Firefighter Overtime Discussing Fair Labor Standards Act (FLSA) for Firefighters, First Responders as well as Human Resource & Finance Professional
The U.S. Department of Labor (DOL), Wage and Hour Division, kicked off the new year with a new opinion letter addressing whether certain employer sponsored incentive bonuses can be excluded from an employee’s “regular rate of pay” when calculating overtime under the Fair Labor Standards Act (FLSA).
The opinion letter responds to a request from an overtime eligible employee that works in the waste management industry and is paid a base hourly wage. In addition to this base pay, employees at this company can earn additional compensation under a “Safety, Job Duties, and Performance” bonus plan. The performance factors associated with the bonus plan include punctuality, attendance, safety practices, compliance with traffic laws, proper attire, and efficiency. The maximum amount of the bonuses is $9.50 per hour, and the company announces the bonus plan to employees in advance. The employee claims that the employer fails to include the money provided though the bonus plan in the regular rate of pay.
The FLSA requires employers to pay non-exempt employees overtime compensation at rate not less than one and one-half times the employee’s regular rate of pay for all hours worked over 40 in a workweek. The FLSA requires that the regular rate include all remuneration for employment unless it fits squarely into a specific exception. One of the more common exceptions is for discretionary bonuses. Whether any bonus provided to an employee is discretionary depends on the specific facts. In other words, just calling a bonus discretionary doesn’t necessarily make the bonus excludable from the regular rate of pay. The FLSA and DOL regulations allows employers to exclude discretionary bonuses from the regular rate if:
- Both the fact and the amount of the payment are determined at the sole discretion of the employer,
- The determination is made at or near the end of the period for which the work was performed, and
- The payment is not made pursuant to any prior contract, agreement, or promise that would cause employees to expect the payment regularly.
Here, according to the DOL, the bonus plan described in the opinion letter is not discretionary because the amount and eligibility are determined by predetermined criteria and formulas. Once employees meet the established criteria, the bonus is earned and quantifiable. By setting advance criteria and formulas, the employer gave up the discretion over both the fact and amount of payment. Because the bonuses are designed to incentivize performance and are communicated in advance, they constitute non-discretionary incentive bonuses. As a result, the bonuses must be included in the employee’s regular rate.
While the FLSA rules pertaining to firefighters differ in the number of hours that must be worked before being eligible for FLSA overtime, the basic principles related to the bonuses described in the opinion letter would also be applicable to firefighters as well. Hypothetically, if a fire department opted to provide firefighters with bonuses related to a firefighter’s productivity and performance that would likely need to be included in that firefighter’s regular rate of pay. One of the most commonly bonuses related to productivity and performance is an attendance bonus. An example would be a fire department that provided a monetary reward for not using sick leave. Attendance bonuses generally must be included in an employee’s regular rate.
Here is a copy of this opinion letter, more on the DOL Opinion Letters, and more on attendance bonuses.
