Although the underlying legal principle is well-established, the letter highlights how easily incentive programs can create regular rate exposure. Many employers use attendance, safety, or productivity bonuses that feel discretionary but, in practice, rely on formulas, announced criteria, or consistent past practice. Any of these features can convert a plan into a nondiscretionary bonus—regardless of managerial intent.
The opinion letter also reminds employers that bonus structure matters as much as bonus purpose. Advance notice to employees, measurable criteria, and automated triggers strongly suggest nondiscretionary treatment, even if elements of the program involve judgment calls. When these bonuses fluctuate week to week, employers must ensure that payroll systems correctly allocate the amounts to each workweek and recalculate overtime accordingly, an area where errors commonly occur.
For large employers with multiple incentive programs, even small misclassifications can produce significant liability, particularly when employees regularly work overtime.