DOL offers guidance on nondiscretionary bonuses, per-project pay

The U.S. Department of Labor's (DOL) Wage and Hour Division (WHD) kicked off the new year by releasing two opinion letters providing guidance for dealing with issues arising under the Fair Labor Standards Act (FLSA). While the opinion letters don't have the force of law, they are clear indications of how the DOL would view a similar situation if it were considering an enforcement action. Further, courts routinely defer to (or adopt) the department's opinions on FLSA questions.

Bonuses and calculating overtime

The first opinion letter addressed the impact on overtime pay if nonexempt employees receive lump-sum, nondiscretionary bonuses, including promised or announced bonuses, production-related bonuses, and performance bonuses. Generally, the bonuses must be included in the regular rate of pay when calculating overtime. Specifically, the bonus amount must be accounted for with regard to the weeks in which an employee works more than 40 hours.

An employer asked the DOL how to allocate a bonus provided to employees who successfully completed a 10-week training course and then signed up for an additional eight weeks of training. They would receive a $3,000 bonus upon successfully completing the 10-week course and signing up for the additional eight weeks—regardless of whether they actually completed the additional training. In the scenario described by the employer, an employee trained no more than 40 hours in eight weeks of the 10-week course but worked more than 40 hours in the other two weeks. The employee signed up for the additional training and received the $3,000 bonus.