DOL Proposes Rule to Update Regular Rate Under FLSA

The U.S. Department of Labor (DOL) has published a proposed rule to clarify and update regular rate requirements under §7(e) of the Fair Labor Standards Act (FLSA) [84 F.R. 11888, 3-29-19]. The regulations have not been updated in decades, and the DOL said the proposed rule “would better define the regular rate for today’s workplace practices.”

The proposed rule does not make sweeping changes. Instead it clarifies whether certain perks, benefits, or miscellaneous items must be included in the regular rate of pay [DOL, Notice of Proposed Rulemaking: Regular Rate].

The FLSA generally requires overtime pay of at least 1½ times the regular rate of pay for hours worked in excess of 40 hours per workweek. Regular rate requirements define what forms of payment employers include and exclude in the regular rate calculation when determining overtime rates.

Listed Exclusions From the Regular Rate

The proposed rule confirms that employers may exclude these 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 system
• Discretionary bonuses
• Benefit plans, including accident, unemployment, and legal services
• Tuition programs

The proposed rule includes clarification about other forms of compensation, including payment for meal periods and “call back” pay.

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