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September 23, 2010
Bonus Definitions and Requirements

In a BLR webinar entitled "Avoid Startling High Fines and Expensive Lawsuits Based on Failure to Pay Overtime on Bonuses," Clint D. Robison, Esq. from the Los Angeles office of Hinshaw and Culbertson LLP described some important requirements relating to bonuses:

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  • The employer retains discretion as to the amount of the bonus payment
  • Discretion is retained until a time close to the end of the period for which the bonus is paid
  • The bonus payment can't be made according to a prior agreement which would cause the employee to expect a regular payment

A percentage of total earnings bonus is defined as:

  • A percentage of total earnings bonus incorporates the overtime into the bonus itself
  • By calculating the bonus on total earnings for a particular time period -- which includes overtime pay for that period -- the overtime component is built into the bonus so additional overtime is not required

Referral bonuses are paid for the recruitment of new employees and are not included in the regular rate of pay if all of the following conditions are met:

  • Participation is strictly voluntary
  • Recruitment efforts do not involve significant time
  • The activity is limited to after-hours solicitation done only among friends, relatives, neighbors and acquaintances as part of the employees' social affairs

Clint D. Robison, Esq. is a an attorney in the Los Angeles office of Hinshaw and Culbertson LLP ( and Chair of its Employment Practice Liability subgroup. He provides counseling, litigation and risk management services to medium- and large-sized public and private entities and handles all aspects of employment litigation and advice including wage and hour matters, discrimination claims, employment contracts, trade secret issues, retaliation claims, sexual harassment claims and Americans with Disabilities Act (ADA) issues.

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