Total Articles: 18
DOL Issues Opinion Letters Providing Guidance on Nondiscretionary Lump Sum Bonuses and Per-Project Payments
Executive Summary: The U.S. Department of Labor (DOL) issued two Fair Labor Standards Act (FLSA) opinion letters on January 7, 2020, addressing questions regarding overtime calculation for nondiscretionary lump sum bonuses and per-project payments under the salary basis test. In the first opinion letter, the DOL ultimately stated that the appropriate method for calculating overtime pay on nondiscretionary lump sum bonus earnings that cannot be identified with particular workweeks is allocating the bonus equally to each workweek. In the second opinion letter, the DOL concluded that a “per-project” payment may satisfy the salary basis test, even in situations where the employee is earning “extra compensation” working on additional projects.
Third-Party Bonuses Are Not Necessarily “Remuneration” for Overtime Purposes, Third Circuit Holds
When an employer permits its employees to participate in a bonus program offered by the employer’s client, based on the work performed for that client, those bonuses do not always qualify as “remuneration for employment” that must be included in the employee’s “regular rate” for purposes of calculating overtime pay due under the Fair Labor Standards Act (FLSA), the U.S. Court of Appeals for the Third Circuit has held. Secretary, U.S. Dep’t of Labor v. Bristol Excavating, Inc., 2019 U.S. App. LEXIS 24767 (3rd Cir. Aug. 20, 2019). In so concluding, the Third Circuit rejected the U.S. Department of Labor’s position that any remuneration received by an employee, whether received directly from the employer or a third party, is always “remuneration for employment.” Instead, the Court of Appeals held, that determination depends on the agreement made between the employer and the employee.
What the DOL Guidance on Nondiscretionary Bonuses Means for Nonexempt Employees
A common challenge for employers of hourly or nonexempt employees who receive quarterly or annual nondiscretionary bonuses is how to factor such bonuses into the employees’ regular rates of pay and calculate the appropriate overtime premiums due to those employees who work more than 40 hours in a workweek. In July 2019, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued Opinion Letter FLSA2019-7, which discusses how employers may account for overtime pay as part of annual and quarterly nondiscretionary bonuses.
Are your bonuses really discretionary?
As the holiday lights start to fade, we come to one of the most anticipated times of the year – bonus season!
Paying Bonuses to Non-Exempt Employees: Avoiding Class-Wide Overtime Violations
Employers generally recognize that their non-exempt employees must receive overtime premiums on their base pay – in most cases, their hourly wage – when they work overtime. However, not all employers are as well attuned to the requirement that overtime premiums may also be required on other, “supplemental” components of compensation to nonexempt employees. Bonuses are a common example.
"Nondiscretionary" Pay And The 90%/10% Approach
Once the U.S. Labor Department's revised definitions for the federal Fair Labor Standards Act's Section 13(a)(1) "white collar" exemptions take effect, employers will be allowed to:
What Bonuses and Incentive Payments Count As "Discretionary" Under The New Exemption Rules?
One of the more surprising changes in the new FLSA overtime exemption rules is a provision allowing certain bonuses, commissions, and incentive pay to count for up to 10% of the new increased minimum salary level. However, the rule provides that only “nondiscretionary” bonuses, incentives, and commissions can be counted. So what exactly does “nondiscretionary” mean?
Second Circuit Affirms: Business Not Obligated to Pay $350,000 “Performance” Bonus to Prospective Employee Who Never Worked A Day
Last year, a Manhattan federal district judge reviewed a decision of a federal bankruptcy court and held that Lehman Brothers was not required to pay a $350,000 performance bonus referenced in the offer letter of a prospective employee who never provided services. In doing so, the Court observed that the Firm terminated the contractual relationship prior to the prospective employee performing work contemplated by the offer letter contract and prior to her official start date, and that there was no evidence that the bonus was intended as a “sign on” bonus to be paid prior to the performance of her duties. The Court of Appeals for the Second Circuit has now affirmed the District Court. Ortegon v. Giddens, 2016 U.S. App. LEXIS 404 (2d Cir. Jan. 12, 2016).
What Is A "Percentage Bonus"?
Overtime wages for employees subject to the federal Fair Labor Standards Act's overtime requirement must be based upon the "regular rate" of pay. This is an hourly rate that is normally determined by dividing the total wages paid for a workweek by the total hours worked in that workweek for which those wages are paid.
Are Employers Required to Provide Holidays or Holiday Premium Pay? [Wage & Hour FAQ]
Back in July, I discussed ways to handle holiday pay for employees with alternative work schedules. Just before the Labor Day holiday weekend, a client and reader of the blog asked me an even more fundamental question: do we have to provide employees with time off for holidays, whether with or without pay, or pay employees overtime or other premiums if they work on a holiday? The answer, as it often is in wage and hour law, is “it depends.”
Holiday Pay for Employees with Alternative Work Schedules [Wage & Hour FAQ]
With paydays that include the recent July 4th holiday coming up, it is a good time to address a fairly common question for employers whose employees work “alternative” workweek schedules: How should employers handle holidays?
Does your company's year-end bonus create an FLSA overtime issue?
Bonuses paid or gifts given to non-exempt employees (those entitled to overtime wages for working hours in excess of 40 per week) at the end of the year or during the holidays can, in certain circumstances, trigger the overtime calculation provisions of the Fair Labor Standards Act (FLSA). The important factor is whether the bonus is discretionary or non-discretionary.
Avoiding Mistletoe Mishaps, Part V: Are Holiday Gifts, Prizes, Or Parties Taxable Wages?
As 2013 comes to an end, we have been considering a number of workplace issues that employers might face at the end of the year and the beginning of the holiday season. In parts one, two, three, and four of this blog series, we covered.
Don't Forget to Include Non-Discretionary Bonuses in Overtime
As 2012 comes to a close, we inevitably receive questions related to year-end bonuses. Last year, I posted about whether employers were required to pay a pro-rata bonus to those employees who left their employment before the bonus was paid out. This year, I thought it might be helpful to remind employers of certain rules relating to bonus payments made to non-exempt employees.
Does An Exempt Employee Who Calls In Sick The Day Before Thanksgiving Get Holiday Pay? [Wage & Hour FAQ]
Our holiday pay policy says that employees must be at work the day before and the day after a holiday. Our office is closed Thursday and Friday for Thanksgiving. If an exempt employee works Monday and Tuesday but calls in "sick" on Wednesday, can we deny the employee holiday pay?
Quick Quiz Answer: Paid-Time-Off And The "Salary Basis"
The answer to our July 11 Quick Quiz is, "One And One-Half Days' Worth".
Quick Quiz Answer: Bonus Based Upon Company's Annual Performance
The answer to our November 4 Quick Quiz is "Yes": Fair Labor Standards Act overtime must indeed be figured on the kind of bonus we described. In fact, the U.S. Wage and Hour Division's Office of Enforcement Policy ("OEP") took this position with respect to such a bonus in a May 2006 opinion letter.
Quick Quiz: Bonus Based Upon Company's Annual Performance
Every February 1, Acme Banking pays a bonus to eligible nonexempt employees for the prior calendar year if Acme's overall performance exceeded certain standards. The standards relate to Acme's return-on-assets, return-on-equity, deposit growth, and efficiency ratio.