A little known aspect of the FLSA is the need for an employer to include non-discretionary bonuses when calculating the regular rate for purposes of overtime calculation. In a collective action, the employees of Publix Super Markets have charged that the Company has not done that, particularly in the face of an alleged admission by the employer that the bonuses were nondiscretionary. The case is entitled White et al. v. Publix Super Markets Inc. and was filed in federal court in Tennessee.
The Company had filed a motion for summary judgment asserting that the quarterly profit sharing bonus paid to hourly employees, the Christmas bonus, paid time for six holidays and tuition reimbursement did not warrant inclusion in the OT rate. The Company charged that the plaintiffs mislabeled the manner in which the employee bonuses were actually calculated and that, in fact, the payments were within the law.
The workers fired back, contending that the Company had gone on record conceding that the payments were nondiscretionary and that the payments conflicted with DOL regulations. The Company rebutted by contending that the bonus already provided “simultaneous payment of overtime compensation due on the bonus.” The Company asserted that the bonus was calculated based on number of hours employees worked at their store during the relevant period and thus fell within the safe harbor of percentage bonuses. If a bonus is computed as a percentage of total employee earnings, then under USDOL regulations, it is legal. The Company asserted that the USDOL had already concluded that the bonus did not need to be included into the OT calculation based on this percentage calculation.
The workers countered by asserting that the DOL’s “longstanding interpretation” of the total earnings requirement for rendering a bonus excludable from the regular rate was that the retail bonus had to be included because they were remuneration for employment and not just expense reimbursements, the Company could not exclude those payments from the regular rate.
Bonuses (or whatever they are called) must be included in the regular rate, if they part of a policy, practice or custom and employees expect such bonuses. Truly discretionary bonuses are rare animals, i.e. the Christmas bonus, but a way to defend such an allegation is to build into the bonus “program” that the giving of such bonuses is contingent on, for example, “budgetary concerns.”
With that said, if the plaintiffs in this case can show that the payments at issue were given as payments for some employment related activity, as opposed to, for example, a paid sick day where no employment activity is engaged in, they might have a case.