With the emphasis program that the Wage and Hour division of the Department of Labor has put on gins this year, we’ve gotten more calls from both gins and DoL on bonuses than ever before. In GENERAL bonuses are added to the regular rate of pay (subject to overtime) when they are non-discretionary. Discretionary bonuses not normally added to the regular rate of pay and therefore not subject to overtime.
That begs the question what qualifies as a discretionary bonus and what is considered non-discretionary. That is, at its heart, a legal question and as we are not attorneys, we are not qualified to tell you whether or not your way of paying bonuses is discretionary or non-discretionary. We can tell you what others have said and link to their sites. In general a discretionary bonus is paid after the fact, and is typically a surprise. It is not promised or expected and is typically not paid every year. A non-discretionary bonus is something that is normally promised ahead of time and is expected and is typically paid each year.
Some examples.. The company met a goal and the Board decided to pay everyone a bonus to celebrate. This is discretionary. The company hands gives a bonus for every 100 days with no-lost time accidents… this is normally non-discretionary. A bale bonus or end of the year bonus is typically not discretionary but there may be some instances where you can attempt to fight a ruling that it is non-discretionary but you feel sure it is totally discretionary. Again, we can’t tell you for sure but we can suggest you review some of the links below to help make that determination.
Fighting one of these claims can get expensive but not fighting can get even more so over time. What do I mean by that? Wage and Hour (in recent experience) will normally require back pay to employees that are found to be owed overtime on bonuses…. THE FIRST TIME. If there’s a history of repeated similar violations, civil money penalties are assessed. CMP’s are also assessed if there seems to be an effort to short employees money they are owed and not simply an oversight. For example, you pay a bonus that is deemed to be discretionary but the Wage and Hour in an audit determines that it is non-discretionary, you may choose not to fight it and pay the back wages. The next year or two years later, you have modified the way you pay the bonus but in a follow up inspection, they determine it is still non-discretionary, it could be very expensive.
Please follow the links below and decide for yourself whether your bonuses are discretionary or non-discretionary and where you stand. If you have an on-going investigation, determine whether or not you’re going to fight it and how far you’re going to take it. Consult with an attorney that deals with this type of an issue if you need to but don’t ignore it. Give us a call and we’ll try to help but again we’re not attorneys and can only help with what other gins and our conversations with Wage and Hour have told us.
LINKS: These are just a few. Many more on the web.