Regular Rate Calculation for Overtime Pay May Be Changing

April 03, 2019
Publication
Inside HR
HR Compliance
Compensation Planning

On March 28, 2019, the U.S. Department of Labor (DOL) announced a proposed rule to clarify and update the regulations governing “regular rate” requirements under the Fair Labor Standards Act (FLSA). Regular rate requirements define what forms of payment employers include and exclude in the "time and one-half" calculation when determining workers' overtime rates.   

Specifically, the DOL is proposing clarifications to confirm that employers may exclude the following from an employee's regular rate of pay:

  • The cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services;
  • Payments for unused paid leave, including paid sick leave;
  • 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 Regulation System and that satisfy other regulatory requirements;
  • Discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
  • Benefit plans, including accident, unemployment, and legal services; and
  • Tuition programs, such as reimbursement programs or repayment of educational debt.

The proposed rule also includes additional clarification about other forms of compensation, including payment for meal periods and "call back" pay. Additional information can be found in their FAQs.

Key Takeaway

Under current rules, employers may be discouraged from offering more perks to their employees as it is often unclear whether those perks must be included in the calculation of an employees' regular rate of pay for overtime pay purposes. The proposed rule seeks to clarify whether certain kinds of perks, benefits, or other miscellaneous items must be included in the regular rate.

This is a proposed rule and no specific action is required at this time. The DOL encourages interested employers to submit comments about the proposed rule electronically at www.regulations.gov by May 28, 2019.

MRA will continue to monitor the regular rate rules and provide applicable updates as they become available.

Source: DOL.gov; Michael Hyatt, Director, HR Government Affairs, MRA – The Management Association