Offset bonus pay against weekly overtime with care

Fabri-Centers gave workers several bonus payments above their base pay, including shift differentials, holiday pay and spot bonuses. But the company calculated employees' overtime pay using just their hourly, base-pay rates.

The Labor Department charged the company with violating overtime law under the Fair Labor Standards Act (FLSA). The company admitted that it owed employees for unpaid overtime and that it should have included the bonuses in employees' regular rates when calculating overtime pay.

However, the company argued that it should be able to credit the amount of these "premium payments" made to employees against the overtime owed. But the Labor Department said the FLSA allows employers to credit only premiums paid during the same workweek that the over-time occurred. An appeals court agreed. (Herman v. Fabri-Centers of America, No. 01-3080, 6th Cir., 2002)

Advice: Some courts have been more employer-friendly on this topic, allowing employers to credit premium pay toward any overtime compensation due, regardless of workweek.

Best bet: If you're faced with this issue, find out what courts in your jurisdiction have ruled. When in doubt, the safest thing to do is offset premium payments only during the workweeks when the overtime was incurred.