Hiring Health Forms Cause Lawsuit Risk? Bonus Overtime Exemption? Three SME Pitfalls Revealed

Pre‑employment family medical history—why lawsuits arise? Bonuses on total income—can overtime recalculation be avoided? Common SME management pitfalls explained. This report delivers a comprehensive evaluation.

EEOC Reminder: Pre‑employment Health Questionnaires May Violate The GINA Act

First, let’s look at the latest in recruitment compliance. The U.S. Equal Employment Opportunity Commission (EEOC) recently filed a lawsuit against a company and reminded other employers that requesting family medical history or other genetic information during hiring may violate the Genetic Information Nondiscrimination Act (GINA).

The defendant in this case is an automobile manufacturer. Between 2022 and 2024, the company required job applicants to disclose whether their parents, grandparents, or siblings suffered from certain conditions such as asthma, cancer, or diabetes.

In completing pre‑employment health questionnaires, the EEOC noted that this practice constitutes the unlawful collection of genetic information. The questionnaire was unrelated to employer‑provided medical or health benefits and did not fall under the narrow exceptions permitted by law. Although the company revised its forms in 2024, it remains liable.

Violations of this kind most often occur in pre‑employment medical exams and employee health benefit programs. Amazon previously faced litigation over its use of medical exams during hiring. The National Human Genome Research Institute, part of the NIH, has noted that because health benefit programs involve the exchange of medical information, requiring employees to provide genetic data may trigger GINA provisions. The EEOC also reminds employers that collecting genetic information in health benefit programs is strictly limited.

The U.S. Department of Labor Has Approved A New Bonus Plan That Exempts Employers From Recalculating Overtime Pay

Next, let’s turn to a new guideline on pay and working hours. The U.S. Department of Labor recently issued an opinion letter (opens in new tab) confirming that a bonus plan based on employees’ proportionate share of total income complies with the overtime rules under the Fair Labor Standards Act (FLSA). Companies adopting this type of bonus program do not need to recalculate overtime pay when distributing bonuses.

Under the FLSA, employees who work more than 40 hours per week must be paid overtime at 1.5 times their regular rate. The regular rate is usually higher than the hourly wage because it includes not only base pay but also qualifying bonuses. In practice, bonus calculations often lag behind; for example, once a company issues a quarterly bonus, the regular rate rises, and the employer must then pay additional overtime to cover the difference.

However, federal regulations provide an exception: if bonuses are distributed as a percentage of employees’ total income, employers are not required to recalculate overtime pay. Because total income already includes both regular wages and overtime, the bonus itself automatically accounts for the corresponding overtime compensation.

This rule is equally relevant for California employers. In 2023, a California appellate court ruled that local companies may directly apply the federal formula without following the California Labor Standards Manual. It should be noted, however, that Department of Labor opinion letters serve only as enforcement guidance and do not carry binding authority in court. Because bonus and wage calculations are complex, businesses are advised to consult legal counsel when designing compensation plans to avoid the risk of underpaying overtime.

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Three Major Management Misconceptions Pose Hidden Risks For Small Businesses

Finally, let’s take a look at three common misconceptions in employee management for small businesses.

Myth 1: Believing payroll software is too costly. Many small businesses still rely on spreadsheets or paper records to manage payroll. This fragmented data not only raises administrative costs but also increases the risk of errors. While skipping payroll tools may seem like a cost‑saving measure, it ultimately leads to talent loss and erodes team trust.

Myth 2: Compliance is only a concern for large corporations. In reality, small and medium‑sized enterprises carry the same obligations in areas such as wage and hour rules, employee classification, and recordkeeping—only with fewer staff to track regulatory changes. When policies are not documented or laws change, problems often surface only during audits or through fines.

Myth 3: Believing that formal HR processes can wait until the company grows larger. As teams expand, with more new hires and additional management layers, the absence of standardized onboarding procedures, employee handbooks, and management systems means different supervisors may adopt inconsistent practices, undermining management consistency.

The core of these three myths lies in the belief that even as a company expands, personnel management can continue to operate informally. Yet as the business grows, these management gaps inevitably surface. Companies that achieve sustainable growth are often those that identify and resolve such risks early—before employees, managers, and the organization itself are affected.

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This article is intended for general informational purposes only and should not be considered legal, tax, or accounting advice. Readers are encouraged to seek professional guidance for advice tailored to their specific circumstances. Click here to schedule a complimentary corporate legal consultation.