Employment Law Questions? Ask an Employment Lawyer.
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It is partially legal. In employment law, the provision of vacation and sick leave is not required. Furthermore, the provision of a bonus is not legally required So, because they are not required an employer can set limitations on how they are received or use. So, it would be legal for the employer to discourage vacation/sick leave use in order to obtain a bonus that they don't have to give in the first place.
The one concern that I have is that some sick leave could also be Family Medical Leave, which is a protected form of leave for handling serious medical conditions. It is illegal to punish someone for using FMLA, so if the used time off is FMLA, the employer CAN'T persist in this penalty. As long as the employer respects that (assuming they are covered by the FMLA as an employer with more than 50 people), then the bonus incentive plan is legal.
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