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Employment Law Alert: Third Circuit Rejects Claim That Employer Violated The FMLA By Prorating The Bonus Of An Employee Who Took FMLA Leave

On August 24, the Third Circuit Court of Appeals affirmed summary judgment for the employer in a particularly interesting FMLA case. In Sommer v. Vanguard Group, the plaintiff, a financial administrator who missed two months of work on FMLA-covered leave, claimed that his employer violated the FMLA by prorating his annual bonus. Under Vanguard’s “partnership plan,” bonuses were paid to “recognize crew members’ contributions to Vanguard’s growth and success in a tangible way.” To be qualified for a bonus, employees had to be employed on the last calendar day of the year, on the date of the plan’s distribution, and on all days in between. Further, the amount of each employee’s individual bonus payment depended on his/her job level, length of service and hours of service. “Hours of service” specifically included “hours for which an employee is paid or entitled to be paid” for either the actual performance of work or for “vacation, holidays, sick time, or an approved leave of absence (including bereavement leave, court duty leave, and military leave).” However, the plan also specifically provided that employees on disability leave under either its short or long-term disability programs would not be credited with hours of service during such leaves.

Sommer claimed that Vanguard’s prorating of bonuses under its partnership plan for FMLA leaves, while not doing so for other types of leaves, such as vacation and sick leave, violated the FMLA. Doing so, Sommer argued, unlawfully interfered with employees’ FMLA rights and had the effect of discouraging them from taking leave under the FMLA.

The district court disagreed with Sommer, granting Vanguard’s motion for summary judgment, and the Third Circuit affirmed the district court’s decision. In so doing, the Court drew a distinction between production-based bonuses, such as the one at issue, and “absence of occurrence” bonuses, such as bonuses awarded to workers for perfect attendance or for remaining accident-free. The former, said the Court, required “some positive effort on the employee’s part at the workplace,” while the latter did not.

Bottom Line

This decision, which represents the first time an appellate court has distinguished between two types of company bonus programs for purposes of an FMLA interference action, is a significant victory for employers. Obviously, the decision is only binding on employers in the Third Circuit, but it is a well-reasoned opinion that, hopefully, other courts will find persuasive, as well.

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