When determining overtime pay for non-exempt employees under the Fair Labor Standards Act, the employer must first determine the employees' regular rate and then calculate the time and one-half overtime premium using this rate. The FLSA regular rate includes most base and incentive compensation paid to employees. Last week, the Eleventh Circuit Court of Appeals (which includes Georgia) held that COVID-19 hazard pay provided to employees at a retirement facility should have been included in their regular rate for overtime calculation purposes.

In Swope v. Episcopal Foundation of Jefferson Co., the Eleventh Circuit issued an unpublished decision confirming Department of Labor rules requiring that almost all forms of incentive compensation be included in the regular rate. Hazard pay offered to employees during the pandemic was a form of incentive compensation that fell within the rules' guidance, and should have resulted in additional overtime pay to affected employees.

Under the FLSA, certain forms of purely discretionary bonuses can be excluded from the employees' regular rate. However, when the availability of the bonus is known to employees in advance, and when they must meet qualifying criteria to receive payment, the incentive pay is considered non-discretionary. Failure to include incentive pay in the regular rate is one of the most frequently violated portions of the FLSA. This error can lead to class or collective action lawsuits seeking back pay and liquidated damages.

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