- The U.S. Department of Labor (DOL) is updating its field operations handbook to make clear that employee bonuses should be allocated equally to each week of a bonus period for computing overtime pay on earnings that can't be tied to particular workweeks, it announced Jan. 7.
- The announcement came in the footnote of an opinion letter answering an employer's question about a nondiscretionary $3,000 training bonus. Employees at the unnamed company received the bonus if they successfully completed 10 weeks of training and agreed to an additional eight weeks. The bonus, however, was not contingent on completion of the additional eight weeks. For this reason, said DOL, the bonus must be allocated to the initial 10-week training period.
- Because each of the 10 weeks was essential to receiving the bonus, and missing any week would disqualify an employee from receiving it, DOL instructed the employer to allocate $300 to each of the initial 10 training weeks for the purposes of calculating overtime pay.
While every situation is different, the Fair Labor Standards Act (FLSA) generally requires that nonexempt employees be paid at least 1.5 times their regular rate for hours worked beyond 40 in a workweek.
DOL recently updated its regulations defining compensation that must be included in that regular rate calculation, addressing, among other things, criteria for determining whether a bonus is discretionary or nondiscretionary (and therefore an item that must be included in an employee's regular rate).
This further clarification came via a less-binding mechanism — an informal opinion letter. These letters address individual, fact-specific questions and are therefore considered by some an imperfect system for receiving DOL insights. They were temporarily jettisoned during the Obama administration in favor of more widely applicable Administrator Interpretations. Still, many employers have welcomed their return with the Trump-era DOL, as opinion letters can serve as a complete affirmative defense in litigation, experts previously told HR Dive.
And with DOL noting that it will update its investigator handbook to reflect its answer, employers may find that this one, in particular, provides notable guidance.