Many employers are unaware that they may be using the wrong overtime rate. The Fair Labor Standards Act (“FLSA”) requires that over-time pay be determined using the employee’s “regular rate” of pay, which includes all earnings paid to the employee during the workweek. However, the FLSA specifically provides that certain earnings may be excluded from the regular rate, such as a bonus that is completely within the employer’s discretion.
However, many employers provide bonuses that are not discretionary. Non-discretionary bonuses must be included in calculating the regular rate used for overtime pay. Determining whether or not a bonus is truly discretionary will depend on the facts related to the bonus.
Remember, if the employer offers a bonus on a regular basis and an employee has come to recognize and expect it, the bonus will most likely be found to be non-discretionary. One example of non‑discretionary bonus is a bonus an employee is entitled to receive as a result of the employee reaching a certain quota.
Laura M. Trujillo
Disclaimer: This blog is for information purposes only. Legal advice is provided only through a formal, written attorney/client agreement