The USDOL has been quite busy lately in issuing regulations and other guidance relating to the provisions in the Families First Coronavirus Response Act. With that said, the “regular” business of the agency continues as best as it can. One of these functions is the issuance of Opinion Letters which, as I have written about numerous times, provide important guidance for employers on how they may comply with the myriad wage hour laws. The agency has issued Letters regarding my favorite topic—what does/does not get included in employees’ regular rate when computing overtime.
One eternally thorny issue is what bonuses do/do not get included. The rule of thumb is that for a bonus to not be included in the regular rate, it must be completely discretionary bonuses. Any bonus that is promised to employees (company policy, labor contract) almost automatically does get included. One example is a longevity bonus.
In Opinion Letter FLSA 2020-3, the agency looked at whether length-of-service payments, mandated by a municipal resolution, should be included in the regular rate. . The employer asking for the opinion advised that eligible employees shall receive longevity awards in the amount of $2/month for every year of service. The employer had been paying these longevity bonuses every two weeks, but wished to pay the bonus in a lump sum at Christmas.
The FLSA regulations exclude Christmas bonuses from being counted towards the elevation of the regular rate. However, employers cannot use that provision as a vehicle for excluding what would otherwise have been includible. In this regard, if the “Christmas” bonus is so much or substantial, then it might “be assumed that employees consider it part of the wages for which they worked” and those that are required by law are not considered gifts for purpose of exclusion from the regular rate.” 29 CFR 778.212(b).
Given these principles, the agency held that as the municipal resolution required that the longevity payments be paid, even if there was some discretion in their form and timing, they had to be included in the regular rate of the employees who received these bonuses. In dicta, the Letter noted that if the resolution had authorized, but not required, the longevity payments around Christmas, they could be excluded from the regular rate.
The Takeaway
Thus, business continues for the DOL, although perhaps not “as usual.” The agency has issued other Opinion Letters on inclusion of certain kinds of bonuses and it is important that these efforts continue as the bonus inclusion issue is one of the grayest and vaguest in the entire FLSA. I don’t like the answer the agency has reached in this matter, but what is paramount for myself, as a management-side practitioner, s that I am more able to properly advise clients how they should comply with the law, which is the overriding goal of every employer.
As it is mine…
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