KingSpry | Department of Labor Updates Regular Rate FLSA

Department Of Labor Updates 60-Year-Old Regulation

Photo of attorney Keely J. Collins

Posted on March 28th, 2019
by Keely J. Collins

Just this morning, March 28, 2019, the Department of Labor announced a proposed rule that would, if adopted, update the “regular rate” requirements of the Fair Labor Standards Act (FLSA).

Why does this matter?

Your “non-exempt,” or hourly wage-earning, employees must be paid at least one and one-half times their “regular rate” for all hours worked over 40 hours.  The FLSA’s regulations provide what forms of payment must be included in employees’ “regular rate.”

The current regulation, adopted more than 60 years ago, includes more traditional forms of compensation in employees’ regular rate, including the perks of employment, such as paid holidays, vacations, and basic medical plans. This current structure not only discourages employee benefits, but is based on an outdated model of employee pay.  In modern times, compensation packages are more likely to include employee benefits and perks, including wellness programs, tuition repayment programs, gym memberships, and paid time off (PTO), among many other things.

What would the proposed regulations, if adopted, do for business?

The regulations would allow employers to exclude the following from the determination of “regular rate.”

  • 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; and
  • tuition programs, such as reimbursement programs or repayment of educational debt.

This would allow you, as an employer, to offer the perks of employment, without fear that this generosity will open the door for scrutiny by the DOL’s Wage and Hour Division.

What should employers be doing, if anything, in light of the proposed rule?

To reiterate, this rule is just in a proposed form. There is nothing final yet that must be implemented. That being said, there is action employers may take to have their voices heard by the DOL.

Officially, the Notice of Proposed Rulemaking will be published on March 29, 2019 in the Federal Register. At that time, all interested parties are encouraged to submit comments on the proposal at www.regulations.gov in the rulemaking docket RIN 1235-AA24. To be taken into consideration by the DOL, all comments must be received by May 28, 2019.

Please contact your legal counsel if you have any questions. You may also feel free to contact me at kcollins@kingspry.com. I would love to hear from you!

 

The Eastern Pennsylvania Employment Log (EPELog) is a publication of the KingSpry Employment Law Practice GroupJeffrey T. Tucker, Esquire, is our editor-in-chief. EPELog is meant to be informational and does not constitute legal advice.