To Prorate or Not to Prorate the Bonus, That is the Question!
The impact of leave on an annual bonus calculation often perplexes employers (and rightfully so). When calculating the amount of a bonus, can the employer take into account an employee’s absence for part of the year? What if the basis of the leave was the FMLA? Does that make a difference?
The Second Circuit Court of Appeals recently addressed this exact issue in Clemens v. Moody’s Analytics, Inc. Plaintiff Gregory Clemens took FMLA leave and upon his return, his annual bonus was reduced. He argued this proration amounted to FMLA interference.
Affirming the ruling of the District Court, the Second Circuit held Clemens’ FMLA rights were not disturbed because the evidence showed his employer, Moody’s Analytics (“Moody’s”), prorated the payments based on the length of the leave, regardless of the reason. In essence, if you were absent from work no matter the reason, Moody’s prorated the bonus.
This case is good news for employers but also gives employers some homework:
- Make sure your bonus structure is tied to specific goals such as hours worked, sales achieved, etc.
- Inform employees what those requirements are and uniformly follow them!
- Make sure you are consistent. Ensure bonuses distributed to employees on FMLA are calculated the same way they are for other types of paid or unpaid leave.
- If the bonus is calculated based on company performance rather than individual performance, pay the employee who is out on FMLA leave the full bonus.
Brody and Associates regularly provides counsel on the FMLA, as well as employment law issues in general. If we can be of assistance in this area, please contact us at firstname.lastname@example.org or 203.454.0560