(a) Statutory provision. Section 7(e)(1) of the Act provides that
the term ``regular rate'' shall not be deemed to include ``sums paid as
gifts; payments in the nature of gifts made at Christmas time or on
other special occasions, as a reward for service, the amounts of which
are not measured by or dependent on hours worked, production, or
efficiency * * *''. Such sums may not, however, be credited toward
overtime compensation due under the Act.
(b) Gift or similar payment. To qualify for exclusion under section
7(e)(1) the bonus must be actually a gift or in the nature of a gift. If
it is measured by hours worked, production, or efficiency, the payment
is geared to wages and hours during the bonus period and is no longer to
be considered as in the nature of a gift. If the payment is so
substantial that it can be assumed that employees consider it a part of
the wages for which they work, the bonus cannot be considered to be in
the nature of a gift. Obviously, if the bonus is paid pursuant to
contract (so that the employee has a legal right to the payment and
could bring suit to enforce it), it is not in the nature of a gift.
(c) Application of exclusion. If the bonus paid at Christmas or on
other special occasion is a gift or in the nature of a gift, it may be
excluded from the regular rate under section 7(e)(1) even though it is
paid with regularity so that the employees are led to expect it and even
though the amounts paid to
different employees or groups of employees vary with the amount of the
salary or regular hourly rate of such employees or according to their
length of service with the firm so long as the amounts are not measured
by or directly dependent upon hours worked, production, or efficiency. A
Christmas bonus paid (not pursuant to contract) in the amount of two
weeks' salary to all employees and an equal additional amount for each 5
years of service with the firm, for example, would be excludable from
the regular rate under this category.
