Attendance Bonuses and Calculating Overtime Under FLSA

Amid the aftermath of the pandemic, many employers have introduced weekly attendance bonuses to encourage employees to return to the office. However, many employees have now claimed attendance bonuses should be considered when calculating overtime pay and that by failing to do so, an employer is violating the Fair Labor Standards Act (FLSA).

These legal disputes revolve around the intricate calculation of the “regular rate” central to the FLSA. According to the FLSA, employers must compensate non-exempt employees at a rate of 1.5 times their standard hourly wage for any hours worked beyond 40 in a designated workweek. The Supreme Court defines the regular rate as the hourly rate paid to the employee for the standard non-overtime workweek. Put simply, if an employee earns $800 for a regular 40-hour workweek, their regular rate stands at $20 per hour ($1,000 divided by 40), with an overtime rate of $30 per hour.

Importantly, the regular rate calculation encompasses more than just base pay. The FLSA mandates that all forms of compensation be factored into the calculation unless they fall under an exemption. Since attendance bonuses seldom qualify for an exemption, they are generally included in the regular rate calculation. In the aforementioned example, a $200 weekly attendance bonus boosts the employee’s weekly compensation from $8000 to $1,000, elevating the regular rate from $20 to $25, and the overtime rate from $30 to $37.50.

Due to a disregard or lack of awareness regarding the intricacies of the FLSA, some employers are disbursing weekly attendance bonuses without adjusting their employees’ regular rates accordingly.

Fixing the situation post-lawsuit is not as simple as just paying the (often marginal) discrepancy between the paid and correct wages. The FLSA imposes increased penalties, including legal fees and, in some cases, double damages. Furthermore, these lawsuits are commonly brought as collective actions, greatly increasing potential liabilities, expenses, and the challenges of legal defense. Recognizing this trend and understanding the potential legal hurdles associated with attendance bonuses is essential for your employer.

If you find yourself in a similar situation, call us for a free case evaluation. Our attorneys are experienced in navigating the nuances of the FLSA and will help you receive the proper compensation you deserve.