On June 12, 2012, the US Court of Appeals for the Seventh Circuit issued an opinion in Arizanovska v. Wal-Mart Stores, Inc. A key issue was whether forcing a pregnant employee to take an unpaid leave of absence due to her inability to perform essential job functions constitutes a materially adverse employment action.

Plaintiff, Svetlana Arizanovska, worked part-time as a stocker at Wal-Mart, which required her to lift up to 50 pounds. Plaintiff became pregnant in 2008 and requested a job accommodation for being unable to lift more than 20 pounds, but she later suffered a miscarriage. She filed a complaint with the EEOC. Plaintiff became pregnant a second time and informed Wal-Mart that she could not lift more than ten pounds. Wal-Mart refused to transfer plaintiff to a position that only required her to fold clothes, as plaintiff requested, because no such position existed.

Wal-Mart placed her on an unpaid leave of absence, pursuant to company policy, because she could not perform her job duties. Under a Wal-Mart job accommodation policy directed at employees with a medical condition that is not a disability, some job assistance was available, but reassignment and light duty jobs were not available. Plaintiff did not return to work and later had another miscarriage.

Plaintiff sued Wal-Mart in federal district court under Title VII and the Pregnancy Discrimination Act, alleging discrimination, retaliation and various state law claims. The district court granted summary judgment on all claims and plaintiff appealed.

The Seventh Circuit affirmed the district court's decision to grant summary judgment to Wal-Mart. But the Seventh Circuit disagreed with the district court's ruling that forcing an employee to take an involuntary unpaid leave of absence was not a material adverse employment for purposes of establishing a prima facie case of retaliation.

Construing the term "adverse action" broadly, the Seventh Circuit, quoting Herrnreiter v. Chicago Housing Authority, identified three categories of adverse employment action that affect either:

The Seventh Circuit reasoned that Wal-Mart had subjected plaintiff to the first type of adverse employment action. The plaintiff lost her part-time paid position and was placed on an unpaid leave status, which essentially made her "temporarily unemployed." Wal-Mart argued that the leave was not an adverse action because it was made pursuant to company policy. The Seventh Circuit rejected this argument, finding that company policy should not be used as a shield to liability. If a harmful employment decision is not materially adverse simply because it was made pursuant to an official policy, employers would be allowed to retaliate with impunity. Furthermore, the Seventh Circuit was not aware of any cases holding that an employment action was not materially adverse merely because it was consistent with company policy.

However, the plaintiff's retaliation claim failed because she could not establish that her filing of the EEOC complaint was a "motivating factor" in Wal-Mart's decision to place her on unpaid leave.

Employers in the Seventh Circuit should be aware that, for purposes of retaliation claims under Title VII, placing an employee on an unpaid leave of absence constitutes a materially adverse employment action, even if the employment action was made pursuant to official company policy. Courts will look at the impact of the decision on the employee when determining whether the decision is materially adverse.