The USDOL is busy again issuing Opinion Letters and has again turned its focus to the issue of inclusion/exclusion of bonuses into the regular rate for purposes of overtime computation. These Letters are not binding on courts but they operate to evidence the agency’s position on whatever issue is being addressed so they are extremely valuable to employers and practitioners alike.
In the Opinion Letter on bonuses, the agency addressed how employers should calculate employee overtime in a scenario when the employee receives a nondiscretionary bonus that is earned over a period of time and is not connected to a specific pay period. The Opinion Letter posited a hypothetical where employees will be eligible for a $3,000 bonus upon completion of a ten-week training program, as well as signing up for an extra eight weeks of training. The hypothetical sets out that the employees worked varying amounts of overtime over that initial ten week period of training.
The Opinion Letter starts by acknowledging that the lump-sum bonus needs to be included in the regular rate of pay, when overtime is computed, over that. The Opinion Letter indicates that the employer must divide the bonus up in equal components for the ten weeks. Thus, for each week, the sum of $300 would be “thrown into” the earnings for that week, when the regular rate is determined as each week. According to the Opinion Letter, each of those allocations “counts equally in fulfilling the criteria for receiving the lump sum bonus.”
The agency (in a footnote) noted that it will be revising its Field Operations Handbook, which is the bible for all field investigators, to “reflect that allocating bonuses equally to each week of the bonus period is the appropriate method for computing overtime pay on bonus earnings that cannot be identified with particular workweeks.”
One commentator has stated that these Opinion Letters are “a reminder of how these guidance documents normally function and have functioned throughout most of the Wage and Hour Division’s history. They provide “discrete, largely uncontroversial technical assistance in a way that delivers clarity to both employers and employees.” He added that “each letter can be very informative, and therefore helpful, for a business or a worker facing the specific situation the letter addresses.”