On September 2, 2020, the Court of Appeals for the Fifth Circuit held that employees bear the burden of proof on whether bonuses should have been included in the regular rate of pay for purposes of calculating overtime compensation under the Fair Labor Standards Act (“FLSA”).

The plaintiffs in Edwards v. 4JLJ, L.L.C. alleged that their employer failed to account for certain bonuses in calculating the regular rate of pay.  Section 7(e) of the FLSA excludes eight categories of remuneration from the regular rate calculation, including bonus compensation 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.”  29 U.S.C. § 207(e)(3).  The Court of Appeals, considering the statutory language as well as the interpretive regulation at 29 C.F.R. § 778.211, noted that “[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.”

In an issue of first impression, the court considered whether the plaintiffs or the employer bears the burden of proof on whether bonuses are discretionary and therefore excluded from the regular rate.  The court held that the burden is on the plaintiffs.  In so holding, the court contrasted the regular rate definitions in § 207(e) with the affirmative defense of exemption from the overtime requirements, the burden of proof on which rests with the employer:

Section 207(e) does not exempt employers from compliance with [the overtime pay requirement in 29 U.S.C.] § 207(a)(1); it provides instruction for compliance with § 207(a)(1), where “regular rate” is used without definition.  Section 207(e) provides that definition, which is crucial for employers if they are to understand what must be included in the regular rate—in order to comply with § 207(a).  It was the [e]mployees’ burden to show that they “performed work for which [they were] not properly compensated.”  And to do so, they must show that [their employer] ought to have included the remuneration in question in the regular rate.  Because § 207(e)(3) is merely a definitional element of the regular rate—and therefore merely a definitional element of the [e]mployees’ claim—it was their burden to show that bonuses were not discretionary according to the statute’s terms.

As the court noted, the holding is consistent with the general principle that “[i]n an FLSA dispute, plaintiffs bear the burden to prove all elements of their claims.”

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Photo of Allan Bloom Allan Bloom

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages…

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York TimesReutersBloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved hundreds of millions of dollars in potential damages.

Allan is regularly called on to advise boards of directors and senior leadership on highly sensitive matters such as executive transitions, internal investigations and strategic workforce planning. He also has particular expertise in the financial services industry, where he has litigated and arbitrated cases, including at FINRA and its predecessors, for more than 20 years.
A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA, Senior Editor), Employment Discrimination Law (ABA/Bloomberg BNA, Final Proof Editor), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR, Editor), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE, Chapter Author).

Allan is a member of the NYSBA’s House of Delegates, sits on the Executive Committee of the NYSBA’s Labor and Employment Law Section, and is a Fellow of the College of Labor and Employment Lawyers. He has been recognized as a leading practitioner by Chambers since 2011.