Companies both large and small are finding themselves in legal battles against employees for not complying with overtime laws. A New Jersey federal court jury unanimously awarded $2.5 million to Staples, Inc. employees in a class-action lawsuit for failing to comply with the laws that require the correct classification of employees (e.g. exempt or non-exempt) and paying for overtime wages. In addition, Valero Energy Corp. is currently involved in a class-action lawsuit that seeks $100 million in damages. The suit, brought on by three current employees, alleges that Valero required employees to work overtime hours “off the clock” without compensation. As an employer, it is important that all wage and hour laws are adhered to, including payment of overtime and the pay-out of bonuses.
Understanding Overtime Hours:
California requires that all hours worked in excess of eight (8) regular hours in one workday or forty (40) regular hours in one workweek will be treated as overtime. Non-exempt hourly employees are compensated as follows for working overtime:
1. Time and a half the regular rate of pay for hours worked beyond eight (8) in a workday;
2. Double the regular rate of pay for hours worked beyond twelve (12) in a workday;
3. Time and a half the regular rate of pay for the first eight (8) hours worked on the seventh consecutive workday in a workweek;
4. Double the regular rate of pay for hours worked beyond eight (8) on the seventh consecutive day worked in a workweek;
5. Time and a half the regular rate of pay for hours worked beyond 40 in a workweek.
6. There is no “pyramiding,” which means you will not be paid overtime twice for the same hours of work.
Bonuses:
Employers usually pay two types of bonuses: non-discretionary and discretionary. Discretionary bonuses are usually paid as a gift for past services and are not measurable by an employee’s work performance, and/or hours worked. An example of a discretionary bonus is a holiday bonus or special occasion bonus. Non-discretionary bonuses are bonuses that are intended to increase an employee’s performance and efforts. For example, bonuses paid on work performance efficiency and quality, attendance, years of service, and bonuses promised to employees at time of hire are considered non-discretionary.
When paying out non-discretionary bonuses, you must also pay the overtime "premium" on the bonus. According to the Department of Labor, since the bonus was earned during the regular hours as well as the overtime hours, the overtime "premium" on the bonus is paid on half-time or full-time (for double time hours) on the regular bonus rate (from DLSE Manual). Unfortunately, you cannot just pay an employee a $100 bonus, if they worked any overtime in the pay period for which the bonus was earned. You must reference the bonus on their pay stubs and note the workweek(s) that the bonus was earned.
Example On How to Calculate Overtime Premium When a Bonus is Paid:
Regular hourly rate of pay.....................................................................................................$10.00
Overtime rate of pay.............................................................................................................$15.00
Total hours worked in workweek = 50
Total regular hours worked= 40 (8 hours x 5 days)
Total overtime hours at time and one-half = 10 (2 hours x 5 days)
Bonus.................................................................................................................................$100.00
Regular bonus rate:
$100.00 (bonus) ÷ 50 (total hours worked) =
$2 .00 ÷ 2 (for half of the regular rate) =
$1.00 x 10 (Overtime Hours) = $ 10.00
Total earnings due for the workweek:
Regular hours: 40 hours @ $10.00 ………………………………………..$400.00
Overtime: 10 hours @ $15.00 ……………………………………………..$150.00
Bonus ………………………………………………………………………...$100.00
Overtime on bonus……………………………………………………………$ 10.00
Total …………………………………………………………………………...$660.00
Remember, wage and hour laws vary by state, it is important that you understand that as an employer you are mandated by law to pay your employees for all hours worked. |
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