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DOL Finalizes Revisions to FLSA’s Regular Rate of Pay Regulations, Effective January 15, 2020

December 12, 2019

The U. S. Department of Labor’s (DOL) Wage and Hour Division (WHD) released a final rule updating the regulations governing regular rate requirements under the Fair Labor Standards Act (FLSA) for the first time in more than 50 years. Regular rate requirements define what forms of payment employers include and exclude in the "time and one-half" calculation when determining workers' overtime rates. The rule focuses primarily on clarifying whether certain kinds of perks, benefits, or other miscellaneous items must be included in the regular rate. Because these regulations have not been updated in decades, the Department’s intent is to better define the regular rate for today's workplace practices. Click “read more” for further information on the new rule.

Specifically, the final rule clarifies that employers may offer the following perks and benefits to employees without risk of additional overtime liability:

  • 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 final rule also includes additional clarification about other forms of compensation, including payment for meal periods and "call back" pay.

AGC’s supports the WHD’s efforts to modernize the regular rate regulations to better reflect the 21st-century workplace. AGC believes that employees and employers alike are best served with a system that promotes maximum flexibility in structuring employee pay and benefits and clarity for employers when preparing total compensation packages. In response to the previously proposed revisions, AGC educated the WHD on the prevalent industry practices and advised that any changes in processes or requirements should be minimally disruptive to business operations and burdensome administratively.  

For more information, contact Claiborne Guy at claiborne.guy@agc.org or 703-837-5382.

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