Wage and Hour Update Regarding Regular Rate Regulations

By: Nathaniel M. Jordan, J.D.

Because the Fair Labor Standards Act generally requires that nonexempt employees receive overtime pay of at least one-and-one-half times their regular rate of pay for time worked in excess of 40 hours per workweek, employers must determine an employee’s regular rate to calculate overtime. An employee’s regular rate includes all “remuneration for employment paid to, or on behalf of, the employee,” and it’s not always simple to determine whether benefits and perks provided to employees are part of the regular rate that must be multiplied to compute overtime pay.

The U.S. Department of Labor (DOL) has announced a new rule effective January 15, 2020, that changes longstanding regular rate regulations to “provide clarity and better reflect the 21st-century workplace.” The new rule permits employers to exclude items like these from an employee’s regular rate of pay:

  • the cost of providing wellness programs, fitness classes, and certain tuition benefits;
  • payments for unused paid leave, including paid sick leave or paid time off;
  • reimbursed expenses, including phone plans and organization membership dues;
  • certain sign-on bonuses and certain longevity bonuses;
  • the cost of office coffee and snacks to employees as gifts; and
  • contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.

The rule also provides clarifications regarding discretionary bonuses, “call-back” pay exclusions, and alternative “basic rate” regulations. The DOL describes the rule as deregulatory and expects it to “encourage employers to provide additional and innovative benefits to workers without fear of costly litigation.” However, employers should take care not to exclude payments or benefits from regular rate without supporting authority to do so.

If you have questions about this article, contact a member of Yoder Ainlay Ulmer & Buckingham’s employment law practice group at (574) 533-1171.

Disclaimer: These materials are for informational purposes only and should not be construed as legal advice on any specific facts or circumstances. We recommend you consult a lawyer if you want professional assurance your interpretation of these materials is appropriate to your particular situation.

©  Yoder Ainlay Ulmer & Buckingham, LLP [December 2019]