Many employers mistakenly calculate overtime only looking at the employee’s hourly wages, which can often be wrong. Under the law, an employee’s regular rate must include all remuneration for employment, subject to specific exclusions outlined in section 7(e) of the FLSA (see below.)
Under current rules, employers have been discouraged (by some employment lawyers) from offering more perks to their employees as it may be unclear whether those perks must be included in the calculation of an employees’ regular rate of pay. The proposed rule focuses primarily on clarifying whether certain kinds of perks, benefits, or other miscellaneous items must be included in the regular rate. Because these regulations have not been updated in decades, the proposal would better define the regular rate for today’s workplace practices.
As an example, when the DOL rules were first created, typical compensation for employees consisted predominantly of traditional wages; paid time off for holidays and vacations; and contributions to basic medical, life insurance, and disability benefits plans. Since then, the workplace and the law have changed. Specifically, employee compensation packages, including employer-provided benefits and “perks,” have evolved significantly. Today, many employers now offer various wellness benefits, such as fitness classes, nutrition classes, weight loss programs, smoking cessation programs, health risk assessments, vaccination clinics, stress reduction programs, and training or coaching to help employees meet their health goals.
Also, today, rather than having separate sick and vacation policies, many employers now combine these and other types of leave into paid time off (PTO) plans.
According to the DOL’s Acting Administrator for the Department’s Wage and Hour Division, this new DOL regular rate proposal would provide clarity for employers to allow them to add more benefits to their employees without unknown overtime consequences or litigation.
What can be excluded from the “regular rate” under the proposed rule?
The Department proposes clarifications to confirm that employers may exclude the following from an employee’s regular rate of pay:
1. the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services;
2. payments for unused paid leave, including paid sick leave;
3. reimbursed expenses, even if not incurred “solely” for the employer’s benefit;
4. reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements;
5. discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
6. benefit plans, including accident, unemployment, and legal services; and
7. 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, “call back” pay, and others.
The DOL expects that the proposed rule will encourage some employers to start providing certain benefits that they may presently refrain from providing due to apprehension about potential overtime consequences, which in turn might have a positive impact on workplace morale, employee compensation, and employee retention.
More information about the proposed rule is available at www.dol.gov/whd/overtime/regularrate2019.htm. The Department encourages interested members of the public to submit comments about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA24. Comments must be submitted by 11:59 pm on May 28, 2019 in order to be considered.
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Proposed changes to regular rate likely to result in more benefits for Florida employees!
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 for the first time in more than 50 years.
This is significant to most employers because under the Fair Labor Standards Act (FLSA), covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek at a rate not less than one and one-half times the “regular rate” of pay.
Regular rate requirements define what forms of payment employers include and exclude in the “time and one-half” calculation when determining workers’ overtime rates.