Jeffrey H. Ruzal, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s New York office, was quoted in SHRM, in “Are Bonuses to Front-Line Workers Included in Overtime Calculations?” by Allen Smith.

Following is an excerpt:

A bonus to a front-line worker, even during the pandemic, might be considered nondiscretionary and thus should be included in overtime calculations if an employer isn't careful. …

Nondiscretionary Bonuses

Under the Fair Labor Standards Act (FLSA), all compensation for hours worked and services rendered is included in the regular rate of pay. The regular rate includes hourly wages and salaries for nonexempt workers, most bonuses, shift differentials, on-call pay and commissions. It excludes health insurance, paid leave, holiday and discretionary bonuses, and certain gifts. …

Examples of nondiscretionary bonuses include:

  • Bonuses based on a predetermined formula (e.g., production bonuses).
  • Bonuses for quality or accuracy of work.
  • Bonuses announced to induce more-efficient work.
  • Attendance bonuses.
  • Safety bonuses (e.g., for a certain number of days without a workplace accident).

"Whether bonuses to front-line workers are nondiscretionary or discretionary really depends on the underlying purpose of the bonus," said Jeffrey Ruzal, an attorney with Epstein Becker Green in New York City. "If the bonus is intended as an incentive for additional hours worked, then that would constitute a performance-based reason for the bonus that would likely cause it to be characterized as nondiscretionary.

"That said, employers must keep in mind the rule of thumb that if a bonus is not guaranteed, based on performance or expected by the employee in question, then it may likely be characterized as discretionary and thus excludable from the regular rate for purposes of calculating overtime," he added.

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