Many employers use bonuses to incentivize workers and motivate workplace efficiency. Salespersons in certain industries will receive incentives tied to individual, group, or organizational performance. Per diems reimburse employees who must pay out-of-pocket for business travel expenses.
Bonuses, incentives, and per diems are all forms of compensation and are thus subject to the applicable state and federal regulations. Your employer may be breaking the law if they are refusing to pay a contractually promised and earned bonus, incentive, or per diem.
At Fair Labor Law, we are dedicated to serving the legal needs of workers throughout the United States. Our bonus and incentive dispute lawyer has over a decade of legal experience and can assist you if your employer has committed a wage violation and failed to appropriately compensate you. We can provide you with the meticulous guidance to prevail in your claim and will work to secure the bonuses, incentives, and/or per diems you are owed. Depending on the circumstances, you may also be entitled to additional compensation, and we will always seek to recover the maximum damages available under the law.
The Fair Labor Standards Act (FLSA) defines two types of bonuses: discretionary bonuses and non-discretionary bonuses. Only non-discretionary bonuses impact a non-exempt employee’s regular rate of pay and overtime calculations.
An employer can choose to award an employee with a “discretionary” bonus – one that is not routinely offered – as a result of especially strong performance or some sort of achievement. These bonuses are often “one-time” affairs, and there should be no set criteria to determine who receives one. In fact, for a bonus to be considered discretionary, there must be no expectation that the bonus can be earned, and the employer must be able to independently decide its value and whether to grant it.
Discretionary bonuses are “excludable” from a non-exempt employee’s regular rate of pay and are not subject to overtime calculations. Bonuses included in severance packages are also considered discretionary.
A non-discretionary bonus is one that employees are aware of in advance and can expect to receive if certain deliverables are met. If the possibility of a bonus is advertised, it is most likely a non-discretionary bonus. Whether someone should receive this type of bonus – and the bonus amount – should also be quantifiable in some way. Non-discretionary bonuses do not impact an employee’s regular rate of pay and will not factor into overtime calculations.
Common examples of non-discretionary bonuses include:
- Bonuses tied to an individual, team, department, or company reaching certain growth or production milestones in a given business quarter
- Bonuses that award seniority and incentivize employee retention
- Bonuses that award workplace safety after a certain number of days without workplace accidents
- Hiring bonuses
- Bonuses included in a union agreement
In most cases, an employer is not legally required to issue a non-discretionary bonus even if its corresponding criteria are met unless the bonus and the conditions for receiving it are included in an enforceable contract. For example, bonuses included in a union’s collective bargaining agreement must generally be honored.
To review, employers are under no legal obligation to award discretionary or non-discretionary bonuses that are not included in enforceable contracts. Wage theft can still occur, however, when discretionary bonuses but the commensurate overtime pay is not. Because discretionary bonuses change an employee’s regular rate of pay, they also impact the overtime rate an employee should be receiving for any applicable hours worked. Employers will sometimes misclassify discretionary bonuses as non-discretionary to avoid having to adjust an employee’s overtime rate.
Our unpaid bonus and incentive dispute attorney can assist you if you have not been paid a bonus that was contractually promised. Our legal team can also help you file a wage claim with the appropriate agency if you have not been paid appropriate overtime compensation after receiving a discretionary bonus.
Employers may utilize a wide variety of incentives to accomplish specific goals. “Incentives” and “bonuses” are sometimes interchangeable terms, as an employer might “incentivize” a team with a promised non-discretionary bonus if they meet set productivity goals. Incentives can take other forms, as well, such as paid time off or fringe benefits.
Under federal law, employers are not necessarily owed any incentives by default unless they are detailed in their employment agreement or some other enforceable contract. The FLSA does not require employers to provide employees with paid time off, discretionary bonuses, or non-discretionary bonuses. Some state laws do require employers to provide paid sick leave, but none mandate bonuses or monetary incentives of any kind.
Incentives will generally be offered voluntarily when employers are looking to recruit attractive job applicants or incentivize existing employees to stay. For example, an employer might advertise generous paid vacation time to compel qualified candidates to apply and consider a position. This incentive should be included in the prospective worker’s employment agreement. If an employer is looking to retain employees, they might offer an amended employment agreement that promises new incentives, such as non-discretionary bonuses or other perks.
Some incentives are also inherent to certain types of jobs, such as sales positions. Many salespeople will receive incentives or commissions tied to the number of products or services they individually sell. Again, the structure of the incentives will be detailed in an employment agreement. It should be noted that any employee must make at least the federal minimum wage outside of any incentives or commission. Incentives and commissions are not “tips,” and employees receiving the bulk of their income through incentives and/or commissions are not regulated the same way as tipped employees.
Incentives can also take the form of “severance packages” and be offered to exiting employees. A severance package is used to compel someone to sign a severance agreement, which generally limits a departing employee’s ability to sue their former employer.
The bottom line is that employers are not legally offered to require most types of incentives unless the applicable state laws specify otherwise. Many employers do voluntarily offer various forms of incentives, and your employer cannot withdraw or deny any earned incentive that is detailed in your employment agreement or any other enforceable contract. If your employer is refusing to honor a contractual or legally required incentive, our labor law lawyer can help. We can review all relevant legal agreements and advise whether you have a claim.
When Am I Entitled to Per Diems?
Many employees will be required to travel for work. Some employers will provide employees with a company credit card that they can use to pay for necessary services. When a company credit card is not available, an employee acting on behalf of a business will need to pay out-of-pocket and be reimbursed by their employer. These reimbursements are called “per diems.”
The federal government has set standard rates for several categories of per diems. An employee traveling on business has the legal right to request reimbursement up to these rates without providing individual receipts. Some states and municipalities have set their own per diem rates, and federal law mandates that employers honor the highest applicable rate.
As of January 2020, the federal per diem rates are as follows:
- $96 per day for lodging
- $55 per day for meals
- $5 per day for incidentals
Federal per diem rates are set lower on the first and last days of travel to compensate for the likelihood that an employee will not be traveling the entire day. On these days, employees are generally entitled to 75% of the applicable per diem rate.
Note that employers and employees are not necessarily limited to the federal government’s or a local municipality’s per diem rates. An employer can negotiate a higher per diem rate with their employee in advance of the business trip. In these instances, an employee is entitled to the higher negotiated per diem amount promised by the employer if they meet conditions established in advance by the employer (such as providing individual receipts for expenses).
If you travel for business and incur out-of-pocket expenses, your boss must reimburse you at the applicable per diem rate. You do not have to prove that you used all available funds, and you are entitled to the full rate. Per diem reimbursements are not taxed and should not involve deductions of any kind. Ideally, your employer will pay you per diem reimbursements in advance. They also have the right to provide you with reimbursements soon after your trip has concluded.
Am I a Per Diem Employee?
Employers have the right to hire and utilize “per diem employees.” These types of employees are “on-call” and are summoned to do a day of work at a flat rate negotiated with their employer. Nurses and substitute teachers are common types of per diem employees.
While employers generally do not need to offer benefits or incentives to per diem employees, they do have to follow applicable minimum wage and overtime laws. Though a day rate is typically contractually agreed upon in advance of potential work, pay must be adjusted if a per diem employee works so many hours in a day that their rate falls below the minimum wage. Per diem employees must also track hours and are entitled to overtime compensation if they work a sufficient number of hours.
Employers will sometimes misclassify part-time employees as per diem employees. If you are considered a per diem employee but are regularly working week-to-week, you may have been misclassified and should get in touch with our firm.
Our bonus and incentive dispute lawyer can help you navigate per diem misclassification issues. Our legal team at Fair Labor Law can also assist with claims involving unpaid per diem reimbursements. We are familiar with many types of compensation structures and provide you with the seasoned guidance and representation you need to recover what you are owed.
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