Quirky Question # 190, Are Perfect Attendance Policies Compliant with the FMLA and ADA?

Quirky Question # 190:

My company is a firm believer in rewarding good behavior as opposed to punishing bad behavior. Along those lines, we give bonuses to employees who maintain perfect attendance over the course of a year. For employees who do have absences, we apply a “no-fault” system that grants employees a set number of days that can be missed each year for whatever reason, so that our supervisors and HR staff do not waste time checking in on the reasons for every absence.

Of course, our employees periodically take different types of leave from work, including leave under the Family and Medical Leave Act and the Americans With Disabilities Act. An employee who recently took FMLA leave advised us that she does not think she should be disqualified from the perfect attendance bonus because she did have “perfect” attendance when she wasn’t forced to be out because of her health issue. Another employee who took some leave for a disability issue claims her missed days should not apply to her annual 15-day threshold, again because the leave was not by choice.

Neither employee’s request seems valid to me. How can an employee who misses work have perfect attendance? And what’s the point of a no-fault attendance policy if certain missed days count, while other do not?

Dorsey’s Analysis:

Attendance policies tend to be the toughest to administer on a day-to-day basis. Perfect attendance bonuses and no-fault attendance policies are no exception. Based on some relatively recent guidance contained in Family and Medical Leave Act (FMLA) regulations, and considering a recent case pursued by the Equal Employment Opportunity Commission (EEOC), however, there do appear to be some clear answers to your questions.

Attendance bonuses and policies can be powerful tools. Employers frequently put in place policies to incentivize positive employee behavior, including providing benefits for employees to attend work punctually and regularly. And like you, employers also have sought to simplify attendance policies to avoid paternalistically requiring an explanation for every missed workday. These “no-fault” attendance policies generally allow a certain number of unexcused absences without requiring the employee to provide any documentation, and then penalize employees who take leave beyond allowable limits.

Both perfect attendance and no-fault policies make encouraging employee dedication and managing absenteeism easy. For perfect attendance bonuses, a simple check of the year’s attendance provides a quick computation of commitment and a clear measure for presenting a reward. For no-fault attendance policies, employees need not fret about getting a doctor’s note, and employers save on the time and energy devoted to these administrative burdens.

Though perfect attendance bonuses and no-fault attendance policies are easy and beneficial to employers and employees alike, both policies implicate employee leave laws, with contrary results. For perfect attendance bonuses, employers should feel comfortable, based on recent FMLA regulation changes, that FMLA and ADA leave may be counted against an employee’s perfect attendance, as long as employees on other leaves are similarly disqualified. But for no-fault attendance policies, while it seems counterintuitive to ignore an employee’s absences when determining whether an employee has reached her threshold of allowable absences, employers should do exactly that when the absences are the result of FMLA or ADA leave.

To understand this difference, it’s useful to be reminded of the FMLA and ADA statutory and regulatory frameworks. The FMLA prohibits an employer from “interfering” with the exercise of an FMLA right, including the entitlement to absences from work. The ADA prohibits employment discrimination or retaliation “against a qualified individual on the basis of disability.” Discrimination includes the failure to provide to a qualified individual with a known disability a reasonable accommodation, including absences from work, unless the accommodation causes the employer an undue hardship. Retaliation includes taking an adverse employment action against an employee because of a disability. Relevant here, the ADA may require an employer to suspend or modify its attendance policies to accommodate a disabled worker.

Turning first, then, to your company’s perfect attendance bonus, FMLA regulations state that an employer may not use the taking of FMLA leave as a “negative factor” in employment actions. See, 29 C.F.R. § 825.220(c). For perfect attendance bonuses, recent regulations allow an employer to exclude an employee taking FMLA leave from a perfect attendance bonus as long as employees having taken other leaves (e.g., vacations) are similarly disqualified. See id. § 825.215(c). One might ask how the FMLA rule prohibiting the FMLA from being used as a negative factor against employees squares with the more recent regulation permitting FMLA leave to disqualify perfect attendance bonuses. The justification appears to be that policies that penalize employees for taking FMLA leave itself are impermissible, but perfect attendance bonus disqualification for FMLA leave simply denies an extra reward that has been conditioned on the employee achieving a job-related performance goal.

As for your company’s no-fault attendance policy, the same FMLA regulation described above specifically prohibits an employer from counting FMLA leave against an employee. See id. § 825.220(c). (“nor can FMLA leave be counted under ‘no fault’ attendance policies”). The Americans with Disabilities Act (ADA), as interpreted by the EEOC, similarly finds fault in no-fault attendance policies. Last year, the EEOC reached a $20 million settlement with Verizon in a nationwide class action where the EEOC alleged Verizon’s no-fault attendance policy violated the ADA. The policy provided for progressive discipline upon accumulation of chargeable absences, but neither included an exception for qualified individuals with disabilities whose absences were caused by disabilities, nor a provision for reasonable accommodation of qualified individuals with disabilities.

In light of the FMLA’s regulations against no-fault attendance policies and the EEOC’s ADA interpretation, it appears employers should be very careful in applying such policies. For some employers, the burdens of accounting for FMLA or ADA leave might outweigh the administrative benefits of such a no-fault policy in the first place. Careful application of a no-fault attendance policy is all the more advisable given the recent amendments to the ADA, which generally permit many more conditions to be considered disabling, and, therefore, require employers to treat many more absences as caused by a disability (and protected against retaliation). For these reasons, some employers may consider returning to a more paternalistic fault-based attendance policy, with absences treated as either “excused” or “unexcused,” and with penalties imposed for excessive unexcused absences.

Another option employers have used to avoid a paternalistic fault system but gain some benefits of a no-fault system is to assign points to unexcused absences (but not excused leaves), then expunge points after a designated period (typically 12 months). Points typically drop off after the designated period even if the employee was on leave for a long period and actually worked very little during the prior 12 months. The question arises, then, whether FMLA or ADA leave may be considered when determining the expungement period in such a point system. Thankfully, in applying these types of attendance points policies, employers may rely on periods actually worked, and need not count periods of FMLA or ADA leave. A relatively recent case from the Seventh Circuit Court of Appeals confirms this. In Bailey v. Pregis Innovative Packaging, 600 F.3d 748 (7th Cir. 2010), the court held such a system was permissible because employees on leave do not necessarily accrue additional benefits while on the leave. Thus, employees on leave would not accrue a benefit (expungement of accumulated points) which would flow from being at work without taking unexcused absences.

One of the reasons employers prefer no-fault attendance policies is that absences need not be verified as excused versus unexcused. Unfortunately, if a paternalistic policy replaces a no-fault policy, the verification process itself includes legal risk. In particular, employers should avoid requiring a doctor’s note to verify every absence occurring during intermittent FMLA leave, and instead rely only on the FMLA-directed certification and recertification process. In the recent case of Jackson v. Jernberg Industries, Inc., 677 F. Supp. 2d 1042 (N.D. Ill. 2010), the employer required employees to produce a doctor’s note for each absence occurring during intermittent FMLA leave. The policy was designed to prevent employee abuse. The plaintiff employee was terminated for failing to and refusing to comply with policy; after the employee was twice tardy for reasons unrelated to the FMLA condition, the employee refused to supply a doctor’s note to support 13 unscheduled absences purportedly due to the FMLA condition, and the employee missed 10 consecutive days for reasons unrelated to the FMLA condition. The court held the employer’s verification policy interfered with employee’s exercise of FMLA rights because a doctor had already provided certification supporting the employee’s intermittent FMLA leave. The court instructed that the FMLA recertification process was enough to protect employers against abuse, and that at recertification, the employer may ask the doctor to analyze the employee’s pattern of absences to determine whether the medical condition supports that pattern. Thus, employers cannot go overboard with verifying the reasons for absences under fault-based absence policies.

Of course, attendance policies are not the only ones potentially affected by the FMLA or ADA. A close cousin is a punctuality policy, which rewards employees for showing up to work on time. Just like no-fault attendance policies, no fault tardiness policies also should be avoided, at least for non-manufacturing jobs where punctuality is not necessary to keep assembly lines running. One of the rare cases analyzing such a policy clearly suggests this result. In Holly v. Clairson Industries, 492 F.3d 1247 (11th Cir. 2007), the employer instituted a no-fault tardiness policy and defined punctuality as an essential function of every employee’s job. A paraplegic employee was terminated for excessive tardiness and sued. The court sided with the employee, holding that strict punctuality was not an essential function for all positions, which the company’s uniform policy failed to recognize. In that case, the employee did not work on an assembly line, and performance was deemed sufficient as long as the work got done. In light of the Holly case, employers should make sure to tie any punctuality policy to the specific essential requirements of the jobs affected.

So, where does that leave your company in trying to design legally compliant and administratively efficient attendance policies? It appears under the current FMLA and ADA legal framework that perfect attendance bonuses are permissible, as long as all types of leaves disqualify an employee from the perfect attendance award. The key is consistency.

No-fault attendance policies should be carefully applied, and some employers might consider replacing them with some sort of fault-based system. Under such a fault-based system, at least for intermittent FMLA leave, an employer should not demand proof to excuse every absence. To guard against the behavior of the employee in the Jackson case (missing 10 straight workdays for reason unrelated to the FMLA condition), employers should consider a no-call/no-show policy permitting termination of employment, and should act on that policy when appropriate. But if the fault-based attendance policy involves the expungement of unexcused absence points after a period of time, the employer may exclude FMLA and ADA leave time from that period.

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