Prorating annual bonuses based on leaves of absence, including FMLA

Q         Can we prorate annual bonuses based on time away from work because of leaves of absence? Can we be more generous in prorating bonuses for Family and Medical Leave Act (FMLA) leaves and less generous for non-FMLA-eligible personal leaves?

A   With respect to the first question, the answer will depend on the type of bonus. If the bonus is based on goal-oriented (such as attendance) or production-based criteria, then it can be prorated. If it is paid company-wide because of a holiday or company performance (with no individual goals), then it shouldn’t be prorated.

As to the second question, I would recommend you treat FMLA leave the same as all non-FMLA leaves. The FMLA regulations provide that “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.” This regulation and the cases that have interpreted it consistently provide that employers don’t run afoul of the FMLA so long as they treat FMLA leave the same as non-FMLA leave.

While it would be hard for employees to argue their FMLA rights were interfered with when they were treated better while on FMLA leave, it’s a best practice to treat all leaves of absence the same with regard to goal-oriented or production-based bonuses.