That's the allegation, at least, in a proposed class action Boeing just removed to federal court. Plaintiff Jerry Belmonte Llarenas, a former quality assurance inspector, says the company's Aerospace Incentive Plan bonuses should have been folded into his "regular rate of pay" before Boeing calculated overtime. They weren't.
The numbers are specific. In a February 2024 pay period, for example, Belmonte Llarenas alleges that he received an incentive bonus of just under $5,000. That same period, he worked 18 hours of overtime paid at a premium multiplier of his base rate. No bonus in the math anywhere.
But if the bonus was non-discretionary, it absolutely should have been included in the regular rate of pay for overtime-calculation purposes.
If you pay incentive or bonus comp to your employees, here is a handy FAQ that explains all of the ins and out of legally paying bonus and incentive comp to your non-exempt employees without running afoul of the FLSA.
1. What is the "regular rate of pay," and why isn't it just the hourly rate?Under the FLSA, overtime has to be paid at 1.5x the employee's "regular rate," and that rate is broader than the number on the offer letter. It includes nearly all compensation for the workweek — base pay, shift differentials, commissions, and most bonuses — divided by hours worked. Employers who overtime-check only the base hourly rate are almost always underpaying.
2. Are all bonuses included in the regular rate?
No, and this is where the whole case turns. The FLSA splits bonuses into two buckets: discretionary and nondiscretionary. Discretionary bonuses get excluded from the regular rate. Nondiscretionary ones don't.
3. What actually makes a bonus "discretionary"?
Two things have to both be true. The employer has to retain discretion over both whether to pay it and how much, and that discretion has to last until at or near the end of the period it covers. A holiday bonus you decide to hand out on a whim in December, amount unannounced in advance, is discretionary. A bonus promised up front, tied to preset performance metrics or attendance targets, is not — even if the employer calls it "discretionary" in the plan document. Courts look at how the bonus actually works, not what the plan calls itself.
4. So what kind of bonus lands in the nondiscretionary column?
Production bonuses. Attendance bonuses. Quality or safety incentive bonuses. Anything promised to employees in advance to encourage them to work more efficiently, stay longer, or hit a target. That's exactly what Belmonte Llarenas alleges about Boeing's incentive plan — eligibility and performance measures "established in advance," not doled out at Boeing's sole discretion at the end of the period. If that's accurate, the bonus was nondiscretionary from day one, and it belonged in the regular rate.
5. If a bonus is nondiscretionary, how do you spread it across the pay periods it covers?
This is the part employers usually get wrong the most, more than the classification question. A nondiscretionary bonus covering multiple workweeks has to be allocated back across those workweeks — you can't just dump the whole thing into the pay period where the check lands. If the bonus can reasonably be attributed to specific weeks, do that. If it can't be broken out that precisely, DOL regulations let you allocate it equally across the workweeks in the bonus period as a reasonable proxy. Either way, you then recompute the regular rate for each of those workweeks, refigure the overtime owed, and pay the difference. One lump-sum bonus check can trigger a whole quarter, or a whole year, of overtime corrections.
6. What should employers actually do about this?
Pull every bonus, incentive, and award program you run and ask one question: is it promised in advance based on a preset formula, or is it a genuine surprise decided at the end? If it's the former, it's nondiscretionary, and your payroll system needs to be recalculating overtime every time one of those bonuses pays out. If your system currently runs overtime off base rate alone and treats every bonus as an afterthought, you don't have a compliance risk. You have two lawsuits already proving it's a real one.