DOL Issues Opinion Letter Addressing Calculating OT Pay in Light of a Non-discretionary Bonus

January 09, 2020

The U.S. Department of Labor has released a new opinion letter addressing the calculation of overtime pay for a non-discretionary lump-sum bonus paid at the end of a multi-week training period. In the scenario presented, the employer informs employees in advance that they will be eligible to receive a lump-sum bonus of $3,000 if they successfully complete 10 weeks of training and agree to continue training for an additional eight weeks. The bonus is non-discretionary, but the employee does not have to complete the additional eight weeks of training in order to retain the lump-sum bonus. The question relates to an employee who works 40 hours per week during eight weeks of the 10-week training period, but works 47 hours in week five, and in week nine, works 48 hours. At the threshold, the opinion letter noted that the lump-sum bonus paid to employees must be included in the regular rate of pay "as it is an inducement for employees to complete the ten-week training period." Further, because the employer pays the lump-sum bonus to employees for completing the 10-week training and for agreeing to additional training, without having to finish the additional training, the lump-sum bonus amount must be allocated to the initial 10-week training period. Further, it is appropriate for the employer to allocate the lump-sum bonus of $3,000 equally to each week of the 10-week training period. Each of the 10 weeks counts equally in meeting the criteria for receiving the lump-sum bonus because missing any week (no matter whether overtime is worked in that week) disqualifies the employee from receiving the lump-sum bonus. The employer then must calculate the additional overtime pay due in those workweeks of the 10-week training period in which the employee worked more than 40 hours.