A $259,474 backpay award the U.S. Department of Labor’s Wage and Hour Division (“WHD”) ordered plastics manufacturer Jadex Inc. and four subsidiaries (“Jadex”) to pay alerts other businesses against improperly failing to include incentives, bonuses and premium pay failed to include incentives, bonuses and premium when calculating and paying overtime under the Fair Labor Standards Act (“FLSA”).

Jadex Overtime Schooling

Jadex Inc., a South Carolina manufacturing holding company that employs approximately 1,800 employees at its headquarters and subsidiaries, Alltrista Plastics LLC, ArtaZn LLC, LifeMade Products LLC, and Shakespeare Co. LLC, is learning an expensive lesson about the FlSA’s requirements to include most shift, differentials, bonuses, or other supplemental compensation in an employee’s base rate of pay when calculating his overtime.

WHD found Jadex underpaid 939 employees by improperly omitting additional pay from the base rate of pay when calculating overtime,

A WHD audit of Jadex found the employers violated the FLSA by failing to include bonuses workers earned by reaching sales and safety goals per quarter, incentives awarded for working night shifts and for serving as trainers to other employees, additional hourly amounts for every hour worked during peak production seasons and bonuses for perfect attendance and personal safety performance during peak seasons.

As a result of the audit, WHD recovered a total $259,474 of overtime for the employees from Jadex.

Precautionary Lesson For Other Businesses

WHD warned other businesses against making similar mistakes when calculating overtime due their workers when announcing its recovery from Jafex. “Employers must understand all applicable rules when it comes to paying workers overtime. This includes adding bonuses and incentive pay when factoring overtime pay. Anything less robs workers of their hard-earned wages,” said Wage and Hour Division District Director Jamie Benefiel in Columbia, South Carolina.

Employers often unknowingly underpay overtime, because they failed to recognize that most bonuses, incentive pay, shift differentials, and other special compensation presumptively generally must be included in the base rate of pay for purposes of calculating overtime due to non exempt employees unless the employer can demonstrate that the extra compensation qualifies under one of the exemptions allowed by the FLSA.

Employers caught making this mistake, can face back pay awards for the unpaid overtime, plus assessments of interest and penalties. To avoid these exposures, employers should consult with qualified legal counsel to confirm their proper treatment of all aspects of compensation paid to nonexempt employees for purposes of overtime, and other wage in our purposes.

Getting nailed for failing to appropriately, taking account incentive, bonus, shift, differentials, and other supplemental compensation creates a particular hardship for the employer as the employer will unexpectedly before’s to pay 1 1/2 times the budgeted supplemental compensation amount plus interest and penalties for overtime hours worked if it turns out that the compensation is required to be taken in account for overtime purposes.

To avoid these unpleasant consequences, businesses and their leaders should consult with qualified legal counsel to fully understand how supplemental compensation is likely to be treated for purposes of the FLSA, before announcing or paying the supplemental compensation. Pre-armed with a proper understanding of what types of supplemental compensation, the FLSA requires an employer to include in the base rate of pay for overtime calculation purposes empowers the business to more reliably budget for and pay incentive compensation without the risk of an anticipated overtime liability.

More Information

We hope this update is helpful. For more information about the these or other health or other legal, management or public policy developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297. 

Solutions Law Press, Inc. invites you receive future updates by registering on our Solutions Law Press, Inc. Website and participating and contributing to the discussions in our Solutions Law Press, Inc. LinkedIn SLP Health Care Risk Management & Operations Group, HR & Benefits Update Compliance Group, and/or Coalition for Responsible Health Care Policy.

About the Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 35+ years of workforce and other management work, public policy leadership and advocacy, coaching, teachings, scholarship and thought leadership.

A Fellow in the American College of Employee Benefit Counsel, Vice Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, Ms. Stamer’s work throughout her 35 year career has focused heavily on working with employer and other staffing and workforce organizations, health care and managed care, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. As an ongoing component of this work, she regularly advises, represents and defends employers, PEOs, staffing, employee leasing and other businesses about worker compensation, payroll and other tax, wage and hour and other compensation and employee benefit, occupational health and safety, contracting, compliance, risk management and other internal and external controls in a wide range of areas and has published and spoken extensively on these concerns. She also has decades of regulatory and other government affairs experience with these concerns including defending these and other businesses before the IRS, EBSA, WHD, EEOC, OCR, HHS, state labor, insurance, and other authorities, and evaluating and responding to federal, state and local statutory, regulatory and enforcement actions by federal and state legislators and regulators.  A prolific author and popular speaker, Ms. Stamer also is widely recognized for her decades of pragmatic, leading edge work, scholarship and thought leadership on workforce, compensation, and other operations, risk management, compliance and regulatory and public affairs concerns.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources available here.

IMPORTANT NOTICE ABOUT THIS COMMUNICATION

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here.

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author and Solutions Law Press, Inc.™ reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving, and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The author and Solutions Law Press, Inc.™ disclaim, and have no responsibility to provide any update or otherwise notify anyone any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication. Readers acknowledge and agree to the conditions of this Notice as a condition of their access of this publication.

Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. Any statements contained herein are not intended or written by the writer to be used, and nothing contained herein can be used by you or any other person, for the purpose of (1) avoiding penalties that may be imposed under federal tax law, or (2) promoting, marketing or recommending to another party any tax-related transaction or matter addressed herein.

©2023 Cynthia Marcotte Stamer. Limited non-exclusive right to republish granted to Solutions Law Press, Inc.™