Chauniqua Young is a partner at Outten & Golden LLP in New York City, where she has built a career focused on protecting employee rights in wage-and-hour and employment discrimination cases. Since joining the firm as an associate in 2014 and becoming a partner in 2021, Chauniqua Young has litigated complex class actions, including a case that secured a $26 million settlement for employees alleging underpayment based on race and gender. Her background includes a clerkship in the U.S. District Court for the Southern District of New York, civil rights litigation as a Bertha Justice Fellow at the Center for Constitutional Rights, and community law work in Berkeley, California. She holds a bachelor’s degree from Sarah Lawrence College and a JD from the Benjamin N. Cardozo School of Law. That depth of wage-and-hour litigation experience informs how bonuses can change the calculation of overtime pay, the subject explored below.
An employee can earn an hourly wage, work overtime, and also receive a bonus during the same pay period. In that situation, the bonus may affect more than the employee’s total earnings. Under federal wage law, certain bonuses must also be considered when calculating overtime pay.
The key concept is the regular rate. For a nonexempt employee covered by federal overtime requirements, the regular rate is generally calculated by dividing the compensation that must be included for a workweek by the total hours actually worked during that week.
Federal law allows certain payments to be excluded, while other compensation, including many bonuses, must be counted. This means the regular rate may be higher than the employee’s stated hourly wage.
When additional compensation must be counted, it increases the total remuneration used to determine the regular rate. Because overtime is based on that rate, an includable bonus can increase the overtime premium owed.
Nondiscretionary bonuses generally must be included in the regular rate. These can include payments based on production, attendance, quality or accuracy, safety, or efficiency when the employer has announced the arrangement in advance. Such bonuses give employees a reason to expect payment if they meet the stated conditions.
Whether a bonus is discretionary depends on how the arrangement operates, not what the employer calls it. A bonus promised in advance or earned under predetermined criteria will generally need to be included in the regular rate unless another statutory exclusion applies. Simply labeling a payment “discretionary” does not make it so.
A truly discretionary bonus is different. For this exclusion to apply, both the decision to make the payment and the amount must remain within the employer’s sole discretion until at or near the end of the relevant period. The payment also cannot result from a prior contract, agreement, or promise that causes employees to expect it regularly.
The calculation shows why the distinction matters. Federal regulations give an example of an employee earning $12 an hour who works 46 hours and receives a $46 production bonus for the week.
The employee earns $552 at the hourly rate, and adding the bonus produces $598 in compensation. Dividing $598 by 46 hours gives a $13 regular rate, so the six overtime hours require an additional half-time premium of $6.50 per hour.
A bonus can become more complicated when it covers several workweeks. Once the amount is known, an includable bonus must generally be allocated back to the workweeks in which it was earned. If the exact amount attributable to each week cannot be identified, federal rules allow another reasonable and equitable method, such as equal allocation by week or, when appropriate, by hours worked.
The timing of payment does not necessarily end the analysis. If a qualifying bonus becomes determinable only after the affected overtime weeks have already been paid, the regular rate for those weeks may need to be recalculated.
Additional overtime can then become due for the weeks in which the employee worked overtime. A later bonus payment can therefore require an adjustment to overtime compensation for earlier workweeks.
For that reason, reviewing overtime and bonus payments together can require more than checking the base hourly wage. Bonus terms, announced criteria, the period in which the bonus was earned, and payroll records showing hours, regular rate, overtime earnings, additions to wages, and total wages can all help explain the calculation. Taken together, those bonus terms and payroll records can help show whether a later bonus should have produced an additional overtime adjustment.
About Chauniqua Young
Chauniqua Young is a partner at Outten & Golden LLP in New York City, where she represents employees in wage-and-hour and discrimination litigation. She began her legal career as a Bertha Justice Fellow at the Center for Constitutional Rights and later clerked in the U.S. District Court for the Southern District of New York. Recognized among The Best Lawyers in America and the Lawdragon 500, she has also received the Public Justice Outstanding Partner Award. She holds degrees from Sarah Lawrence College and Cardozo School of Law.
