We’ve reached the end of yet another year. I hope it was wildly successful for your organization.
Are you ready to pay out year-end bonuses?
Or perhaps instead you want to offer a pay incentive to employees to improve attendance or production? Take, for instance, a point-based attendance bonus policy in which employees are assessed points for every tardiness or absence (even for FMLA or ADA-covered leave), which, in turn, disqualifies an employee from receiving the incentive.
In these situations, can an employer disqualify an employee from the bonus or incentive?
In short, Yes.
Under trusty Section 215 of the FMLA regulations, an employer can disqualify an employee from a bonus based on achievement of a specified goal, such as hours worked or perfect attendance, even where the employee has not met the goal due to FMLA leave. The regulations provide guidance for us here:
. . . if a bonus or other payment is based on the achievement of a specified goal such as hours worked, products sold or perfect attendance, and the employee has not met the goal due to FMLA leave, then the payment may be denied, unless otherwise paid to employees on an equivalent leave status for a reason that does not qualify as FMLA leave. For example, if an employee who used paid vacation leave for a non-FMLA purpose would receive the payment, then the employee who used paid vacation leave for an FMLA-protected purpose also must receive the payment.
29 C.F.R. § 825.215(c)(2) (my emphasis and bold).
Let me put this another way.
When qualifying employees for and/or calculating bonus payments or incentives, employers must treat employees who take FMLA leave the same as those who are on “an equivalent leave status for a reason that does not qualify as FMLA leave.”
Ok, Jeff, you ask, where do you get your support for this?
Stick with me.
In the preamble explaining the changes to 29 C.F.R. § 825.215(c)(2), the Department of Labor stated:
Equivalent leave status refers, for example, to vacation leave, paid time-off, or sick leave. Leave for a reason that does not qualify as FMLA leave refers, for example, to vacation or sick leave that is not for an FMLA purpose (i.e., the vacation or sick leave is not also FMLA leave). Thus, for example, if an employer policy does not disallow an attendance bonus to an employee who takes vacation leave, the employer cannot deny the bonus to an employee who takes vacation leave for an FMLA purpose (i.e., substitutes paid vacation leave for FMLA leave). However, if an employer’s policy is to disqualify all employees who take leave without pay from such bonuses or awards, the employer may deny the bonus to an employee who takes unpaid FMLA leave. If an employer does not count vacation leave against an attendance bonus but does count unpaid leave against the attendance bonus, the employer may deny the bonus to an employee who takes 12 weeks of FMLA leave, two weeks of which the employee substitutes paid vacation leave, but ten of which the employee takes as unpaid FMLA leave. 73 Fed. Reg. 67985 (Nov. 17, 2008).
So, bottom line, if you deny bonuses and incentives to those on other, similar forms of leave — such as absences related to jury duty leave, military leave to ADA leave — you can deny the same bonus to the employee who took FMLA leave.
But what about unconditional pay increases automatically given to employees? That’s a different story. When increases such as a cost of living increase are provided to all employees without any condition attached, an employee who has taken FMLA leave is entitled to the same increase.
Beware of State and Local Leave Laws
The above takes care of federal FMLA leave. But could state or local paid sick leave laws create an issue for you?
Maybe. Most state leave laws are silent on the question of whether you can deny a bonus to an employee who takes state/local paid sick leave. In these cases, you arguably could apply the federal FMLA standard.
However, many of these laws include anti-retaliation provisions that might be applicable. Take, for instance, my home city of Chicago, whose sick leave ordinance states generally that employers cannot take adverse actions because of the use of protected paid sick leave. Pretty generic, yes? And not likely to impact your approach to the payment of bonuses.
But take the City of Minneapolis’ sick and safe time ordinance. Here, the City states that, “An employer may not take an employee’s legitimate sick and safe time use into account when rating that employee’s attendance record for the purposes of awarding a benefit, such as a . . . bonus. Such actions would constitute unlawful retaliation.”
Before you prorate or deny that bonus, check your friendly local paid leave law, and make a quick phone call to your favorite employment attorney.
Other Holiday Pay Issues
What about other FMLA issues you face around the holidays, such as holiday pay during FMLA leave, calculating FMLA during the holidays, and dealing with an employee who plays hooky during the holidays? See my other posts on these issues below:
- For those with questions about whether you pay an employee holiday pay when they missed the day before or the day after the holiday because of FMLA leave, see my previous post here for the answer.
- If you’re wondering how you calculate FMLA leave time when the employee is absent on the holiday or during a plant shutdown for the holiday, you must adhere to very specific FMLA regulations on point. I answer that question here.
- For tips on fighting FMLA abuse around the holidays, either dial (800) HELP-ME-JEFF or see my previous post giving my Top 10 suggestions for combating FMLA leave abuse.