Benefit accrual during FMLA leave
Amelia, the company’s Family and Medical Leave Act (FMLA) administrator, tried to ease Conrad’s concern regarding his vacation allotment. He wanted to take a trip and needed more than his one week of vacation. Amelia explained that, because he had been on FMLA leave for 12 weeks, he did not accrue vacation during that time. He had his one week of vacation before he began FMLA leave, and because the company did not require that he substitute his vacation for unpaid FMLA leave and because Conrad did not want to do so, he still had his one week of vacation available when he returned from FMLA leave. Conrad believed, incorrectly, that he would continue to accrue vacation while on FMLA leave. Amelia showed him the company policy, which clearly indicated that was not the case. Although Conrad was not terribly happy about the situation, he accepted it.
While covered employers must maintain an eligible employee’s group health benefits during unpaid FMLA leave, when it comes to other benefits, much will depend upon the company’s policies and practices. The use of FMLA leave cannot result in an employee losing any employment benefit that accrued before leave began. The employee is entitled to the benefits that had accrued but were not used.
If an employee is using accrued paid leave during unpaid FMLA leave, however, your policies regarding accrual of benefits while on such paid leave will apply. If, for example, your policy indicates that vacation will accrue while an employee is on any form of paid time off, then employees who are using accrued paid time off for unpaid FMLA will continue to accrue vacation during the time employees are using accrued paid time off. If employees are not using accrued paid leave and are taking unpaid leave, they are not automatically entitled to such accrual.
Companies may, if they wish, allow employees to continue to accrue benefits and seniority during unpaid FMLA leave. Employers are not, however, required to do so by law.
If a bonus is based on the achievement of a specified goal such as hours worked, products sold, or perfect attendance, and an employee has not met the goal due to FMLA leave, then the bonus may be denied, unless otherwise paid to employees on an equivalent leave status for a reason that does not qualify for FMLA leave. If for example, an employee who used paid vacation for a non-FMLA purpose would receive the bonus, then an employee who used paid vacation for otherwise unpaid FMLA (for a qualifying reason) would also receive the bonus.
When it comes to vesting purposes and eligibility to participate in pension and other retirement plans, any period of FMLA leave is to be treated as continued service (i.e., no break in service). If, for example, a plan requires an employee to be working on a specific date in order to be credited with a year of service for vesting or participation purposes, an employee on FMLA leave who subsequently returns to work is deemed to have been working on that date. Employees are not, however, necessarily entitled to pension plan credit for the time spent on FMLA leave.
The bottom line is employers should treat similarly situated employees similarly — whether on FMLA leave or not — when it comes to company benefits.