Watch Out for Bonus Programs and the FMLA!
Kegler Brown E-mployment Alert September 28, 2005
If you give a bonus to employees, and you have an employee who has been off on FMLA leave, be careful to consider the FMLA requirements when deciding whether the employee is entitled to the bonus.
As a rough general rule, the FMLA Regulations contemplate that bonuses that employees get for "doing nothing" cannot be denied or reduced for employees on FMLA leave (i.e., those that do not require performance, but instead are based on the absence of occurrences, such as attendance and safety bonuses). On the other hand, bonuses that are based on performance can be denied or reduced.
A federal district court in Pennsylvania recently confronted this issue. The employer's bonus plan was created to reward an employee's contributions to growth and to allow them to participate in financial increases. Under the company policy, bonus payments were pro-rated if employees were absent during the bonus period, whether for personal leave or for other situations where employees were not actively at work. Under these circumstances, the court ruled that it was permissible under the FMLA to pro-rate the bonus of an employee who was on an eight-week disability leave. The reason the pro-ration was permissible was because the premise of the bonus was contribution to successful financial results. [Sommer v. The Vanguard Group, 380 F. Supp. 2d 680 (E.D. Pa. 2005)].