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Figuring Out the Figures

Deducting or increasing salary in relation to various types of leave is the subject of this month's column, including pro-rating pay for employees on FMLA leave or for those who work less than a full day because of illness.

Monday, February 26, 2007
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Money -- when you need to pay more, and when you can deduct some from salary for employees on various types of leave. Those are the questions you have asked, specifically in the context of employees seeking a pay increase upon return from FMLA leave, and employees who leave work early on a particular day due to illness.

Since we all enjoy some alliteration now and then, I have dubbed March "money month" and offer legal and practical HR management advice in response to your inquiries.

Question: Can an employer pro-rate a pay increase if an employee was out on FMLA? Would it make a difference if it were a paid (short-term disability) versus unpaid (personal) leave? Additionally, related to FMLA, how does the employer prove that the employee has been given his or her FMLA rights on a timely basis?

Answer: Under the FMLA, eligible employees are entitled to 12 weeks of unpaid leave for qualifying reasons and they are entitled to return to the same or an equivalent position, with equivalent pay, benefits and working conditions, at the conclusion of the leave.

"Equivalent pay," as defined by the FMLA regulations, requires that an employee receive cost-of-living increases or any other unconditional pay increases that may have occurred during the FMLA leave period, irrespective of whether the leave was paid or unpaid.

The regulations provide that other pay increases, such as those conditioned on seniority, length of service or work performed, need be granted only to the extent that they would have been granted to employees on an equivalent, non-FMLA-qualifying leave of absence. 29 C.F.R. 825.215(c).

As you note, the need to "pro-rate" a pay increase may depend on whether the FMLA leave was paid or unpaid, but the relevance of this distinction depends entirely on the employer's leave policies.

If the employer would not pro-rate a pay increase for employees on, for example, unpaid military leave or an unpaid personal leave of absence, then it need not do so for an employee on unpaid FMLA leave.

If the employer would pro-rate a pay increase for employees on a paid, non-FMLA-qualifying leave of absence, then it would need to pro-rate a pay increase for employees on paid FMLA leave.

It is a bit difficult to answer the second question in the abstract. Certainly, written documentation is your best defense to an employee's claim that he/she did not receive all the notice and benefits required under the FMLA.

My first advice, therefore, is to DOCUMENT, DOCUMENT, DOCUMENT.

Send the employee written confirmation that his/her leave has been designated as FMLA-qualifying. Confirm the duration of the leave, whether it will be paid (and to what extent) or unpaid, how health-insurance premiums will be paid during the leave period, and any notice expected upon return to work.

Document the date the employee returns to work, and if the employee is being returned to a different, but equivalent, position, include a note in his/her personnel file reflecting the job duties of the new position and their equivalency to the former position.

In relation to the initial question, if conditional raises were granted while the employee was on FMLA leave, confirm whether the organization's policy or practice has been to grant those increases to employees on any other type of leave before they have satisfied the requisite seniority, work performance or other conditional criteria.

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If an organization does not grant such increases to employees on other types of leave, include with the FMLA documentation a note referencing this policy and confirming the date on which the employee on FMLA leave would be eligible for a salary increase.

A company representative may also want to meet with the employee, upon his/her return from FMLA leave, to explain the policy with regard to salary increases and to confirm when the employee would next be eligible to be considered for such an increase.

Question: What is the labor law regarding employers' pay-out for an employee who comes to work and leaves because they are ill but have only worked two hours?

An employer must compensate employees for hours worked. If an employee is a nonexempt hourly employees under the Fair Labor Standards Act, the employee should be paid for the two hours that he/she worked, but you need not compensate the employee for the balance of the workday.

If, however, the employee is an exempt salaried employee under the FLSA, you may not make deductions from pay in increments of less than a full day without jeopardizing the employee's exempt status.

In the scenario described, an organization would have to compensate an exempt employee as if he/she had worked the full day. However, if the employer maintains a bona fide plan, policy or practice of providing compensation for salary loss occasioned by sickness or disability (a sick leave policy), the organization could deduct the balance of the workday from the employee's bank of sick days.

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