What happens if an employer does not pay enough in nondiscretionary bonuses and incentive payments in a given quarter for an employee to remain overtime-exempt under the Fair Labor Standards Act?

Author: Deborah J. Tibbetts, Esq.

If an employer does not pay an employee enough in nondiscretionary bonuses and incentive payments in a given quarter for the employee to retain his or her overtime-exempt status, then the employer may make a catch-up payment at the end of the quarter. However, the entire amount of the bonus or payment may be only up to 10 percent of the standard salary level for the preceding 13-week period. In addition, the employer has only one pay period to make up for the shortfall. Any such catch-up payment counts only toward the prior quarter's salary amount and not toward the salary amount in the quarter in which it is paid.

If the employer chooses not to make the catch-up payment, then the employee is entitled to overtime pay for any overtime hours worked during the quarter.