Ins and Outs of Perfect Attendance Awards - American Society of Employers - Anthony Kaylin

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Ins and Outs of Perfect Attendance Awards

perfect attendanceDoes your organization award perfect attendance?  Is it done on a weekly, monthly, quarterly, or yearly basis?  And what does perfect attendance mean exactly?  Perfect attendance needs to also take into account the variety of days that should still be counted towards perfect attendance without penalizing the employee for taking them.

For example, should an employee be rewarded for perfect attendance when they take a scheduled vacation day?  What about jury duty?  Or bereavement leave?  Or what about required military service? In this situation, courts have held that taking military leave must be afforded the same "rights and benefits" as employees taking comparable non-military leaves.  Therefore, if the policy promoting the perfect attendance includes jury duty or bereavement leaves, the employee would be entitled to the award.

What about an employee who otherwise would be qualified but is on FMLA leave?  Under FMLA regulations, a perfect attendance bonus may be denied to an employee who fails to qualify due to the use of FMLA leave.  But there is a big “but.”  If the bonus is paid to employees "on an equivalent leave status for a reason that does not qualify as FMLA leave," the employee would then be entitled.  The regulations provide the following example: if an employee who used paid vacation leave for a non-FMLA purpose would receive the payment, then the employee who used paid vacation leave for an FMLA-protected purpose must also receive the payment.  It’s unclear if an employee on FMLA which is unpaid would also get the award simply because they are on FMLA leave.

On the other side of the coin, FMLA cannot be used against an employee who would otherwise have a perfect attendance record.  In a 2019 case before the U.S. 6th Circuit Court of Appeals, which includes Michigan, the court stated that intermittent FMLA leave could certainly halt progress toward a 30-day perfect attendance streak, but it could not lawfully be allowed to erase it.  In this situation, the employer was using a point system for attendance.  It was disciplining an employee for attendance and counting FMLA time as a point against.  The FMLA regulations prohibit an employer from counting FMLA leave against an employee.

However, the court also pointed out that sick leave on its own could disrupt perfect attendance. 

Below is a sample Perfect Attendance Award policy:

[Name of Company] recognizes nonexempt employees semi-annually for perfect attendance on January 1 and July 1. To receive an attendance award, the employee must have been a full-time employee during the previous six-month period and have used no sick leave, taken no time off without pay, had no unscheduled late arrivals or early departures that are not made up within the same workweek, and had no unscheduled vacation leave (less than 48 hours advance notice).

An absence that is designated as covered under Family and Medical Leave or the Americans with Disabilities Act does not disqualify an employee from this award.

The attendance award is $100 cash. This cash award has to be considered taxable income to the employee but will be “grossed up” to cover taxes so that the actual amount the employee realizes is $100. It will be included in the employee’s paycheck the first regularly scheduled payday following January 1 and July 1.

Note that the policy specifically identifies when the attendance will be disrupted or not.  In this situation, unpaid time off and sick leave (or unscheduled PTO time) would disrupt the attendance record. 

There is also an FLSA component to Perfect Attendance Awards.  Per the U.S. Department of Labor Wage and Hour division, attendance bonuses are considered nondiscretionary bonuses and must be included in the base rate for the time period in which overtime is earned.

If your organization has or is considering perfect attendance policies, HR should review all scenarios with legal counsel to ensure proper implementation under the various laws.


Source: Foley & Lardner 8/16/22, Felhaber & Larson 8/20/19




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