Tuesday, November 22, 2016

Dropping some wage and hour wisdom on turkey giveaways

One law firm for which I used to work provided each staff member an annual Thanksgiving turkey as a holiday thank you to its employees. With the hindsight of two decades of employment-law experience, here’s my question—should the fair market value of that turkey been included in the employees’ regular rate of pay? Because if it was, the company would have to include its value in the calculation of employees’ overtime rates.

Thankfully, the FLSA excludes such gifts from the regular rate of pay. Employers, your Thanksgiving turkeys and supermarket gift cards are safe from the clutches of the DOL’s Wage and Hour Division.

Under the FLSA, “regular rate” does not include “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency.”

To qualify under this exclusion, “the bonus must be actually a gift or in the nature of a gift. If it is measured by hours worked, production, or efficiency, the payment is geared to wages and hours during the bonus period and is no longer to be considered as in the nature of a gift.”

If the bonus paid at Christmas or on other special occasion is a gift or in the nature of a gift, it may be excluded from the regular rate under section 7(e)(1) even though it is paid with regularity so that the employees are led to expect it and even though the amounts paid to different employees or groups of employees vary with the amount of the salary or regular hourly rate of such employees or according to their length of service with the firm so long as the amounts are not measured by or directly dependent upon hours worked, production, or efficiency.
So, what does one have to establish such that a turkey or other holiday gift is excluded from the regular rate calculation?
  1. It is a discretionary gift.
  2. Its value is not measured by hours worked, production achieved, or efficiency attained.
  3. It can be provided with sufficient regularity such that employees expect it (i.e., an annual tradition), provided that it remains discretionary and not tied to hours worked, production, or efficiency.

I’m off the rest of the week to enjoy my turkey and fixings with my family. I hope you enjoy yours too. And, I hope you take you at least a few moments to reflect on that which you are thankful. So often we get bogged down in the everyday, which can prove to be both negative and mundane. One of the reasons I love Thanksgiving so much (other than my mother-in-law’s turkey) is because it gives you the chance to stop and reflect on all of the good that you have in your life. And we each have a lot of it.