Richards Layton & Finger

DOL Clarifies "Regular Rate" for FLSA Overtime Calculations

January 7, 2020

The U.S. Department of Labor (DOL) recently announced a final rule that provides clarity to employers regarding the types of compensation that should be included to determine an employee’s “regular rate” of pay when calculating overtime pay under the Fair Labor Standards Act (FLSA).

The rule marks the first significant update to the regulations governing regular rate requirements in over 50 years. Those requirements define the forms of payment included and excluded in the FLSA’s regular rate of pay, which is used in the calculation for determining overtime rates.

The DOL’s new rule, which takes effect on January 15, 2020, provides an expanded list of specific benefits that employers may exclude from the regular rate computation. These include:

  • Certain parking benefits, wellness programs, onsite specialist treatments, gym access and fitness classes, employee discounts, certain tuition benefits, and adoption assistance;
  • Payments for unused paid leave;
  • Certain reimbursement expenses beyond expenses incurred “solely” for the employer’s benefit;
  • Certain sign-on and longevity bonuses;
  • Office coffee and snacks provided to employees as gifts;
  • Discretionary bonuses; and
  • Certain contributions to benefit plans.

This new rule allows employers to provide certain benefits to employees without as significant an impact on overtime pay. Please contact an RLF attorney if you need assistance with the new rule.

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