Paul DeCamp Quoted in “Are Referral Bonuses Included in Overtime Calculations?”


Paul DeCamp, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Washington, DC office, was quoted in SHRM, in “Are Referral Bonuses Included in Overtime Calculations?” by Allen Smith.

Following is an excerpt:

Referral bonuses generally aren’t included in the regular rate of pay and so aren’t included in overtime calculations, according to a recent Department of Labor (DOL) opinion letter. But some portions of a referral bonus could be included if the employee has a contractual right to the payment.

The regular rate of pay is used to calculate overtime premiums under the Fair Labor Standards Act (FLSA). 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 other discretionary bonuses, and certain gifts. …

Paul DeCamp, an attorney with Epstein Becker Green in Washington, D.C., explained, “It does not serve the underlying purposes of the statutory overtime requirement—encouraging employers to spread work around in order to alleviate unemployment and to reduce the harms of excessive labor—to require an employer to pay a premium on top of a referral bonus.” He noted that to be excludable, the referral bonus should not depend on the quality or quantity of the employee’s work.