(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. Employers may also provide gifts with more regularity throughout the year, as long as they are provided with the understanding that they are gifts. Office coffee and snacks provided to employees, for example, would also be excludable from the regular rate under this category.
[33 FR 986, Jan. 26, 1968, as amended at 84 FR 68772, Dec. 16, 2019]
Notes of Decisions
Cited in
14
cases (
9 in the last 5 years), 1992–2025 · leading case:
Mercado v. S&C Elec. Co., 2025 IL 129526 (Ill. 2025).
Mercado v. S&C Elec. Co., 2025 IL 129526 (Ill. 2025).
“” 29 C.F.R. § 778.212 (b) (2019). The federal courts applying this regulation hold that an employee’s regular rate under the FLSA includes performance bonuses.”
Mercado v. S&C Elec. Co., 2023 IL App (1st) 220020 (Ill. App. Ct. 2023).
“§ 207 (e)(1) (2018) (regular rate shall not 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…”
Moreau v. Klevenhagen, 956 F.2d 516 (5th Cir. 1992).
“29 C.F.R. § 778.212 (1989). . The County now requires its officers to qualify only once each year.”
Woodworth v. Loma Linda Univ. Med. Ctr. (Cal. Ct. App. 2023).
· cites it 6× “” ( 29 C.F.R. § 778.212 (b) (2022).) But a Christmas bonus qualifies for the exclusion even if it is paid “to all employees” and “with regularity so that the employees are led to expect it.”
Rebecca McPhee v. Lowe's Home Centers, LLC (4th Cir. 2021).
· cites it 2× “29 C.F.R. § 778.212 (b). However, special occasion bonuses (like a Christmas bonus) can be excluded even if “employees are led to expect it and even though the amounts paid to different employees .”
Beyer v. Michels Corp. (E.D. Wis. 2023).
· cites it 2× “The plaintiff acknowledges that 29 C.F.R. §778.212 (c) provides that a Christmas bonus may be a gift even though it is paid with regularity, but argues that the court should “harmonize §778.”
McGrath v. City of Somerville (D. Mass. 2019).
“29 C.F.R. § 778.212 . Accordingly, plaintiffs’ motion for summary judgment will be granted to the extent it contends that the City violated the FLSA by failing to include the seven wage augments in its calculation of plaintiffs’ regular rate of pay.”
Alminiana v. Lowe's Home Centers, LLC (W.D.N.C. 2020).
“§ 207 (e)(1); see also 29 C.F.R. § 778.212 (c) (“gift” bonuses need not be included in regular pay even though employees may expect the bonuses and even though the amounts paid to different employees or groups of employees vary according to their length of service with the firm…”
Jones v. Univesco, Inc. (E.D. Tex. 2021).
“Second, Univesco reiterates its claim that the rent discount is a “gift” under 29 C.F.R. § 778.212 . (Dkt. #25 at 12). Third, Univesco asserts that it incurred no “reasonable cost” to provide the rent discount to Jones and, therefore, there was no amount to add to Jones’s…”
Beyer v. Michels Corp. (E.D. Wis. 2022).
“211 (b) (defining “discretionary” bonuses); 29 C.F.R. §778.212 (defining “gifts” and “in the nature of a gift”).”
Costa v. Apple, Inc. (N.D. Cal. 2025).
“” 29 C.F.R. § 778.212 (b). Determining whether a 3 payment falls within the “gift exclusion” requires the court to consider the nature of the contract 4 that provides for the payment, not how parties to the contract may have understood it.”
Karen Hartstein v. Hyatt Corp., 82 F.4th 825 (9th Cir. 2023).
“29 C.F.R. § 778.212 (b). The district court concluded that the hotel rooms were “gifts .”
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