Earlier today, the U.S. Department of Labor (“DOL”) announced a proposed rule to update regular rate calculations under the Fair Labor Standards Act (“FLSA”). Under the FLSA, employers must pay overtime pay to employees who work more than 40 hours in a week. The overtime pay rate is one and a half times an employee’s “regular rate” of pay. However, as many employers know, calculating an employee’s regular rate is not as straightforward as it may seem.
The DOL has not implemented any significant changes to the regulations regarding regular rate of pay in several decades. Accordingly, the proposed rule will update the regulations to clarify whether common benefits offered in the modern workplace must be included in an employee’s regular rate of pay.
In an effort to encourage employers to provide more benefits to their employees, the proposed rule excludes the following from an employee’s regular rate:
- The cost of providing onsite specialist treatments from chiropractors, personal trainers, counselors, etc.
- The cost of providing gym access, gym memberships, and fitness classes
- The cost of providing wellness programs, such as health promotions and disease prevention activities
- Employee discounts on retail goods and services;
- Payments for unused paid leave, regardless of the type of leave
- Reimbursed travel or other expenses, even if not incurred “solely” for the employer’s benefit
- Reimbursed travel expenses that do not exceed the amounts set forth in the Federal Travel Regulation
- Certain types of bonuses, broadening the current meaning of “discretionary bonus”
- Certain types of benefit plans, such as accident, unemployment, and legal services; and
- Certain types of tuition programs, such as course discounts, tuition-reimbursement programs, and programs for repayment of educational debt.
The proposed rule also includes changes to the existing “call-back” pay and “basic rate” regulations.
Frantz Ward attorneys will monitor developments on the proposed rule throughout the comment period.