Department of Labor Issues Proposal to Update the FLSA’s Regular Rate Regulations

The U.S. Department of Labor (DOL or Department) announced a proposed rule to update and clarify the regulations pertaining to regular pay rate requirements.  This proposed rule would modify the requirements for the first time in 50 years.  Written comments are due on or before May 28, 2019.

Currently, it is unclear whether certain perks must be included in the calculation for regular rate pay.  The proposed rule is intended to better define the regular rate and focuses on clarifying whether certain perks, benefits, or other items must be included in the regular rate. 

The DOL, in its Fact Sheet: Notice of Proposed Rulemaking to Update the Regulations Governing the Regular Rate under the FLSA, discusses some key provisions of the proposed Rule.  The Department’s proposed clarifications include the following:

• that the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services may be excluded from an employee’s regular rate of pay;
• that payments for unused paid leave, including paid sick leave, may be excluded from an employee’s regular rate of pay;
• that reimbursed expenses need not be incurred “solely” for the employer’s benefit for the reimbursements to be excludable from an employee’s regular rate;
• that reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and meets other regulatory requirements may be excluded from an employee’s regular rate of pay;
• that employers do not need a prior formal contract or agreement with the employee(s) to exclude certain overtime premiums described in sections 7(e)(5) and (6) of the FLSA; and
• that pay for time that would not otherwise qualify as “hours worked,” including bona fide meal periods, may be excluded from an employee’s regular rate unless an agreement or established practice indicates that the parties have treated the time as hours worked.

The Department also proposes to provide examples of discretionary bonuses that may be excluded from an employee’s regular rate of pay under section 7(e)(3) of the FLSA and to clarify that the label given a bonus does not determine whether it is discretionary.