The US Department of Labor announced its final rule applicable to employers seeking to offer perks and benefits to employees without creating confusion regarding their regular rate of pay for overtime calculation purposes.

The Fair Labor Standards Act (FLSA) requires employers to pay their non-exempt employees at least one and one-half times their regular rate of pay for any hours worked in excess of forty-hours in a given workweek. Compliance with the rule has caused many a headache for employers and their human resource professionals.

One particular area of confusion has been what is meant by “regular rate of pay.” Examples of types of pay which must be included in the regular rate are non-discretionary bonuses, commissions, and shift differentials. Beyond these examples, however, the DOL has not provided significant guidance on what other perks and benefits offered to employees must be included in the calculation of a given employee’s regular rate.

Just in time for Christmas, the DOL finalized a rule which provides a list of the types of pay which do not need to be included in the calculation. The rule states that employers can exclude:

  • The cost of providing certain parking benefits, wellness programs, onsite specialist treatments, gym access/fitness classes, employee discounts on retail goods and services, certain tuition benefits, 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 longevity bonuses;
  • The cost of office coffee and snacks to employees as gifts;
  • Contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.

The DOL also clarified that labeling bonuses as “non-discretionary” does not make them non-discretionary. The final rule provides several factual examples that are useful to employers when determining whether bonuses offered to employees are truly non-discretionary.  Employers are encouraged to review the final rule and the factual examples provided by the DOL to ensure their practices remain in compliance. The final rule becomes effective January 15, 2020.

The attorneys at Fishel Downey Albrecht & Riepenhoff, LLP routinely advise public and private employers on state and federal wage laws. If you have any questions about this case or any other matter, please contact us at info@fisheldowney.com or call 614.221.1216.