During my pregnancy I was on modified duty because of complications. I was told by the director of employee health that if I worked in the same dept. on modified duty that it would not affect my fmla. I was not off on leave I still worked or tried to work 40 hours a week until my pregnancy came to an end and went on short term disability.
While on leave, I received a letter from my dept. director stating that my job would be posted due to exhausted fmla.
His view is that while I was on modified duty that counts as fmla.
My question is can they post my job if I was still working on modified duty and told it would not affect my fmla?

No, time that you were working most definitely cannot count as FMLA. Doesn't matter if it was "modified" duty or not. Work time is not leave time, and FMLA is leave.

Now, the weeks that you did not work a full 40 hours, the time you did not work can count as FMLA. But they absolutely cannot count time that you were working as FMLA.

Once you stopped working, how much time did you miss? Have you returned to work? If not, have you been fired or otherwise adversely affected due to this (erroneous) determination?