Can we postpone employee's pay increases or bonuses for the amount of time an employee is out on FMLA leave?

If an employer provides unconditional pay increases to all employees, such as cost of living increases, then an employee who has taken FMLA leave is entitled to that increase just as other employees are. Employers that grant these increases on a particular date each year, need to provide pay increases on the same date to those on family or medical leave.

However, “Pay increases conditioned upon seniority, length of service, or work performed must be granted in accordance with the employer's policy or practice with respect to other employees on an equivalent leave status for a reason that does not qualify as FMLA leave.” (Reg. 825.215) Therefore, employers that grant pay increases after a certain number of months of active service may be able to delay an increase for a proportionate amount of time, as long as this is consistent with procedures for other types of leave.

Employers must be sure their policies on pay increases and employee leaves of absence are fair and applied consistently to avoid claims by those taking FMLA leave that they are victims of retaliation.

The rules for bonuses are the same as those for pay increases: an employee’s eligibility depends on how the bonus is structured and what the employee must do to receive it. Per the regulations, “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.” (Reg. 825.215)

For example, if an employee bonus is based purely on production, and the employee is not there to produce, he or she may be excluded from eligibility, assuming those on similar non-FMLA leaves are also excluded.

As a result, employers must be clear regarding eligibility requirements for various types of bonuses to be certain they do not improperly disadvantage employees returning from family or medical leave.