On December 12, 2019, the Department of Labor (DOL) issued a Final Rule on what can be included and what can be excluded when calculating the regular rate for the purpose of calculating overtime. This is the first time in 50 years the DOL has issued new regulations regarding the regular rate.
The Department clarifies the regulations to confirm that employers may exclude the following from an employee’s regular rate of pay:
- the cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access, and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;
- payments for unused paid leave, including paid sick leave or paid time off;
- payments of certain penalties required under state and local scheduling laws;
- reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred “solely” for the employer’s benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments”;
- certain sign-on bonuses and certain longevity bonuses;
- the cost of office coffee and snacks to employees as gifts;
- discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples and;
- contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.
The Final Rule also gives more specific definitions of call-back pay and basic rates.
The Final Rule will be published December 16, 2019 in the Federal Register and will take effect January 15, 2020. Employers should start working now to be sure they understand the new regular rate rules and make adjustments on or before January 15. If your payroll system automatically calculates regular rate, you will want to contact your vendor regarding when and how they will make adjustments and update the platform. Please contact Employers Council with any questions.