We outlined the flurry of Opinion Letters that the Department of Labor (DOL) recently issued, but an important topic in one of those letters deserves a deeper dive: the requirement that employers include so-called "non-discretionary" bonus compensation in overtime pay calculations under the Fair Labor Standards Act (FLSA). Specifically, the DOL's January 2026 Opinion Letter reminds us that this oft-overlooked calculation is critical to ensuring FLSA compliance. Let's revisit the mechanics of properly paying non-discretionary bonus income to non-exempt employees.
The Regular Rate of Pay Is Not Necessarily Just the Base Hourly Wage
Step one is determining the "regular rate of pay." Employers often get tripped up here by assuming the "regular rate" just refers to the base hourly wage earned for each hour worked. Not necessarily. The regular rate includes all remuneration for employment, with limited exceptions. Thus, the regular rate must include non-discretionary bonus compensation. (And as we've previously covered, the regular rate must also include other forms of non-discretionary income, like shift differentials and commissions, but today we are focused on bonuses.)
Non-Discretionary Bonus Compensation Is Typically Based on Predetermined Criteria
That begs the question, what is a non-discretionary bonus? The FLSA more clearly specifies what it isnot. As the DOL Opinion Letter explains, the FLSA requires that three conditions be met for a payment to be an excludable ...
Grace Kang has worked as an attorney specializing in intellectual property and business law for 20 years, the last 16 in the greater Los Angeles area. A graduate of Stanford Law School, she said h...