Aug 04, 2016
By Peter Friedmann

Generally speaking, employees who are exempt from the protections of the Fair Labor Standards Act (FLSA) must receive overtime pay for all hours worked over 40 hours per week at a rate not less than time and one-half their regular rate of pay.  You can find more information from the Department of Labor here- Our Ohio Employment Lawyers can answer any questions you have about whether or not you are entitled to overtime pay.

“Regular rate of pay” becomes an interesting issue when an employee’s regular rate of pay includes certain types of bonuses, like non-discretionary bonuses.  There are many examples of non-discretionary bonuses, such as shift differential pay, promotional bonuses and cost of living adjustments.  Non-discretionary bonuses are those promised to employees before work begins.  A good example is when an employee makes X amount of sales, he or she receives X% as a non-discretionary bonus that is factored into the hourly rate of pay.  It is a little known aspect of the FLSA that an employer must include non-discretionary bonuses when calculating the regular rate of pay for purposes of overtime pay calculations.

Truly discretionary bonuses, which are a very rare animal, are not included when calculating the regular rate of pay of an employee for overtime bonuses.   Discretionary bonuses include any gift (like a Christmas bonus), premiums paid for work on Saturdays, Sundays or holidays, and vacation pay.  When a non-discretionary bonus covers a period of time that is longer than one work week, it must be reapportioned back over the work weeks of the period during which it was earned.  Employers make a mistake where they allow the employee to be paid the non-discretionary bonus for a 30-day period, but do not go back and reapportion that bonus to the employee’s regular rate of pay per hour.  Often, a non-discretionary bonus will result in an increase in the rate an employee is paid per hour, thereby increasing the rate he or she is owed for any overtime pay for that period of time.  This is one of the most common mistakes employers make with regard to the FLSA.  If you believe you are being paid the wrong amount of overtime pay because of a bonus structure like the one being described here, please reach out to our Ohio overtime lawyers here