[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR778.212]

[Page 420]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 778_OVERTIME COMPENSATION--Table of Contents
 
    Subpart C_Payments That May Be Excluded From the ``Regular Rate''
 
Sec. 778.212  Gifts, Christmas and special occasion bonuses.

    (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.

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