Articles Discussing Holiday Pay, Gifts and Bonuses Under The FLSA.

In 2020, non-exempt, hourly employees of Lowe’s sued the home improvement retailer under the Fair Labor Standards Act (FLSA) for not including payment of a one-time bonus, and payment for time spent on charitable volunteer activities, in the “regular rate” used to calculate their overtime pay.  The U.S. District Court for the Western District of North Carolina dismissed the suit.  On June 17, 2021, the Fourth Circuit Court of Appeals affirmed dismissal, holding that the bonus and volunteer time pay were properly excluded from the calculation of overtime pay.  McPhee v. Lowe’s Home Centers, LLC.  The Fourth Circuit has jurisdiction over federal courts in the Carolinas, Maryland, Virginia, and West Virginia.

Affirming the dismissal of wage and hour claims against “big box” retailer Lowe’s, the Fourth Circuit Court of Appeals agreed that company bonuses, provided to employees following 2018 revisions to federal tax law, were rightly excluded from the “regular rate” used to calculate overtime compensation under the Fair Labor Standards

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.

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.

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?

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).

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.”

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?

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.

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?