How to Tell If You Are Being Underpaid

Have you ever received a bonus at any time in the last four years from your employer? If so, you were probably getting underpaid for your overtime hours, and you may be due quite a bit of money.

If this sounds strange, that’s because it is. The Fair Labor Standards Act (the “FLSA”) protects employees in a lot of ways, and one of them is via a quirk that requires hourly rates to be raised – and employees to be given additional back pay for the overtime hours that they worked in the bonus period – whenever an employer gives out a bonus. So, if your employer chooses to hand out bonuses, it also is legally required to pay you more per hour in addition to the bonus that it awarded.

Here’s how this quirky, technical, legal requirement works. Say your employer, Company X, adds a $200 bonus to each employee’s pay because the company hit its sales targets for the pay period (two-week period). During that period, you worked 100 hours (80 hours of straight time and 20 hours of overtime), at an hourly rate of $10/hour. You look at your paystub, and your overtime rate is listed at the time and a half, $15/hour. Therefore, you got paid 80 x $10, or $800, and 20 x $15, or $300, totaling $1100 for the pay period before taxes were taken out.

Normally, these rates would be correct, but in this example, you were underpaid and your employer owes you money because it gave you a bonus. The FLSA says that the employer has to figure the bonus into your hourly rate by adding half of it to your pay. So, Company X needs to go back and calculate $1200 for the employee’s earnings in the pay period, not $1100. Therefore, your hourly rate is $1200/100 hours = $12/hour. Your overtime rate (time and a half) is, therefore, $18 (rather than $15). Accordingly, because you worked 20 hours of overtime, the employer needs to pay you $3 x 20 hours = $60 (in addition to the bonus it already paid) in the next pay period. This is called an FLSA true-up payment, and it’s so technical and such an odd concept that 99% of employers forget to (or intentionally do not) pay it.

Here’s why this is such a big deal. If your employer missed the true-up payment, and you have since gone on to another job, you are likely due not just the true-up payments for the past four years, but also a 30-day penalty of 8 hours per day times your hourly rate. Together, you could be looking at thousands of dollars for something that you (and, possibly, your employer) did not even know existed.

Whether or not you ultimately decide to pursue any legal action, it’s important that you contact us if you received bonuses and suspect that your employer may have missed the FLSA true-up payment. We can take a look at your pay stubs and determine whether you are owed money, and how much. If we determine that your employer missed the payment, in many cases we can get that money paid back to you. Contact The Carter Law Firm today for more information.