On March 28, 2019, the Department of Labor (DOL) issued its second proposed rule change to overtime pay in less than three weeks. This proposed change relates to the definition of the regular rate of pay under the Fair Labor Standards Act (FLSA), which affects how overtime is calculated. In particular, the proposed change focuses on the types of compensation and benefits that employers must include in the overtime calculation.
Read “DOL Proposes New Overtime Rules” published on March 8, 2019
The FLSA requires that employers pay non-exempt employees 1.5 times their regular rate of pay for all hours worked in excess of 40 hours per week. The regular rate of pay includes all remuneration for employment unless specifically excluded by the statute. The regular rate of pay currently includes hourly wages or salary, as well as non-discretionary bonuses, commissions, on-call pay, and shift differentials.
The DOL’s proposed rule confirm that the following types of benefits are excluded from the regular rate of pay:
- Wellness programs, on-site specialist treatment, gym access, and fitness classes;
- Reimbursed expenses, including travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation system;
- Employee discounts on retail goods and services;
- Payouts for unused vacation and sick leave;
- Accident, unemployment, and legal services benefits; and
- Tuition reimbursement and repayment of student loans.
The proposed rule further clarifies that the following types of bonuses are excluded from the overtime calculation: Bonuses paid to employees who make a unique or extraordinary effort that are not awarded according to pre-established criteria, severance bonuses, employee-of-the-month bonuses, bonuses for overcoming challenging or stressful situations, and other similar bonuses if the bonus is in the sole discretion of the employer and is not paid pursuant to any prior agreement.
The DOL recognizes that the proposed changes are needed so the regulations reflect the modern workplace. The proposed rule also may encourage employers to provide more benefits to employees. Not only will the benefits be excluded from the overtime calculation, but employers would no longer face the administrative burdens of tracking these kinds of compensation for purposes of calculating overtime.
The Notice of Proposed Rulemaking was published in the Federal Register on March 29, 2019. Comments are due by May 28, 2019, and may be submitted at www.regulations.gov by searching docket RIN 1235-AA24.
Written by Attorney Katherine C. Campbell at Friday, Eldredge & Clark, LLP. She is an associate who serves as litigation counsel for individuals and businesses in complex business and commercial disputes including employment claims, collective action wage and hour claims, and breach of contract matters.
This information is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our Labor and Employment attorneys.