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DOL Redefines "Rate of Pay"

Updated: Nov 29, 2019

Wage and Hour Division (WHD)

Notice of Proposed Rulemaking: Regular Rate

On March 28, 2019, the U.S. Department of Labor (Department) announced a proposed rule to amend 29 CFR part 778 to clarify and update regular rate requirements under section 7(e) of the Fair Labor Standards Act (FLSA).

The FLSA generally requires overtime pay of at least one and one-half 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 “time and one-half” calculation when determining workers’ overtime rates.

Under current rules, employers are discouraged 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.

The Department proposes clarifications to the regulations to confirm that employers may exclude the following 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;

~andTuition 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 rule won't be finalized until later this year but now is a good time to make sure your payroll practices are in compliance.

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