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Regular Rate

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On March 28, 2019, DOL announced a proposed rule to clarify and update the regulations governing the "regular rate" on which overtime is computed.   Under current rules, employers are discouraged from offering more perks to their employees as it may be unclear whether those perks must be included in the calculation of an employees' 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 proposed clarifications to confirm that employers may 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 DOL has not proposed any changes to the definition of an excludable discretionary bonus but the agency has proposed some new examples of discretionary bonuses that are excludable.  These include bonuses paid to employees who make unique or extraordinary efforts that are not awarded according to pre-established criteria, severance bonuses, bonuses for overcoming challenging or stressful situations, and employee-of-the-month bonuses.  The proposed rule also includes additional clarification about other forms of compensation, including payment for meal periods, "call back" pay, and others. 

Comments on the "regular rate" regulations are due May 28, 2019. 

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