DOL Announces Proposed Rule On “Regular Rate”

On March 28, 2019, the U.S. Department of Labor (DOL) announced a proposed rule to clarify and update the regulations governing “regular rate” requirements. Regular rate requirements define what forms of payment employers include and exclude in the “time and one-half” calculation when determining employees’ overtime rates.

The DOL explains: “Under current rules, employers are discouraged from offering more perks to their employees as those perks may be vaguely defined in calculating an employee’s regular rate of pay. The proposed rule focuses primarily on clarifying whether certain kinds of perks, benefits, or other miscellaneous items must be included in the regular rate.” The DOL’s proposal allows employers to 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 under the Federal Travel Regulation System and that satisfy other regulatory requirements;
• discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
• benefit plans, including accident, unemployment, and legal services; and
• 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 “show up” pay.

Employers can review the proposed rule via the Federal Register. Public comments are invited with a May 28, 2019 deadline. We will keep you updated on this matter.

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