DOL’s June 23 overtime recovery is a useful payroll warning. The agency said a multi-trade contractor owed $1,730,598 in back wages to 1,666 hourly workers after incentive bonuses were left out of the regular rate used to calculate overtime.

That’s the part small employers should focus on. Overtime isn’t always base hourly rate times time-and-a-half. If a bonus belongs in the regular rate, leaving it out can underpay overtime even when the base hourly rate looks correct.

The payroll risk

The Fair Labor Standards Act uses the regular rate of pay to calculate overtime for nonexempt employees. DOL guidance explains that some bonuses are excluded, but others must be included. The dividing line often depends on whether the bonus is discretionary or tied to an agreement, policy, production target, attendance, safety, performance, or another expected condition.

When the bonus belongs in the regular rate, payroll may need to allocate it across the covered workweeks and calculate any additional overtime premium. That’s easy to miss if payroll is set up to treat bonuses as a separate payment with no overtime effect.

Why this is different from the salary-threshold issue

BCA recently covered the restored federal white-collar salary threshold. This is a different problem. The June 23 DOL release is about hourly workers, incentive bonuses, and the regular-rate math used for overtime.

An employer can have the right hourly classification and still make a regular-rate mistake. That’s why bonus plans, attendance incentives, safety incentives, shift premiums, and production incentives should be reviewed by payroll type, not just by name.

What BCA readers should do

Pull a list of every bonus or incentive paid to nonexempt employees. For each one, identify whether it is discretionary, whether workers expect it, what condition triggers payment, and how payroll handles overtime weeks.

Then test one pay period by hand. If the calculation can’t be explained, the payroll setup needs review before the same mistake repeats across hundreds of checks.

Sources

1. U.S. Department of Labor, “US Department of Labor recovers $1.7M in back wages for 1,666 hourly employees denied overtime by multi-trade contractor,” June 23, 2026. https://www.dol.gov/newsroom/releases/whd/whd20260623
2. U.S. Department of Labor, “Fact Sheet #56C: Bonuses under the Fair Labor Standards Act.” https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses
3. Electronic Code of Federal Regulations, 29 CFR 778.209, “Method of inclusion of bonus in regular rate.” https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-B/part-778/subpart-C/subject-group-ECFRa240e99a879fbca/section-778.209
4. Littler, “DOL Opinion Letter Confirms Bonuses Under Predetermined Pay Plans Must Be Included in Regular Rate for Overtime Calculations,” January 2026. https://www.littler.com/news-analysis/asap/dol-opinion-letter-confirms-bonuses-under-predetermined-pay-plans-must-be

Disclaimer

This article is for general educational purposes. It is not legal, tax, payroll, financial, or regulatory advice. Rules can change, and the right answer depends on the facts. BCA can help readers organize the issue and coordinate with the appropriate licensed advisor when needed.