What employers often miss when calculating proper overtime is that they must include in the regular rate different kinds of supplemental payments that non-exempt people receive.  If they do not, they are not paying properly.  When it involves one employee, maybe not such a big deal.  When it involves dozens or hundreds of workers, e.g. a class, then it becomes a very big (and expensive) deal.  A recent example of this is the settlement between a chain of liquor stores and a group of workers who alleged their pandemic bonuses were not included when they were paid overtime.  The case is entitled Sanchez v. Gold Standard Enterprises Inc. and was filed in federal court in the Northern District of Illinois.

The workers advised the Court that they would get full relief under the settlement.  They wrote that “the gross settlement fund of $220,617.00 represents a gross recovery of 100% of alleged overtime owed.  This is an excellent result for settlement class members.”  The lawsuit emanated from the failure of the Company to include temporary bonuses given to employees during the beginning of the COVID-19 pandemic.

The settlement also makes allowance for the liquidated damages that the employees may have won if the matter went to trial.  The lawyers want one-third of more than $70,000 for their work.  They asserted to the Court that “based upon the negotiated fee agreement in this case, the normal rate of compensation in similar cases, the risk class counsel undertook engaging in this litigation, and the excellent result achieved for members, class counsel is entitled to reasonable attorney’s fees of one third of the fund.”

Another interesting aspect of the settlement is that there was no waiver of future claims.  There was only a release of claims under the FLSA and Illinois law.  The named employee also received $10,000 as the class representative.  The concern was that he might incur retaliation, in the form of not being hirable at other retail entities because of his prominent role in the case.  The workers note in their brief that “while perhaps retaliation is or should be illegal, it’s hard to prove, and many employers will think twice about hiring a low-wage worker who cost a prior employer over $200,000 because they stood up for the rights of hundreds of co-workers.” 

The Takeaway

I call this kind of case a silent “killer.”  Many employers, good faith and well intentioned, simply do not grasp the nuances and intricacies of the FLSA as concerns the proper calculation of overtime.   These extra payments, non-discretionary bonuses, shift differentials, earned commissions, all must go into the aggregate compensation of the employee(s) at the end of the week if they work more than forty hours, these payments increase that rate.  The best approach is to be proactive and conduct an internal audit of all of a company’s payroll and compensation practices to ascertain compliance and then fix what may be broken.

An (big) ounce of prevention…