March 28, 2019

The U.S. Department of Labor (DOL) has issued a proposed rule revising “regular rate” requirements employers must follow under section 7(e) of the Fair Labor Standards Act (FLSA).

This rulemaking effects most employers because under the FLSA employers must provide overtime pay of at least one-and-one-half times the “regular rate of pay” for hours worked in excess of 40 hours per workweek. Regular rate requirements define what forms of payments (per diems, wellness programs, unused paid leave, etc.) that employers must include or may exclude in the “time and one-half” calculation when determining workers’ overtime rates.  This is the first update to these regulations in several decades.

The proposed rule expands the ability of employers to exclude the following types of compensation from an employee’s regular rate of pay:

• Per diems and reimbursed expenses, even if not incurred “solely” for the employer’s benefit;
• Reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulations;
• Payments for meal periods, “call back” pay, and holiday pay;
• The cost of providing wellness programs, gym access, and fitness classes;
• Employee discounts on retail goods and services;
• Payments for unused paid leave, including paid sick leave;
• Discretionary bonuses;
• Benefit plans, including accident, unemployment, and legal services; and
• Tuition programs, such as reimbursement programs or repayment of educational debt.

The proposed rule is open for public comment for 60 days.  You can find the text of the proposed rule here.

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