{ "schema": "amendsignal.record/1", "generated_on": "2026-11-04", "publisher": { "name": "AmendSignal", "url": "https://amendsignal.com/" }, "notice": "Coverage is limited, so a missing record does not mean nothing changed. General information, not legal advice. Check the official source. Please cite the record's url.", "change": { "id": 61, "url": "https://amendsignal.com/changes/wage-and-hour-division-says-a-pooled-quarterly-bonus-based-on-total-earnings-already-includes/", "title": "Wage and Hour Division says a pooled quarterly bonus based on total earnings already includes the overtime due on it", "change_type": "guidance", "change_type_label": "Opinion letter", "status": "guidance_issued", "status_label": "Issued as agency guidance", "status_statement": "As of our last check on November 2, 2026, this is agency guidance, not a rule. It explains how the agency reads the law and does not create a legal requirement on its own.", "significance": "No new requirements", "jurisdiction": { "code": "US", "name": "United States" }, "authority": { "name": "Wage and Hour Division", "short_name": "WHD" }, "identifiers": [ { "type": "opinion_letter_number", "label": "Opinion letter", "value": "FLSA2026-6" } ], "dates": [ { "type": "publication", "label": "Published", "value": "2026-05-28", "precision": "day" } ], "in_short": { "what_changed": "The Wage and Hour Division (WHD) issued an opinion letter saying that one employer's quarterly bonus pool, split by each employee's share of total straight-time and overtime earnings, already includes the overtime due on the bonus under the Fair Labor Standards Act (FLSA). That employer does not need to recompute the regular rate or pay extra overtime when it pays the bonus.", "whos_affected": "The letter answers one requester's facts. Employers that pay non-discretionary bonuses to non-exempt employees as a percentage of total earnings, either directly or through a pooled share, may find its reasoning useful.", "what_to_do": "This letter creates no new duties for employers. If you pay a similar bonus, consider checking that your earnings base includes overtime pay and leaves out pay already excluded from the regular rate." }, "summary": "The Wage and Hour Division (WHD) says that under the Fair Labor Standards Act (FLSA), one employer's quarterly bonus pool, split by each employee's share of total straight-time plus overtime earnings, already pays the overtime due on the bonus. The employer therefore does not need to recompute the regular rate or pay extra overtime when the bonus is paid. The opinion letter (FLSA2026-6) answers one requester's facts and creates no new legal requirement.", "business_functions": { "state": "limited", "functions": [ { "slug": "payroll", "name": "Payroll" }, { "slug": "legal-and-compliance", "name": "Legal and compliance" } ] }, "added_on": "2026-11-03", "updated_on": null, "updates_in_progress": null, "last_checked": "2026-11-02", "record_url": "https://amendsignal.com/changes/wage-and-hour-division-says-a-pooled-quarterly-bonus-based-on-total-earnings-already-includes/record.json", "what_changed": [ { "kind": "fact", "kind_label": "From the source", "text": "The WHD concluded that the requester's client's quarterly bonus already pays any overtime due on the bonus, so the client need not recompute the regular rate or pay additional overtime when it pays the bonus.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opening paragraph", "excerpt": "It is our opinion that, under the circumstances presented, your client’s quarterly bonus provides simultaneous payment of any overtime compensation due on the bonus, satisfying the Act’s overtime requirement." }, { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opening paragraph", "excerpt": "when your client distributes the quarterly bonus to its employees, it need not recompute the regular rate or pay additional overtime compensation." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "The WHD says a bonus pool divided by each employee's share of all participants' total earnings counts as a \"percentage of total earnings\" bonus under section 778.210 of title 29 of the Code of Federal Regulations (CFR), even if the bonus plan does not use that term.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "Accordingly, it satisfies the requirements of 29 C.F.R. § 778.210 and, therefore, constitutes a percentage of total earnings bonus, even if the bonus plan does not describe the bonus in such terms." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "The WHD says two ways of splitting a pool are acceptable: dividing each employee's total earnings by all participants' total earnings and applying that share to the pool, or dividing the pool by all participants' total earnings and applying that percentage to each employee's total earnings.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "Either approach is acceptable." } ] }, { "kind": "inference", "kind_label": "Our analysis", "text": "The letter does not withdraw or replace earlier guidance. It describes its position as the agency's longstanding view rather than a new rule or an exception to the overtime requirement.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "This is not an exception to the FLSA’s overtime pay requirement, but the Division’s longstanding recognition" } ] } ], "who_is_affected": [ { "kind": "fact", "kind_label": "From the source", "text": "The opinion rests only on the facts the requester described. Different facts could lead to a different conclusion.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Note at end of letter", "excerpt": "This opinion is based exclusively on the facts and circumstances described in your request" }, { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Note at end of letter", "excerpt": "The existence of any other factual or historical background not contained in your letter might require a conclusion different from the one expressed herein." } ] }, { "kind": "inference", "kind_label": "Our analysis", "text": "Beyond the requester, the reasoning is most relevant to employers that pay non-exempt employees non-discretionary bonuses calculated from total straight-time and overtime earnings.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "Employers generally calculate total earnings bonuses in one of two ways." }, { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "Non-discretionary bonuses, on the other hand, must be included in the regular rate." } ] } ], "business_implications": [ { "kind": "fact", "kind_label": "From the source", "text": "The WHD says the earnings base must include any required overtime premiums and must not include amounts already excluded from the regular rate.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opinion", "excerpt": "so long as the earnings for each employee include any required overtime premiums and do not include any amounts previously excluded from the regular rate of pay when determining those overtime premiums." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "The WHD says employers may not use these bonuses to evade overtime, and may not dilute overtime by adding previously excluded items (such as gifts, discretionary bonuses, expense reimbursements or benefit plan contributions) to the earnings base.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "an employer may not use the percentage of total earnings bonuses “to evade the overtime requirements of the Act[,]”" }, { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "(2) including items within an employee’s earnings that were previously excluded from the employee’s regular rate of pay, such as gifts, discretionary bonuses, expense reimbursements, or employer contributions to employee benefit plans." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "The WHD says employers may weigh other factors, such as seniority or performance, as long as each employee's overtime earnings rise by at least the same percentage as their straight-time earnings.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "As long as the resulting percentage increase to each employee’s pre-bonus overtime earnings is no less than the percentage increase to their pre-bonus straight-time earnings, then the principle set forth in sections 778.210 and 778.503 applies" } ] }, { "kind": "fact", "kind_label": "From the source", "text": "If a pool is split by hours worked instead of earnings, the WHD says each overtime hour must count as 1.5 hours.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Footnote 3", "excerpt": "so long as each hour worked under 40 in a workweek is valued at one hour and each overtime hour worked is “boosted” to 1.5 hours when determining total hours worked." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "The WHD says the FLSA does not regulate how an employer sets the size of a bonus pool, so it may be tied to sales, profits or another metric.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opinion", "excerpt": "As an initial matter, the Act does not regulate an employer’s determination of the total amount available to employees in a bonus pool." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "The WHD says employers may credit certain excess premium payments, such as daily overtime or overtime paid above 1.5 times the regular rate, against any overtime owed because of a later bonus.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Footnote 6", "excerpt": "an employer may credit excess premium payments described in sections" }, { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Footnote 6", "excerpt": "such as overtime pay for work in excess of a daily standard or overtime pay paid at a rate which is greater than 1.5 times the employee’s regular rate of pay, against any overtime obligation attributable to the bonus." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "The letter is an official interpretation for purposes of the Portal-to-Portal Act and may be relied on under section 10 of that Act.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Closing", "excerpt": "This interpretation may be relied upon in accordance with section 10 of the Portal-to-Portal Act" } ] } ], "required_actions": [ { "kind": "fact", "kind_label": "From the source", "text": "Under the FLSA, as the letter describes it, employers must pay non-exempt employees overtime at not less than one and one-half times the regular rate for hours worked over 40 in a workweek.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "The FLSA requires that employers pay non-exempt employees at least the federal minimum wage for all hours worked and overtime compensation “at a rate not less than one and one-half times the regular rate at which [the employee] is employed” for all hours worked over 40 hours in a workweek." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "Under the FLSA and its regulations, as the letter describes them, non-discretionary bonuses must be included in the regular rate.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "Non-discretionary bonuses, on the other hand, must be included in the regular rate." } ] }, { "kind": "fact", "kind_label": "From the source", "text": "Under the FLSA regulations, as the letter describes them, when a bonus amount is settled later, it must be spread back over the workweeks in which it was earned and any additional overtime calculated. The letter says this recomputation is not needed for a valid percentage of total earnings bonus.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "“it must be apportioned back over the workweeks of the period during which it may be said to have been earned[,]” and any additional overtime compensation due must be calculated for each workweek." } ] } ], "recommended_actions": [ { "kind": "recommendation", "kind_label": "Our suggestion", "text": "Consider reviewing your bonus formulas to confirm they are based on each employee's total straight-time plus overtime earnings.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opinion", "excerpt": "the bonus must be a percentage of each employee’s total earnings—both straight-time earnings and overtime earnings—that does not dilute the overtime portion of the ratio." } ] }, { "kind": "recommendation", "kind_label": "Our suggestion", "text": "Consider checking that the earnings base leaves out items already excluded from the regular rate, such as gifts, discretionary bonuses, expense reimbursements and benefit plan contributions.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "(2) including items within an employee’s earnings that were previously excluded from the employee’s regular rate of pay, such as gifts, discretionary bonuses, expense reimbursements, or employer contributions to employee benefit plans." } ] }, { "kind": "recommendation", "kind_label": "Our suggestion", "text": "If you split a pool by hours, consider confirming that overtime hours count as 1.5 hours.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Footnote 3", "excerpt": "so long as each hour worked under 40 in a workweek is valued at one hour and each overtime hour worked is “boosted” to 1.5 hours when determining total hours worked." } ] }, { "kind": "recommendation", "kind_label": "Our suggestion", "text": "Consider confirming that the method you use to align workweeks with the bonus period is applied the same way every period.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Background", "excerpt": "whatever method your client utilizes for aligning the workweek—whether a rolling 13-week or 3-calendar-month period—is applied evenly and consistently each quarter." } ] }, { "kind": "recommendation", "kind_label": "Our suggestion", "text": "Before relying on this letter, consider comparing your plan's eligibility and allocation rules with the facts the letter assumed.", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opinion", "excerpt": "Although we do not know the eligibility requirements for the bonus pool or whether there are any other factors given weight when allocating the pool among participants, we have assumed for purposes of this analysis that there are no additional factors" } ] } ], "required_actions_assessment": null, "applicability": [ { "criterion": "where", "label": "Where", "answer": "United States, nationwide", "kind": "fact", "kind_label": "From the source", "evidence": [] }, { "criterion": "employer_type", "label": "Employers", "answer": "Employers that owe FLSA overtime to non-exempt employees and pay them non-discretionary bonuses. The letter itself answers one employer's facts.", "kind": "inference", "kind_label": "Our analysis", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Background", "excerpt": "You represent that your client pays a quarterly bonus to a group of “eligible employees,” at least some of whom work overtime hours and are entitled to the requisite pay under the FLSA." }, { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Note at end of letter", "excerpt": "This opinion is based exclusively on the facts and circumstances described in your request" } ] }, { "criterion": "industries", "label": "Industries", "answer": "All industries. The letter does not limit its reasoning to any industry.", "kind": "inference", "kind_label": "Our analysis", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "General Legal Principles", "excerpt": "Employers generally calculate total earnings bonuses in one of two ways." } ] }, { "criterion": "functions", "label": "Functions", "answer": "Payroll and compensation teams that calculate bonuses and overtime, with legal or compliance review.", "kind": "inference", "kind_label": "Our analysis", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Background", "excerpt": "Your client then generates a “gross earnings” report, which includes “both straight time and overtime compensation earned during the quarter” by the eligible employees." } ] }, { "criterion": "applies_if", "label": "Applies if", "answer": "You pay non-exempt employees a non-discretionary bonus calculated as a percentage of their total straight-time plus overtime earnings, directly or as a share of a pool.", "kind": "inference", "kind_label": "Our analysis", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opinion", "excerpt": "we conclude that your client’s quarterly non-discretionary bonus, if calculated as described below, constitutes a percentage of total earnings bonus under section 778.210" } ] }, { "criterion": "action", "label": "Action", "answer": "Consider checking that your bonus formula uses total earnings, including overtime, and no excluded pay.", "kind": "recommendation", "kind_label": "Our suggestion", "evidence": [ { "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf", "locator": "Opinion", "excerpt": "so long as the earnings for each employee include any required overtime premiums and do not include any amounts previously excluded from the regular rate of pay when determining those overtime premiums." } ] } ], "open_questions": [ { "question": "Does the conclusion still hold if a bonus plan uses eligibility rules or allocation factors beyond each employee's share of total earnings?", "context": "The letter says it did not know the plan's eligibility requirements or other allocation factors and assumed there were none." }, { "question": "Can employers other than the requester rely on this letter for their own similar bonus plans?", "context": "The letter says it may be relied on under section 10 of the Portal-to-Portal Act, but also that it rests only on the requester's facts." } ], "events": [ { "event_type": "originating_action", "label": "Issued", "occurred_on": "2026-05-28", "summary": "FLSA2026-6: Whether a bonus calculated by comparing an employee’s total straight-time and overtime earnings to the total straight-time and overtime earnings of all employees eligible for the bonus is a “percentage of total earnings” bonus under 29 C.F.R. 778.210 that provides for the simultaneous payment of any overtime compensation due on the bonus, thus satisfying the FLSA’s overtime pay requirement.", "source": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf" } ], "corrections": [], "sources": [ { "label": "Whether a bonus calculated by comparing an employee’s total straight-time and overtime earnings to the total straight-time and overtime earnings of all employees eligible for the bonus is a “percentage of total earnings” bonus under 29 C.F.R. 778.210 that provides for the simultaneous payment of any overtime compensation due on the bonus, thus satisfying the FLSA’s overtime pay requirement.", "publisher": "Wage and Hour Division", "role": "primary", "url": "https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA2026-6.pdf" } ] } }