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Proposed Department of Labor Rule to Update Regular Rate Requirements
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Workforce Management

Proposed Department of Labor Rule to Update Regular Rate Requirements

In late March, the Department of Labor (DOL) announced a proposed rule to clarify and update the regulations governing the regular rate requirements under the Fair Labor Standards Act (FLSA). Unless exempt, an employee’s regular rate of pay is used to determine how much he or she should be paid for working overtime. The FLSA generally requires overtime pay of at least 1.5 times the regular rate for hours worked past 40 hours per week.

The proposed rule details what forms of payment employers can exclude when determining an employee’s regular rate of pay. The cost of the following items would no longer apply:

  • Tuition programs
  • Discretionary bonuses
  • Payment for unused paid leave
  • Wellness programs, fitness classes, gym access, onsite specialist treatment
  • Employee discounts on retail goods and services
  • Benefit plans, including unemployment, accident and legal services
  • Reimbursed expenses, even if not incurred “solely” for the employer’s advantage
  • Reimbursed travel expenses that don’t exceed the maximum travel reimbursement permitted under the federal system

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

Under the current rules (which haven’t been updated in 50+ years), employers are discouraged from offering more perks to their employees as it may be unclear as to whether or not those perks must be included in the calculation of an employee’s regular rate of pay. This proposed rule is designed to better reflect a 21st-century workplace and encourage employers to start providing certain benefits without fear of litigation and apprehension about potential overtime consequences.

In turn, the DOL is optimistic this proposed rule would have a positive impact on workplace morale, employee compensation and retention. They invite your feedback and encourage the public to submit comments at www.regulations.gov in the rulemaking docket RIN 1235-AA24. Comments must be submitted by 11:59 p.m. on May 28, 2019 in order to be considered.

Organizations should take time to review their current regular rate of pay practices and ensure they’re prepared for the potential impact of these changes. The outcome could impact how you determine overtime pay for some employees.