FLSA’S “REGULAR RATE” WILL CHANGE SOON

The U.S. Department of Labor (“DOL”) recently offered hope to many employers that are seeking clarity regarding compliance with the Fair Labor Standards Act’s (“FLSA”) overtime calculation rules. The FLSA generally requires employers to pay employees overtime pay of at least one and one-half times their regular rate for hours worked in excess of 40 hours a week. It has been nearly 60 years since the DOL last updated its regulations pertaining to overtime calculation rules. Although compensation standards have progressed over the last 30 years, employers have been discouraged from offering their employees certain compensation packages in the absence of regulatory clarity. The DOL’s proposed rule will help resolve some of this ambiguity.

In particular, the new rule would exclude various forms of compensation from an employee’s “regular rate.” The FLSA defines an employee’s regular rate as “all remuneration for employment paid to, or on behalf of, the employee.” Some of these exclusions include, but are not limited to, the following: (1) payments for unused paid leave; (2) reimbursed expenses, even if the expenses are not for the employer’s benefit; (3) various benefit plans, including unemployment and legal services; (4) costs associated with providing wellness and fitness programs; and (5) certain reimbursement tuition programs.

Moreover, the DOL’s new rule also clarifies what constitutes a discretionary bonus. In particular, the new rule provides that simply calling a bonus “discretionary” does not make it so for purposes of calculating overtime wages. Bonuses that are included in the regular rate, however, are those paid out pursuant to an employee’s employment agreement. For more information regarding the federal overtime regulations and how it will affect your business, contact the attorneys at Rock, Fusco & Connelly, LLC.

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