultimately denied without discussion in late February, so for now, the Reo holding remains the law. Had it been accepted and had the panel agreed with the Ramos decision, it would have overturned 20-plus years of settled law. As the Ramos dissenting judge noted, if the legislature had disagreed with the holding in Reo, it could easily have amended Section 3(1) to protect employees acting on their own behalf. It did not do so, which is evidence that Reo was not incorrectly decided. 

We do not know if that is why the conflict panel request was denied, but Ramos is still out there, and this issue may get teed up again in the future. Adopting the reasoning of Ramos would also have put employers facing a claim under Section 3(1) in a position having to prove the employee did in fact falsify his or her timesheet. Effectively, employers will have to prove a negative—i.e., the employee did not perform services for which she or he should be compensated. This can be very difficult to do. As with any allegation of employee wrongdoing, employers would be well advised to do a thorough investigation into suspected timecard falsification before terminating. 

This would include giving the accused employee an opportunity to tell his or her side of the story. If nothing else, carefully investigating may allow the employer to argue that it has a good-faith reasonable belief of employee wrongdoing, which is a recognized defense to other retaliation, interference and wrongful termination claims. 

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