The Department of Labor recently issued a final rule for employers that makes it easier for employers to offer perks and benefits to their employees without fear of those benefits being considered part of an employee’s regular rate for purposes of calculating an employee’s overtime rate. For years employers felt as if they were guessing on whether certain benefits should be included in an employee’s regular rate, but the DOL has issue specific rules for a variety of benefits frequently offered to employees.
The DOL clarified that employers may exclude the following benefits from an employee’s regular rate:
- 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 rule also discusses that call-back pay no longer must be “infrequent and sporadic” in order to be excluded from the regular rate, and merely must not be prearranged.
The rule will take effect on January 15, 2020. Both public and private employers should be thrilled with this announcement, as the employer-friendly DOL continues to clarify and reduce the benefits that may have previously been included in employees’ regular rate. At the same time, the removal of these benefits will hopefully incentivize employers to add or continue providing these benefits for their employees.
While this rule helps to clarify the determination of what should be included in employees’ regular rate, the calculation is still complicated. If you or your organization need assistance with determining what constitutes compensation under the FLSA, contact the Wiley Law Office, for wage and hour advice you can trust.