An Air Carrier First Officer reported that the Captain; just returning from an extended leave; climbed in the LEVEL CHANGE mode with the autopilot engaged and did not understand why the FMC altitude restriction was not captured.

Narrative

The flight began with a normal Crew briefing with the Captain informing me he had been off of flying for a while and to watch him. The departure points and altitude restrictions were briefed and verified in the FMC. The initial altitude was set at 19;000' per the departure in the Altitude selector. During the rotation; a coffee pot was heard falling in the galley. On the initial climb out; the Captain selected VNAV and LNAV while proceeding toward the BAKRR intersection. At approximately 4000 FT; he proceeded to select Level Change. At that time; I asked the Captain if he would like 7000 FT in the altitude window for the BAKRR restriction of at or below 7000 FT. He stated that he knew about the restriction and would stop the climb at 7000 FT. About 5000 FT with a 3500 FPM climb rate; the Captain decided to call back to the Flight attendants to find out what the noise we heard during the takeoff roll was. Passing through 6500 FT; I again mentioned to the captain about the 'at or below 7000 FT restriction.' The Captain said he knew but didn't try to stop the climb until passing 6900 FT. The aircraft continued to climb to 7300 FT at approximately two miles before BAKRR. The Captain asked why it continued its climb when the FMC was set correctly. We discussed the fact that the aircraft will not follow the FMC in Level Change. He again mentioned that he had been out on medical leave for the last four months and was still getting used to the new automation. The flight was continued with no mention of anything from ATC. As a pilot monitoring; I could have taken the aircraft from the Captain but didn't feel it was necessary when I reminded the Captain of the altitude restriction twice and he stated he had the aircraft. I should have reset the altitude selector back to 7000 FT as soon as the Captain selected Level Change.