COVID Related Wage Increases Includible In Regular Rate In FLSA Overtime Case

Fox Rothschild LLP

Fox Rothschild LLP

I have blogged many times about cases where relatively small amounts of compensation, bonus type compensation, are not included when an employer calculates the regular rate for overtime and a class action ensues. Now, this is happening with COVID-related bonuses and extra monies. A recent example is a case where a group of workers have charged that COVID compensation increases were not added into their regular rates. The case is entitled Sanchez v. Gold Standard Enterprises Inc., and was filed in federal court in the Northern District of Illinois.

The plaintiff alleges that the company, known as Binny’s Beverage Depot, promised to pay workers extra money to stay and work during COVID, but then did not include those monies when the company computed overtime. The company did not do so and thus, according to the Complaint, the employer “substantially underpaid its workforce when they worked overtime while risking their lives.”

The allegation is that the employer wanted employees to work through the dark days of the pandemic, so it promised to increase worker compensation. The employer instituted a policy under which it paid hourly workers 1.5 times their hourly rates for all hours they worked between March 15-July 4, 2020 and an extra $2 per hour for hours worked between July 5, 2020-January 2, 2021. The Company also granted bonuses for salaried (i.e. exempt) supervisors who worked through the crisis. The Complaint notes that “this compensation was well-deserved: these workers were literally risking their lives by potentially contracting Covid-19.”

The company called the extra $2/hour “temp bonus pay.” The named plaintiff claims that, regardless of the name, the monies should have been included in regular rate computations. The named plaintiff also claims that US Department of Labor has issued guidance during the pandemic that specifies that these kinds of payments must be included in regular rate calculations. He seeks a class of similarly situated workers who were not allegedly properly paid.

The Takeaway

It is a basic rule that any monies (i.e. bonus, incentive pay) that are promised to employees if they “do something,” like meeting certain production goals, or having perfect attendance for a quarter, or working through a pandemic, are includible in the regular rate under the FLSA regulations. It does not matter what the money is called, e.g. temp bonus pay. This is the kind of thing that can easily trip up an employer. On a weekly basis, on a per employee basis, these amounts are usually very small. When, however, you take a class of employees and now the sums start to aggregate and can be doubled (i.e. liquidated damages), the stakes become much higher.

Much higher…

[View source.]

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Fox Rothschild LLP

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