The Giant Company incorrectly excluded pandemic bonuses from overtime rate, Labor Department says

Dive Brief:

The Giant Company failed to correctly calculate workers' overtime payments when it excluded lump sum bonuses paid out beginning in May 2020, according to an Aug. 16 announcement from the U.S. Department of Labor (DOL).
In response to the pandemic, the Ahold Delhaize-owned grocer raised workers' hourly rates by $2 an hour in March 2020. It discontinued the raise a few months later, instead substituting bonuses. The store distributed the bonuses in June 2020, October 2020 and February 2021 but it did not include these payments in its overtime calculation.
The Labor Department recovered $165,653 in back wages for more than 3,000 grocery store workers in Maryland, Pennsylvania, Virginia and West Virginia.

Dive Insight:

The equation DOL directs employers to use when calculating overtime pay is simple on its face — multiply a worker's regular rate by at least one and a half, and apply that to all hours worked beyond 40 in a workweek. But several elements behind that simple equation can make overtime a complicated topic.

DOL said The Giant Company improperly calculated its workers' regular rate, an area that often gives employers trouble. As Al Gristina, a district office director at DOL's Wage and Hour Division, noted in the press release: "Shifting pay from the hourly rate to a bonus does not mean the employer can exclude it when calculating overtime."

The Labor Department holds that employers need not include discretionary bonuses in calculating workers' regular rate. So employers can forget about payments such as employee-of-the-month bonuses, severance bonuses and referral bonuses, according to a DOL fact sheet.

But employers do need to include nondiscretionary bonuses. DOL lists a few: "bonuses based on a predetermined formula, such as individual or group production bonuses; bonuses for quality and accuracy of work; bonuses announced to employees to induce them to work more efficiently; attendance bonuses; and safety bonuses."

The Giant Company was among a host of grocers that temporarily raised wages for associates early on in the pandemic before rolling back the increases as 2020 progressed. The decision by the chains to end the pay bumps prompted a broad outcry from labor advocates and politicians. In July 2020, a group of U.S. senators wrote to the chief executives of 15 grocery companies, including Ahold Delhaize, to ask them to restore the extra compensation for frontline workers.