Does your organization offer a bonus plan that rewards workers for their productivity? If so, be sure to avoid a surprisingly common mistake that’s tripped up many Indiana employers: incorrectly structuring the bonus plan—or making deductions from bonuses—in a way that violates the
A new Indiana court ruling shows how an organization can legally pro-rate an employee’s bonus:
- Make sure your bonus plan is actually based on productivity, and not on attendance, safety or other examples of the absence of an occurrence. Those types of bonuses cannot be pro-rated, and you cannot penalize an employee for taking .
- Bonuses based on production goals, company performance or quality standards can be pro-rated, and you can make deductions for FMLA absences. For example, if an employee is out for the full 12 weeks of FMLA leave, you can pay 75% of the person’s full bonus.
Recent case: Robert Golden, a manager at Chautauqua Airlines in Indianapolis, requested FMLA leave to stay home with his newborn child. The company grudgingly granted the leave.
When Golden returned, he learned that the airline had cut his annual bonus by the proportional amount of FMLA leave. (The bonus was for company production and performance.)
He sued, alleging he was being penalized for taking FMLA leave. But the court threw out the case, reasoning that the bonus plan was set up to reward production and performance, not merely attendance. (Golden v. Chautauqua Airlines, No. 1:05-786, SD IN, 2007)