“Penalizing” Employee for Using Leave, Quirky Question # 64

Quirky Question # 64:

We have a number of programs at our company that are designed to reward employee behaviors that are important to the success of our company.  For example, we provide a financial benefit to employees who have 100 percent attendance annually.  Another example is that we provide our employees a bonus based on a combination of factors, including quality of their work, contributions to their department, and commitment and loyalty to our firm.

We periodically have employees take different types of leave, such as leave under the FMLA, maternity/paternity leave, and leave under the Americans With Disabilities Act.  One of our employees who recently took FMLA leave advised us that she does not think she should be disqualified from 100 percent attendance bonus, and should not be penalized for the bonus we provide based on the criteria listed above.

Her position makes no sense to me.  Why would she qualify for a perfect attendance bonus if she missed work?  Why should she qualify for a bonus based on her contributions when other people are working year-round and contributing more than she is?  Am I missing something?

Dorsey’s Analysis:

This is a tough question, on which courts are rendering inconsistent opinions.  So, while I’ve offered a few thoughts below, I encourage you to monitor these kinds of situations carefully to see how this area of the law develops.

That said, upon first glance, your position seems eminently reasonable – how can a person who has been absent for some period of time qualify for a perfect attendance bonus?  Similarly, how can an employee who has missed time (perhaps substantial amounts of time) be deemed to have made the same contribution to your firm’s performance as those who have been there every day?

The problem with this initial reaction, however, is that it fails to take into account the statutory protections afforded by the Family and Medical Leave Act (FMLA). Under the FMLA, an employee may sue her employer for “interfering” with the exercise of her statutory rights. An interference claim typically involves a five-factor prima facie case (i.e., the basic elements required to pursue a FMLA claim). The prima facie elements are: 1) she is an employee eligible for FMLA leave; 2) the defendant is a covered employer; 3) she is entitled to FMLA leave; 4) she provided notice of her intent to take leave; and 5) the defendant employer denied her the FMLA benefits to which she was entitled.

With regard to an “interference” claim, the fifth element can be that the employer somehow used the leave against the employee in an unlawful manner, as “unlawful” is defined by the statute or the relevant regulations. Therefore, it is important to review the regulations. Under 29 C.F.R. §825.220(c), an employer cannot use the taking of FMLA leave as a “negative factor” in employment actions. As some courts have pointed out, if an employer takes an employment action based, in whole or in part, on the fact that the employee took FMLA-protected leave, the employer has denied the employee a benefit to which he or she was entitled.

For example, in the very recent case of Wojan v. Alcon Laboratories, Inc., Case No. 07-11544 (E.D. Mich. September 15, 2008), the court analyzed a situation where an FMLA-eligible, drug sales employee took FMLA leave. In the years before she took FMLA leave, the employee had been a very high performer, receiving high rankings on her performance evaluations based on both subjective and objective ranking methods. She had annual sales rankings that rose from number 53 to as high as number 12 in the nation, which qualified her for the company’s highest sales award, the President’s Club.

In late 2004, however, the employee took FMLA leave in connection with the birth of her child. The Company did not adjust her sales quota to account for the time she was away from work. Consequently, with 12 weeks away from her job, her comparative sales rankings dropped to number 89 nationwide. Given her low rating, she was placed on a Performance Improvement Plan, and ultimately, discharged for poor performance. The plaintiff-employee argued that the company’s refusal to adjust her sales quota based on her leave “set in motion an unbroken chain of events resulting in her termination.”

The federal district court agreed, denying the employer’s summary judgment motion on the employee’s FMLA interference claim.  The court concluded that by failing to re-set the employee’s sales quota, adjusting it for the time she was away from work, the employer had allowed the leave to negatively affect a term of her employment.  (I note, in passing, that the plaintiff brought a number of other claims as well, including FMLA retaliation, sex discrimination, pregnancy discrimination, marital status discrimination — she was a single mother — and retaliation under the state discrimination statutes. There also were a number of other facts that substantially strengthened the employee’s case and portrayed the employer in a negative light. For example, the plaintiff presented evidence that her supervisor had told her upon her return from leave that she had better not be showing baby pictures to her colleagues and that she had better be out selling. How these collateral facts affected the determination of the court is difficult to pin down with precision. Let’s just say, however, that they could not have helped the employer.)

Another very recent case (decided just last week), from the federal district court in Minnesota, assessed many of the same issues. In Dickinson v. St. Cloud Hospital, No. 07-3346 (D. Minn. October 20, 2008), the court considered whether the hospital’s method of calculating “absenteeism” interfered with the plaintiff-employee’s exercise of her FMLA rights. The hospital compared the amount of time an employee worked against the amount of time the employee was scheduled to work. If an employee’s absenteeism, calculated in this fashion, reached a certain percentage, the employee began a progressive disciplinary cycle. Dickinson, an LPN who had missed time off due to various physical problems that qualified her for FMLA leave, was disciplined for excessive absenteeism (first with written warnings, then with a suspension, and eventually, with discharge). She sued, claiming that the hospital’s method of determining the absenteeism percentage should have included the qualified FMLA leave time as part of the time in which she was scheduled to work. She argued that had her FMLA absence time been included in the denominator of the calculation, it would have resulted in a lower absenteeism percentage and she would not have been subject to discipline.

The Minnesota district court agreed, although it pointed out that different courts were reaching opposite conclusions on this issue. Nevertheless, the court found that the hospital’s method of calculating absenteeism had resulted in her FMLA leave constituting a “negative” factor, in violation of the regulations discussed above. Again, the employer’s summary judgment motion on the interference claim was denied.

Applying the principles of these cases to your situation suggests that you should not consider the qualified FMLA leave when assessing your employee’s “perfect attendance.” I recognize that this seems incongruous but if you disqualified the employee from receiving your “perfect attendance” bonus, you would be using the FMLA leave as a negative factor. Arguably, this would trigger your employee’s right to assert an FMLA interference claim.

The same analysis would appear to apply to the more subjective “contribution” bonus paid out by your company.  If you disqualified your employee from receiving this compensation simply because she had exercised her statutory rights to take FMLA leave, you again are using your employee’s leave as a “negative” factor, potentially exposing your company to an interference claim.

In sum, I’d simply urge your firm to move cautiously in this arena. The cases described above are very recent, having been decided within the last two months. As noted, other cases have reached the opposite conclusion. But, this is an area where you should at least evaluate the relevant issues when deciding how to proceed. Finally, of course, if there are other performance problems on which your decision-making is grounded, the mere fact that an employee has taken FMLA leave will not preclude you from taking disciplinary action, up to and including termination. Just make sure that you carefully document these other reasons because in all likelihood, you will be defending your discipline or discharge decision and will need to explain why these other variables, and not the FMLA leave, led to the company’s disciplinary action.

Dorsey & Whitney

Dorsey & Whitney

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