The U.S. Department of Labor (“Department”) is clarifying and updating the regulations governing the regular rate requirements under the Fair Labor Standards Act (“FLSA”). On December 12, 2019, the Department announced a Final Rule that will allow employers to more easily offer perks and benefits to their employees.
The FLSA generally requires overtime pay of at least one and one-half times the regular rate for hours worked in excess of 40 hours per workweek. Regular rate requirements define what forms of payment employers include and exclude in the “time and one-half” calculation when determining workers’ overtime rates. This new Final Rule marks the first significant update to the regulations governing regular rate requirements under the FLSA in over 50 years.
Among other things, the rule clarifies which perks and benefits must be included in an employee’s regular rate of pay, as well as which perks and benefits an employer may provide without including them in the regular rate of pay. In relevant part, the Final Rule confirms that employers may exclude the following from 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; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments”;
- certain sign-on bonuses and certain longevity bonuses;
- the cost of office coffee and snacks to employees as gifts;
- discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples and;
- contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.
The Final Rule has an effective date of January 15, 2020.
Knowing how to structure your employees’ pay is critical to ensuring that you are in compliance with the FLSA requirements. Violations can be expensive, both in terms of penalties and litigation costs. Harrison Law Group has the knowledge and experience to help you ensure that you are correctly classifying your employees’ rate of pay, and the litigation experience to defend you should an employee make a claim. For more information, contact Faith Harrison.
Information regarding this Final Rule was gathered from the U.S. Department of Labor website. See, https://www.dol.gov/agencies/whd/overtime/2019-regular-rate/faqs#8