Some bonuses, that is. You see, overtime is calculated as “time and a half” of your regular rate. What many employees do not know is that your regular rate and hourly rate are not always the same. Your hourly rate may be fixed at $10, but if you receive certain eligible bonuses, your regular rate increases for the period in which you earned those bonuses. Thus, your overtime rate also increases for that period.

It is a violation of California law if your employer does not factor your eligible bonuses into your overtime pay.

Safety bonuses and other bonuses intended to provide incentives for continued high performance are factored into your regular rate. This includes bonuses promised upon hire and incentives awarded for length of employment, attendance, efficiency, and quality of work. On the other hand, bonuses given purely as gifts, such as Christmas bonuses or end-of-the-year bonuses, are not considered wages and do not count toward your regular rate.

The law requires that the amount of the eligible bonus be evenly distributed back over the workweeks for which the bonus was awarded. The hourly rate plus the distributed amount from the bonus combines to produce your regular rate. Your employer then owes you time and a half based on that regular rate for any overtime you worked during those weeks.

Employers’ failure to pay this adjusted overtime rate is a common problem in many industries. Warehouse employees and oilfield employees, for example, often receive safety bonuses and bonuses for meeting production goals, but they are not compensated properly for the extra overtime earnings they are owed as a result.  Employees in the property management industry also regularly receive apartments for “free” or receive a significant discount on rent as a condition of their employment. The value of the apartment or rent reduction provided by your employer likewise increases your regular rate of pay and any overtime pay you have earned by extension.

There are caveats to this rule— If the extra overtime pay is built into your bonus, this eliminates the need for your employer to separately pay you for the retroactive overtime rate increase.

The attorneys at Justice Law Corporation can help you figure out if the bonuses you received should have increased your overtime pay.

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