HR Policy Applauds and Seeks Additional Guidance in DOL’s Proposed Regular Rate Rule

June 14, 2019

HR Policy urged the U.S. Department of Labor to update and provide additional examples of the types of benefits employers can offer employees without having to fear they would violate the regular rate computation rule for overtime payments under the Fair Labor Standards Act.

The regulations were last updated over 50 years ago and have failed to keep up with the wide variety of creative methods of compensation provided by employers.  The regulations govern when an employer must factor in compensation other than an employee's hourly wage when determining the amount of time-and-a-half overtime.

The proposed rule, which was published on March 29, 2019, would provide much-needed clarity and specific examples of which types of payments and benefits do not have to be included in a regular rate computation for overtime payments under the FLSA, including onsite medical benefits, wellness programs, gym memberships and discounts on employer-provided retail goods and services.  The proposed changes will enable employers to provide additional and innovative benefits to employees without fear of costly litigation.

In our comments, we recommend three additional examples of common, discretionary bonuses that should not have to be included in a regular rate calculation including:

  • Year-end bonuses based on company performance;
  • Referral bonuses for employees not primarily engaged in recruiting activities; and
  • Payments to induce ratification of a collective bargaining agreement.

The Association also urged DOL to provide additional examples of the types of tuition and education benefits that can be excluded from the regular rate of pay, including student loan repayment benefits.

Outlook:  A final rule on what benefits do not have to be included in the FLSA’s regular rate calculation for overtime pay is likely to be published towards the end of 2019 or early in 2020.