New Proposed DOL Regular Rate of Pay Rules Are Out for Comment
“We started off trying to set up a small anarchist community, but people wouldn’t obey the rules”
– Alan Bennett
On March 29th, 2019 the Department of Labor (“DOL”), Wage and Hour Division (“WHD”), proposed a revision of their current regulations regarding the calculation of the regular rate. For more information visit the proposed rule at https://www.regulations.gov/document?D=WHD-2019-0002-0001. This proposed rule will amend 29 C.F.R. Part 778 of the Code of Federal Regulations which clarifies section 7(e) of the Fair Labor Standards Act (“FLSA”). The same rule applies to overtime under the Contract Work Hours and Safety Standards Act. (“CWHSSA”).
Nonexempt employees who work more than 40 hours per week are ordinarily entitled to time and one-half overtime premium pay for all hours worked over 40. The regular rate is used in overtime calculation to determine “time and one-half”. The proposed rule is important for two primary reasons. First, because it provides further clarity to employers and employees, this allows them to formulate employment contracts with more certainty. This allegedly benefits everyone governed by the FLSA, and the DOL estimates this will save $281,000,000 over the next ten years. Second, this benefits employers because they are able to exclude certain enumerated benefits provided to their employees from the regular rate. This means that when calculating overtime, they will not have to include the cost, per employee, for example, of a wellness plan in the regular rate which decreases overtime premium amount multiplied by 1.5 in a “time and one-half” calculation.
In the Executive Summary of the request for comments, the WHD cites several motivations for the proposed revision. Chief among them is the change in benefit plans that employers have offered since the regulation was first promulgated more than 60 years ago. This was before employers offered programs relating to stress reduction or weight loss and the proposed change is designed to provide guidance for the evolving benefit plans offered by employers. In addition, states have changed their own laws necessitating paid sick leave and other benefits. As a result, the DOL felt that these circumstances necessitated clarification on the current rule.
Comments to the regulatory proposal can be submitted at www.regulations.gov, docket number Rin 1235-AA24, until May 28, 2019.
What does the proposed rule exclude from the regular rate of pay? Among other things, wellness programs, gym access, employee discounts, payments for unused sick leave, some reimbursed expenses, some types of discretionary bonuses, and tuition reimbursement programs. DOL also proposes to clarify what is reasonable or “properly reimbursable” with regard to some of these benefits. What does the proposed rule include in the regular rate? The proposed rule would formalize existing guidance that some lump some cash bonuses tied to the quality or quantity of an employee’s work be included, as well as any other benefits made on account of those things or to further supplement an employee’s wages. WHD also proposes to include pay for bona fide meal periods in the regular rate if both parties treat them as hours worked. However, these meal periods are generally not treated by the parties as hours worked.