Bonus Pay in California for Non-Exempt Employees | Mann & Elias
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Bonus Pay in California for Non-Exempt Employees


Most companies know the value of their employees. They do what is necessary to develop and retain their talent. Bonuses are among the many rewards that businesses use to motivate employees, show their appreciation for their work, and boost team morale. A bonus is a payment that is outside the normal salary. It is something added to the latter. Bonuses are nevertheless regulated by the state of California’s wage and hour laws. You should know how these regulations apply to any bonus system you have established. Your employees must also be aware of how bonuses impact their tax and wage-hour calculations.

You should retain the services of an employment attorney in Los Angeles if you are thinking about giving your employees bonuses as part of a larger incentive system. If you are a small business going through a time of prosperity and you can afford to award bonuses, you should do so. To avoid disputes and misunderstandings with recipients, you need to design the system in accordance with the law.

Bonuses Earned and Unearned

The way in which you design your bonus system will depend on many factors, including the financial soundness of your company and your objective in awarding them.

Bonuses can be earned and unearned. An earned bonus requires an employee to meet some set criteria, which can be a certain number of hours worked in a year, new business brought in, or their contribution to the company’s profit.

An unearned bonus, also called a discretionary bonus, is given for no reason other than the employee’s loyalty and good service. It can also be a way to show your appreciation for what your employees have done.

No matter the kind of bonus you give, it will still be considered a wage under the California Labor Code. This means it must be paid in a timely way—that is, on the payday that applies to the pay period. All bonuses, whether cash or non-cash, must be taxed according to their value.

How Bonuses Affect Overtime Calculations

If your employees work overtime and they receive a bonus, the latter must be included in the former. The California Department of Labor Standards and Enforcement has set out guidelines that describe the method of calculating overtime bonus pay. You must discern the amount of overtime worked per regularly scheduled hours. This must then be multiplied by 1.5 to get the total amount of overtime bonus pay.

Discretionary Bonuses

California labor law defines a discretionary bonus as “sums paid as gifts at a holiday or other special occasions, such as a reward for good service, which are not measured by or dependent upon hours worked, production or efficiency, are not included for purposes of determining the regular rate of pay.”

It is important to get this right. You must ensure that your bonus system operates in accordance with the law. Here are some general pointers to help you determine whether the bonuses you award are earned or discretionary:

  • Discretionary bonuses cannot be dependent on hours worked, productivity, or any other measurable criteria
  • Discretionary bonuses cannot be so large that employees consider it a wage or part of a wage
  • If you award money for the holidays, it is considered discretionary
  • If you award money to employees who have made good suggestions or come up with good ideas, it can be considered discretionary only if it was not part of some general program in which employees were required to participate.

If you are thinking of implementing a bonus payment plan, an employee commission plan, or giving end of the year discretionary bonuses, you should consult with a qualified attorney. You want to enhance productivity and boost the morale of your workforce. These are all laudable goals and will be good for your business. Establishing a bonus system may help you achieve them, but the system must be constructed and run according to California wage and hour laws.

If You Are an Employee Who Has Not Received an Owed Bonus

If you were promised a bonus and have not yet received your money, then you may need to take legal action against your employer. It may not have received your money because of an honest mistake or oversight. You should always try to reason with your employer before taking the matter further. If you have exhausted this approach, then you may need to sue for unpaid bonuses.

You should not fight this battle alone. Our Los Angeles lawyers for bonus pay have handled many cases like yours. Our trusted legal professionals make it their mission and aim to help ordinary people who have been mistreated and cheated by their employers. Dealing with a company to get the money owed to you can be incredibly stressful. Legal counsel can provide you with the insight and representation you require if you need to sue for unpaid bonuses.

The first thing your lawyer will do is sit down with you and ask you to recall the circumstances surrounding your participation in the bonus scheme. You should turn over any documentation, emails, and text messages related to the topic. If necessary, he or she will issue a subpoena for company records that describe and explain the bonus system and may contain evidence of your participation in it.

The most common defense used by companies trying to cheat employees out of their bonus pay is to claim that the latter did not meet the criteria. If you in fact did meet the criteria to receive your bonus, your lawyer will gather the evidence that proves it. This may require speaking to your work colleagues, sifting through company documents, and interviewing administrative staff involved with the matter.

The main aim of employment attorneys for bonus disputes is to get you the money you deserve. If it is found that the company unjustly denied you the bonus and put you through an unnecessary period of stress and strain, you may be able to sue them for emotional distress in addition to the bonus money.


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