The FLSA requires employers to include the value of certain kinds of perks, benefits and other items (“Extras”) in an employee’s regular rate of pay for purposes of calculating overtime. This can create a mathematical and economic nightmare for employers where the Extras are provided periodically or at year end, requiring a retroactive recalculation of the employee’s regular rate of pay for purposes of paying overtime based on 1.5x the employee’s regular rate of pay. In March, 2019, the DOL announced a proposed rule to amend FLSA regulations to confirm that employers can exclude a long list of Extras from an employee’s regular rate of pay. The new rule proposes to exclude:
- 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 PTO, 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 permitted under the Federal Travel Regulation System regulations and that satisfy other regulatory requirements;
- 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 also clarifies how other forms of compensation, such as meal periods call-back pay and show-up pay, should be treated. The public comment period for the amendments closed on June 12, 2019 (after one extension). According to SHRM, the final rule was sent to the White House budget office on September 9, 2019.
We will post again once the final rule is issued. In the interim, employers should make sure they are properly calculating employee’s regular rate of pay and paying overtime accordingly.
DOL’s summary is here: https://www.dol.gov/whd/overtime/regularrate2019.htm