Earlier this month, a widely-recognized Fortune 50 company reached a $1.7 million agreement with the Equal Employment Opportunity Commission to resolve nearly a decade of litigation over the company’s nation-wide policy of discharging workers who do not return from medical leave after 12 months.

While this settlement still requires approval by a federal judge, the litigation itself (and the size and scope of the settlement, which also includes changes to the company’s policy, notice-posting, record-keeping, reporting, and other requirements) should be instructive for employers dealing with a common issue: what to do with employees who are granted a medical leave but cannot return to duty at the end of a set time period.

In arguing for its 12-month maximum medical leave policy, the company maintained that such a limit is permissible under the Americans with Disabilities Act (ADA), since regular work attendance is an essential job function for its employees. Certainly hard to argue that isn’t true. However, the EEOC has long contended that leave can be a necessary “reasonable accommodation” that employers must consider under the ADA. While that may also be true, the EEOC takes this point further and also contends that virtually any maximum leave policy or other similar inflexible criteria violates the ADA’s reasonable accommodation requirements. The EEOC contends such set and inflexible rules are really just a way for a company to weed out disabled workers. Further, the EEOC argues that such rules are an illegal employment qualification standard that improperly affects disabled workers.

While this settlement is not an admission of liability by the company, nor proof that the EEOC’s position would necessarily win in court, in view of the settlement’s size and scope, and that it is the result of years of hard-fought (and likely expensive) litigation, it certainly will embolden the EEOC to take this same position with other employers who have “maximum medical leave” policies.

What the EEOC expects is that each employee disability situation is reviewed individually, with regard to each employee’s specific disability, limitations and accommodation needs, as well as the essential duties of his/her job. Periods of absence on medical leave such as 12 months might be fine if used as a guide or point at which to re-visit their employment status or conduct an appropriate review (and as needed, a further interactive process with the disabled employee about his/her ability to return to work and any accommodations needed to do so). But the EEOC will take issue with any absolute, hard and fast time limit which appears to make the time out of work the only factor in deciding that employees must be terminated – especially where the employee is actually asking for some specific amount of additional time off but is automatically denied that time. The company’s basic point in this case has appeal – after all, if an employee has not worked for 12 months and cannot return to work at that point, should they really be considered an employee anymore? But from the EEOC’s perspective, when a time limit is the only factor that matters – not the employee’s health, limitations or possible reasonable accommodations, including any additional leave that might be necessary under the circumstances – that violates the ADA. A future court may have to decide if the EEOC’s position is right. In the meantime, you do not want your business to be the test case that decides this issue.

If your company has a maximum leave policy, you should discuss this case and the EEOC’s position with counsel to ensure that your process is different, and hopefully ADA-compliant, and will not subject you to future litigation from your terminated employees or the EEOC.