- The U.S. Court of Appeals for the Fifth Circuit, in an issue of first impression, has answered a critical question in Fair Labor Standards Act (FLSA) overtime disputes: "Who has the burden of proof on whether bonuses are discretionary and therefore excluded from the regular rate under § 207(e)(3)?"
- In Joshua Edwards, et al. v. 4JLJ, L.L.C., et al., the Fifth Circuit held that the burden falls on the employees. It then reversed a jury verdict in favor of the employer, an oilfield service company, stating that the employees clearly proved their quarterly performance bonuses should have been included in their rate for overtime pay calculations.
- The court found that the performance bonus agreement, which was memorialized in a written contract given to employees upon hiring, provided a concrete pay scale and there was a "complete absence of any evidence contradicting the universal applicability of the agreement[.]" Accordingly, "the performance bonuses were nondiscretionary under the FLSA, and 4JLJ ought to have included them in the regular rate."
The U.S. Court of Appeals for the Fifth Circuit, in an issue of first impression, has answered a critical question in Fair Labor Standards Act (FLSA) overtime disputes: "Who has the burden of proof on whether bonuses are discretionary and therefore excluded from the regular rate under § 207(e)(3)?" See Joshua Edwards, et al. v. 4JLJ, L.L.C., et al., Case No. 19-40553, 2020 WL 5229686, at *7 (5th Cir. Sept. 2, 2020). In Edwards, the Fifth Circuit reversed a jury verdict in favor of the employer, stating that the employees clearly proved their performance bonuses should have been included in their rate for overtime pay calculations.
By way of background, the FLSA requires employers "to pay non-exempt employees who work more than 40 hours a week overtime of one and one-half times the employees' 'regular rate' of pay." Gagnon v. United Technisource, Inc., 607 F.3d 1036, 1041 (5th Cir. 2010); 29 U.S.C. § 207(a)(1). To determine the employees' "regular rate," the employer must look at the hourly rate actually paid for "all remuneration for employment." Id. Under § 207(e)(3), remuneration is not included in the regular rate if:
both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly.
Therefore, according to the Fifth Circuit, "[f]or a bonus to be excepted from the regular rate under § 207(e), the employer must maintain discretion over whether to give the bonus and the amount given."
Fifth Circuit DecisionTo determine whether § 207(e)(3) is an exemption from the overtime provisions in § 207(a), the Fifth Circuit analyzed whether "§ 207(e)(3) [is] 'of a piece with compliance with § 207(a)' 1 or [if it is] more like the exemptions listed in § 213—a mechanism for exempting oneself from compliance with § 207(a)?" If the Court treated § 207(e)(3) as "of a piece with compliance with § 207(a)," then the burden would remain with the plaintiffs to prove all elements of their claims under the FLSA. Samson v. Apollo Resources, Inc., 242 F.3d 629, 636 (5th Cir. 2001). However, if the Court treated § 207(e)(3) as an exemption from complying with § 207(a), the burden would fall on the employer. Id.
The Fifth Circuit concluded that the burden remained with the...
