• How Do FMLA Leaves Affect Your Employee Bonuses?
  • April 2, 2010
  • Law Firm: Miller Johnson - Grand Rapids Office
  • Attendance and performance bonuses—so called goal-based bonuses—can be powerful tools to motivate your employees by rewarding performance, safety, attendance, or other behavior you want to encourage. Have you considered incentive bonuses in the past but hesitated to use them because the Family and Medical Leave Act (FMLA) regulations did not make it clear how to treat employees whose bonuses might be affected by their FMLA leave? Fortunately, new FMLA regulations have created a standard that is easier to apply.


    Simply stated, the new regulations require employers to treat FMLA absences and non-FMLA absences equally. Employees cannot be treated worse for taking FMLA absences than they would have been had the absences not qualified for FMLA protection. And if a perfect attendance bonus makes no exception for any absences no matter what the cause, an FMLA absence may be counted against an employee’s attendance for the purposes of qualifying for the bonus.


    To apply the new standards, we suggest using the following series of three questions:


    Is the bonus for achieving a specific goal?

    Only goal-based bonuses may be denied or prorated for employees who have taken FMLA leaves. Luckily, the regulations define “goal-based” very broadly, and only bonuses awarded to all employees, like holiday bonuses, are not considered goal-based. So, attendance bonuses, safety bonuses, production bonuses, and sales bonuses are all goal-based bonuses.


    Are employees “credited” for any other absences?

    For goal-based bonuses other than attendance bonuses, like production or sales bonuses, employers sometimes give employees a bump to account for time missed.
    If you do that, you must treat employees who have taken FMLA leave the same as employees who have taken other types of leave. Think of time missed as either paid or unpaid and apply the same standard for all time missed in either category.


    Are employees “penalized” for any other absences?

    Some bonuses—usually attendance-based bonuses—are reduced or prorated depending on the time the employee has actually worked. Your approach should be the same as in the preceding situation. That is, if you penalize employees for absences, you must apply the same standard for FMLA and non-FMLA absences. Again, it is easiest to separate absences according to whether they are paid or unpaid and use the same approach for absences in both categories.


    We recommend that employers carefully draft bonus programs to ensure that they comply with the FMLA. A well-drafted program may be one of the most effective ways to encourage and reward performance. Miller Johnson has a specialized FMLA Solutions Practice Group to provide expertise on all FMLA concerns.