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Tina
Tina, Attorney
Category: California Employment Law
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Experience:  JD, 17 years experience & recognized by ABA for excellence in employment law.
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I would like to know if I can deduct overtime payment for bonuses

Customer Question

I would like to know if I can deduct overtime payment for bonuses from the bonus itself..

...http://www.fredlaw.com/articles/employment/OTPayWinter2008.pdf

The article mentions on page 211 "OT-in Bonus", that if agreed in advance the overtime can be built in the bonus system... If I pay my employee $8 Hour , $12 O/T, who worked 50 hours in one week, and earned a $400 commission based bonus.. according to my calculation regular rate of pay comes out to $16/hour, and I owe $80 of overtime, minus the $40 I already paid in OT in the $12 (4X10).. can the $40 im paying in overtime on the commission come off the commission,like in this case $363 in commission and 36$ in commission overtime, will come out to $400.... And i'm in California
Submitted: 3 years ago.
Category: California Employment Law
Expert:  Tina replied 3 years ago.
Hello and welcome,

I have reviewed the article you cite here and that applies to hours worked by the employee that do not exceed 40 hours per week. You and the employee may contractually agree to pay a flat amount per week if their hours fluctuate, but you may not contractually agree to exempt the employee from overtime unless they fit the legal description of a salaried exempt employee typically.

The scenario you propose would normally violate federal and state law, which is more stringent than federal law.

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Customer: replied 3 years ago.
The answer did not help me. Im currently paying my employees $8/hour and 12$/hour if they work overtime. I want to start a bonus program to pay them commission on sales and customer service, I want to pay them a bonus of lets say 10% of their sales, however I don't want to start this bonus program if I have to pay overtime and the bonus amount. cause they work a lot of overtime. Is there a way that if the bonus comes out $400 per month I can deduct the overtime I owe them for the bonus from the bonus itself... and still pay them 8$ hour and 12$ per hour for the overtime hours they worked...
Expert:  Tina replied 3 years ago.
No. I'm sorry if you are unhappy with the law, but this is not appropriate typically. You are required to pay overtime and cannot avoid it. The overtime cannot normally be deducted from any bonus you may implement as the law would then require that you pay both normally.

Tina, Attorney
Satisfied Customers: 32720
Experience: JD, 17 years experience & recognized by ABA for excellence in employment law.
Tina and other California Employment Law Specialists are ready to help you
Customer: replied 3 years ago.
so when is this in option?


OT-in Bonus
Where the bonus is not discretionary, but instead earned based on a promise or agree‑
ment, the employer and employee may agree in advance that any overtime due will be
built‑in to the bonus payment itself. This arrangement does not alter the amount of over‑
time due, but the manner in which it is paid.
Expert:  Tina replied 3 years ago.
Please provide a link and page number where you found this information and whether it is the FLSA or CA law.

Customer: replied 3 years ago.
its the same one from above....http://www.fredlaw.com/articles/employment/OTPayWinter2008.pdf
Expert:  Tina replied 3 years ago.
I see.

The primary problem with this plan under CA law, is that any bonus must be included in calculating overtime for the employee. It would increase the employee's base wage for purposes of calculating overtime and thus create a situation where you would be in violation of state law if you do not pay overtime at a higher rate, so you need to ensure the bonus covers the higher rate of overtime pay.

Here is a link that provides more information on this:

http://www.californiaemployeerightsattorneys.com/apg_pg5_Bonuses_and_Overtime_Pay.html

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Tina
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JD, 17 years experience & recognized by ABA for excellence in employment law.