DOL proposes new rule clarifying regular rate requirements under the FLSA

Last week, the U.S. Department of Labor (DOL) announced a proposed rule seeking to update the “regular rate” requirements under Section 7(e) of the Fair Labor Standards Act (FLSA), thereby clarifying the types of payments an employer may exclude from its overtime calculations.

The FLSA generally requires that employers pay non-exempt employees overtime at a rate of one and a half times the employee’s regular rate for all hours worked over 40 hours in a workweek. An employee’s regular rate includes “all remuneration for employment paid to, or on behalf of, the employee” except for certain payments that are statutorily excluded from the regular rate by Section 7(e) of the FLSA.

The DOL’s rule proposes clarifications allowing employers to exclude the following forms of remuneration 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 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 includes additional clarification about other forms of compensation, including payment for meal periods and “call back” pay.

The 60-day period to comment on the proposed rule closes on May 28, 2019. Employers interested in submitting a comment on the final rule may do so electronically here.