On March 29, the United States Department of Labor (DOL) issued a request for comments on proposed rules for calculating overtime for non-exempt employees. Specifically, the document notes the confusion of what items of compensation are included in the rate calculation for determining an employee’s regular rate for overtime purposes. Noting that a majority of part 778 was promulgated more than 60 years ago, the DOL noted that workplace laws and types of compensation received in the workplace have evolved dramatically.

The proposed rule would clarify when unused paid leave, bona fide meal period, reimbursements, benefit plans, and certain ancillary benefits may be excluded from the regular rate. According to the DOL, the proposed rule would also revise certain sections of the regulation “to adhere more closely to the Act.”

The Fair Labor Standards Act (FLSA) generally requires overtime pay of at least one and one-half times the regular rate of pay for hours worked in excess of 40 hours per workweek. 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 DOL has noted that many perks and benefits in the modern workplace have not been addressed in the rate of pay calculation throughout the years.

The DOL proposes clarifications to the regulations to confirm that employers may exclude the following from an employee’s regular rate of pay:

  • The cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services
  • Payments for unused paid leave, including paid sick leave
  • Reimbursed expenses, even if not incurred “solely” for the employer’s benefit
  • Reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and that satisfy other regulatory requirements
  • Discretionary bonuses
  • Benefit plans, including accident, unemployment, and legal services
  • Tuition programs, such as reimbursement programs or repayment of educational debt

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

The Department of Labor will be taking comments on the proposed rulemaking through May 29, 2019. Interested parties may submit comments on the proposal here.