$4 Million Mistake – Incentive Pay Should Have Been Included When Calculating Overtime

Harris Health System in Houston, Texas learned an expensive lesson about how to properly calculate employee overtime and has agreed to pay more than $4,000,000 in back overtime wages to 4,573 nurses, lab technicians, respiratory care practitioners, X-ray technicians, medical technologists, registered pharmacy technicians, eligibility auditors and security officers. Workers should note – just because an employer is big and sophisticated, does not mean that it is getting it right when it comes to the overtime pay laws.  As this case illustrates, it can be well worth it for employees to seek information and help when they suspect that they are not being paid in compliance with the federal and/or Texas laws on overtime pay. This exact issue was previously discussed in a prior post titled SHOULD MY BONUS BE INCLUDED IN MY OVERTIME PAY RATE? and includes an example of how a production bonus would be taken into account.  What types of compensation must be included when calculating the correct overtime pay rate for workers has been the subject of many wage and hour lawsuits, but the basic rules are pretty straight forward – although the administration of the process may be burdensome for the employer.  The fact that the required record-keeping and calculations are inconvenient, is not however an excuse to short workers on the overtime pay they are legally owed under the applicable labor laws in Texas. In short, under federal and/or Texas overtime labor laws, all non-discretionary incentives paid should be factored into the calculation of workers’ regular rate of pay – which is the rate on which overtime is calculated.  So, when such incentives are included, the hourly rate paid for each overtime hour increases.  The vast majority of incentives and bonuses fall into the category of non-discretionary.  The few types of truly discretionary incentives / bonuses tend to be items such as Christmas bonuses that employees know they can’t rely on since they are made at the sole discretion of the employer.  This is very different than a bonus or incentive that is promised in exchange for achieving specific goals. Harris Health is not the first, or the last, large employer to get caught omitting incentive pay and bonus payments from the calculation of workers’ overtime pay rates.  Similar claims and lawsuits have been brought in recent years against other health care, retail, financial services and oilfield employers.  These types of claims have resulted in many millions of dollars being put back in the pockets of the hard-working Texans who earned them. Because of the strict time limits imposed by federal and Texas overtime pay laws, procrastination can be costly.  Do not rely on your boss or Human Resources for this critical information.   If you have any doubts as to your entitlement to overtime, contact the overtime pay experts at The Lore Law Firm for a free and confidential review. Call 1-866-559-0400, email  mlore@overtime-flsa.com or  submit your information using our convenient  Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances – because time is money.

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