Q - A: Be consistent when prorating bonuses based on unpaid leave

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?

Yes, you can prorate annual bonuses based on time away from work because of leaves of absence. Federal circuit courts of appeals have consistently held employers don't unlawfully interfere with an employee's rights under the FMLA by prorating their bonus payments based on the number of weeks they took leave under the FMLA.

The U.S. 2nd Circuit Court of Appeals clarified as recently as 2019 that employers should treat FMLA absences and non-FMLA absences the same for purposes of prorating bonus payments. For example, if a bonus payment is based on the achievement of a specific goal, such as hours worked or perfect attendance, and the employee didn't meet the goal due to leave, then she doesn't qualify for the bonus payment ― or at least, not the full amount.

You can prorate certain bonus payments to employees who have taken FMLA leave, so long as the reduction in bonus payments is similar to non-FMLA types of leave. Accordingly, you cannot be more generous in prorating bonuses for FMLA leave and less generous in prorating bonuses for non-FMLA leave. They must be substantially equivalent or wholly equivalent.