The United States Department of Labor (“DOL”) released a Final Rule – commonly referred to as the “Bonus Rule”– that clarifies how employers should calculate the overtime rate of an employee if that employer also provides employee with any bonus or other incentive-based pay under the fluctuating workweek method.
Under the fluctuating workweek method, nonexempt employees receive a set weekly salary no matter how many hours they work, plus additional overtime pay when they work more than 40 hours in one workweek. For example, an employee is paid the same weekly salary whether the employee works 30 hours or 45 hours. However, when the employee works more than 40 hours in a week, the employee receives additional overtime pay for each hour of work over 40 hours.
Under the new “Bonus Rule,” the DOL clarifies that employers can pay bonuses or other incentive pay, such as commissions or hazard pay, in addition to the fixed weekly employee salaries even when the employee is paid using the fluctuating workweek method. Importantly, the DOL confirmed that any additional bonus(es) or incentive pay must be included when calculating the regular rate of pay, subject to certain limited exclusions. This regular rate of pay must be used to calculate the proper overtime wages for these employees.
The DOL recently released Fact Sheet #82 to guide employers through the nuanced “Bonus Rule.”
Please contact us if you have any questions regarding this Alert or would like to discuss this topic further.
Contact info: Meredith S. Campbell Chair, Employment and Labor Group
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