Labor & Employment Law Daily Wrap Up, EMPLOYEE LEAVE—S.D. Cal.: Former SBA loan specialist with anxiety failed to state FMLA, California claims, (Jan 13, 2025)

By Jason Albright, J.D.

Two days after she requested FMLA leave, a manager unexpectedly called her, placing her on unpaid status due to her “refusal” to work.

The Small Business Administration was entitled to dismissal of the FMLA, Federal Tort Claims Act, and California claims of a former loan specialist who was transferred to a call center position in another department, developed anxiety, and then was placed on unpaid status in the spring of 2023 after she submitted a request for FMLA leave, a federal district court found. Her bare allegation that she was “rehired” by the SBA in November 2022 did not convey enough detail for the court to adequately assess the plausibility of her eligibility to sue under Title I of the FMLA, which covers employees who have worked for an employer at least 12 months. She also failed to address the SBA’s argument that FTCA claims can be brought only against the United States, which she did not name, and her California claims were barred by sovereign immunity (Chin v. Small Business Admin., No. 24-CV-732 JLS (AHG) (S.D. Cal. Jan. 10, 2025)).

Loan specialist for SBA. The plaintiff, according to the court, is a former employee of the United States Small Business Administration (SBA). The SBA allegedly “rehired” her on November 4, 2022, to work in San Diego, California, as a loan specialist in its Processing Disbursement Center (PDC”).

Overtime. In the PDC, she “had become accustomed to working 60 hours a week,” entitling her to overtime pay.

Transfer. Though she “received the highest score possible and never was disciplined” while working in the PDC, she was informed on March 9, 2023, that some PDC employees “would be transferred to another department due to insufficient work.”

CESC. The next day, she was informed that she was chosen for transfer to the COVID-19 Economic Injury Disaster Loan Servicing Center (CESC). At first, she welcomed the transfer and believed that her new role “would be no different than the previous ones.”

Call center representative. Within days, however, she learned that she would be reassigned as a call center representative, a role she believed to be an entry-level position for which she was overqualified. She also learned that, in the CESC, she would be limited to working 40 hours each week, effectively reducing her pay by more than a third.

Anxiety. Upon these realizations, her anxiety, from which she suffers, “began to worsen.”

Attempts to reclaim position. For the next two weeks, she made several attempts to reclaim her prior role, to no avail. Upon learning of her specific assignment on March 17, 2023, she emailed the lead loan specialist to explain that “her high-performance evaluations at PDC evidenced her skillset and proved her training would be wasted in the entry level Call Center Representative position.”

The lead, however, could only assure her that “she would relay [her] concerns to the appropriate supervisor,” further aggravating the plaintiff’s anxiety. Eventually, the lead notified her that she should contact her new manager.

HR instead. Believing that HR would more readily respond to her concerns than the new manager, she contacted an HR officer, who told her that she should instead contact her new supervisors, the CESC director and deputy director.

Intensifying anxiety. “Flummoxed by the lack of a central point of contact who could address her concerns with the new assignment,” according to the court, the former loan specialist experienced anxiety that continued “to grow substantially.” Then, on March 22, 2023, she received word that the senior supervisory loan specialist had decided that she would remain with the customer service team. She requested a meeting with HR, but received only a response from the senior specialist stating that her position as a call center representative was the only one available based on current workloads.

Medical leave request. With her anxiety intensifying, the former loan specialist became unable to complete her work and sought medical assistance on March 27, 2023. She was diagnosed with severe anxiety, and her doctor recommended she take medical leave through June 5, 2023. Acting on that recommendation, she submitted her doctor’s note to a deputy supervisor and requested 12 weeks of leave under the FMLA.

Unpaid status. Then, unexpectedly, the senior supervisory loan specialist called her two days later and placed her on unpaid status due to her “refusal” to work. She tried to explain that she had continued to fulfill all her work obligations up until her FMLA request, but he did not relent. The senior specialist explained that being placed on unpaid status was the equivalent of being laid off. Though it was unclear from the face of the complaint, the court noted, the former loan specialist is “apparently no longer employed by SBA.”

Lawsuit and motion to dismiss. She pursued her grievances through two parallel administrative avenues, receiving a right-to-sue letter from the California Civil Rights Department and, after having her claims denied, receiving the option to sue in federal district court from the EEOC. She filed suit in federal district court on April 23, 2024, alleging 13 causes of action under federal and California state law. The defendants moved for dismissal of all claims.

Sovereign immunity and state-law claims. The court first found that the former loan specialist’s state-law claims were barred by sovereign immunity. These included alleged violations of the California Fair Employment and Housing Act, breach of contract, wrongful termination, and whistleblower retaliation, in violation of FEHA and other California labor laws. As federal agencies and employees, the defendants argued that they can only be sued in their official capacity if Congress has expressly waived their immunity. Here, they pointed out, the former loan specialist could point to no such waiver, and her own opposition was silent on the point except with respect to her FMLA claims. The court thus considered the issue waived and dismissed the state-law claims with prejudice.

FMLA claims. Her FMLA claims were dismissed without prejudice and with leave to amend. Here, the court found that the former loan specialist’s bare allegation that she was “rehired” by the SBA in November 2022 did not convey enough detail to adequately assess the plausibility of her eligibility to sue under Title I of the FMLA, which covers employees who have worked for an employer at least 12 months.

FTCA claims. Finally, the court found that the former loan specialist’s tort claims, construed as having been brought under the Federal Tort Claims Act (FTCA), also failed. Here, she alleged that SBA was liable for negligent hiring, supervision, and retention, and that individually named defendants were also liable along with it for intentional infliction of emotional distress. Here, the defendants argued that the claims are fatally flawed because FTCA claims may be asserted only against “the United States itself—not any federal agency or official.” Because the former loan specialist failed to address this argument, the court considered it waived and dismissed the claims with prejudice.

The case is No. 24-CV-732 JLS (AHG).

Judge: Sammartino, J.

Attorneys: Carney Richard Shegerian (Shegerian & Associates) for Sherry Chin. Betsey Boutelle, U.S. Attorney's Office, for Small Business Administration of the U.S.

Cases: EmployeeLeave PublicEmployees Discharge TortClaims Covid19 StateLawClaims Procedure CaliforniaNews