On December 16, 2019, the DOL announced a final rule that clarifies which perks and benefits must be included in the regular rate of pay. This clarification matters because if the value of the perk or benefit must be included in the regular rate of pay, it must also be included in the calculation of overtime – which gets challenging when the perk/benefit is provided at the end of the year or on an irregular basis requiring retroactive recalculation of the regular rate of pay and any overtime based on that increased regular rate of pay.
The rule provides that the following perks/benefits may be provided without risk of additional overtime liability (and need not be included when calculating an employee’s regular rate of pay):
- The cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;
- Payments for unused paid leave, including paid sick leave or paid time off;
- Payments of certain penalties required under state and local scheduling laws;
- Reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred “solely” for the employer’s benefit;
- Certain sign-on bonuses and certain longevity bonuses;
- The cost of office coffee and snacks to employees as gifts;
- Discretionary bonuses*; and
- Contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.
*The final rule also clarifies that the label given a bonus does not determine whether it is discretionary and provides examples of discretionary bonuses that may be excluded from an employee’s regular rate of pay.
The DOL Fact Sheet on the new rule is here: https://www.dol.gov/agencies/whd/fact-sheets/regular-rate
The entire text of the new rule is here: https://www.federalregister.gov/documents/2019/12/16/2019-26447/regular-rate-under-the-fair-labor-standards-act