Proposed Rules from the Department of Labor
On March 29, 2019, the US Department of Labor (DOL) proposed new rules to clarify what forms of employee compensation and benefits must be included in the regular rate of pay when employers calculate overtime for nonexempt employees.
Under the Fair Labor Standards Act (FLSA), when calculating overtime pay, employers must pay covered, nonexempt employees overtime pay of one and a half times their regular rate for time worked in excess of 40 hours per workweek. The regular rate is defined as “all remuneration for employment paid to, or on behalf of, the employee”. The FLSA regulations state that the regular rate includes the employees’ cash wages as well as other forms of compensation, e.g., commissions, shift differentials and other premium pay, meals and lodging and certain non-discretionary bonuses. The FLSA regulations don’t require other forms of compensation such as paid leave, show-up pay and discretionary bonuses to be included in the regular rate.
Other benefits and perks that have become popular over the years such as certain benefit plans, wellness programs, vaccination clinics, fitness classes, employee discounts on retail goods or services and expense reimbursement have raised questions as to whether or not they should be included in calculating an employee’s regular rate of pay for overtime purposes. Over the years, class-action lawsuits have argued that the cost of some of these benefits and perks should be included when calculating the regular rate of pay for overtime.
What are the new rules intended to do?
The DOL’s proposed changes would provide more clarity and, in many cases, exclude some of the benefits and perks (wellness programs, discounts on retail goods and services, certain tuition reimbursement benefits) from being considered as part of a nonexempt employee’s regular rate for overtime calculation purposes. The rules would also explain and provide examples of discretionary bonuses that may be excluded from an employee’s regular rate.
The full proposed rules are available on the Federal Register website.
What’s next?
There is a 60 day public comment period which ends on May 28, 2019. After that, the DOL will release their final rule.
Xenium will provide additional information on this topic as it is made available from the DOL.