FMLA Leave: Can We Push Back the Annual Performance Review Date When Employees Take Leave?

When our employees go on leave, such as FMLA leave, we adjust their appraisal dates to reflect the leave time. For example, if they take 3 months of leave, they get their appraisal at the 15-month point rather than the usual 12 months. Now some of them are saying that the FMLA says that leave time can’t be counted against them, and they are demanding a 12-month appraisal even though they only worked 9 months. Can this be right? — Anonymous

Our HR Management & Compliance Report: How To Comply with California and Federal Leave Laws, covers everything you need to know to stay in compliance with both state and federal law in one of the trickiest areas of compliance for even the most experienced HR professional. Learn the rules for pregnancy and parental leaves, medical exams and certifications, intermittent leaves, required notices, and more.

This question comes up often for many employers. We asked Mary Topliff of the Law Offices of Mary L. Topliff to clear up the confusion.

This is certainly a common question, and it appears quite logical to have a 12-month performance review period consist of 12 months of work. However, there is an underlying issue with performance reviews that requires consideration of the federal Family and Medical Leave Act (FMLA) and its counterpart, the California Family Rights Act (CFRA). Because the CFRA regulations adopt the FMLA regulations on the points addressed below, for purposes of this article, we’ll just say FMLA.

The issue is whether delaying a performance review for an individual who has taken FMLA leave conflicts with the obligation to return the leave taker to a position with ‘equivalent pay, benefits, and working conditions.’ If your performance reviews trigger any type of salary increase, merit pay, or other compensation determinations or affect some other working condition, delaying the performance review may cause problems.

From a broad perspective, keep in mind that the FMLA regulations state that ’employers cannot use the taking of FMLA leave as a negative factor in employment actions, such as hiring, promotions, or disciplinary actions; nor can FMLA leave be counted under ‘no fault’ attendance policies.’ Moreover, the regulations broadly describe the term ‘equivalent terms and conditions of employment’ as requiring that the employee who has taken FMLA leave have the same or equivalent opportunity for bonuses, profit-sharing, and other similar discretionary and nondiscretionary payments. 

Delaying an employee’s performance review because he or she took an FMLA leave clearly falls under ‘taking action because of the FMLA leave.’ We must then look at whether that delay is a negative factor in any employment action. To do so, examine all implications of delaying a performance review, even those that are not apparent. For example, look at whether it may impact eligibility for internal promotions or create a different review schedule going forward.

More specifically, examine whether and to what extent the performance review is tied to compensation determinations and, in turn, what the impact of a delay in the review might be on the compensation paid to the employee. In defining ‘equivalent pay,’ the regulations state that an employee is entitled to any unconditional pay increase that occurs during the FMLA leave period, such as a cost of living increase. However, the employee is not necessarily entitled to pay increases that depend to some degree on the employee’s performance and production—for example, increases conditioned on seniority, length of service, or work performed. The law does not require that an employee who has taken FMLA leave during a performance review period receive the same increase as a co-worker who did not take leave when the criteria for the increase relate to production, rather than simply attendance.

If a salary increase takes into account attendance by either the individual or the work unit or department, an employee who took FMLA leave may be entitled to the increase. The regulations discuss this issue in the context of bonuses, but it is just as relevant to a pay increase determination. They note that many employers pay bonuses for job-related performance, including perfect attendance and safety, which do not require performance by the employee but rather contemplate the absence of occurrences.

To the extent that an employee who takes FMLA leave had met all the requirements for either a performance-based or attendance-based bonus or pay increase before FMLA leave began, the employee is entitled to continue this entitlement on return from FMLA leave. In other words, the employee may not be disqualified for the bonus or pay increase for taking the FMLA leave. In contrast, a bonus or pay increase for exceeding production goals is performance-based and thus may take into account the time off taken during the relevant period.

To summarize, if a delay in providing a performance review for an employee who has taken an FMLA leave negatively impacts their compensation, any discretionary pay, or any other aspect of employment opportunities in the future, there is a potential for running afoul of the FMLA. Many companies opt to keep the performance reviews on schedule and prorate any salary increases to account for the leave period. This option tends to eliminate the risks if the salary increase is entirely production-related.

The criteria for any compensation and bonus determinations should be reviewed in detail before implementing an automatic pro rata adjustment practice for employees on leave status.”

Mary L. Topliff is principal of the Law Offices of Mary L. Topliff in San Francisco.