On December 12, 2019, DOL published its final rule making the first changes in 50 years in the definition of the FLSA’s “regular rate.” The regular rate, instead of an hourly employee’s base hourly rate, must be used in calculating the rate used for payment of all overtime wages earned by employees covered by the FLSA.
In last month’s issue, we summarized the principal categories of changes we expected to be made in the final rule. The final rule permits employers to exclude from the regular rate calculation the following categories of compensation:
- 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.
- Contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.
The final rule will be effective on January 15, 2020.