Employees subject to the overtime provisions of the Fair Labor Standards Act must pay time and one-half the employee’s regular rate of pay for hours worked over 40 in a given week. As employers began offering new perks to employees, the question of what specific forms of compensation are included in that regular rate has been a topic of considerable uncertainty. On December 12, the Department of Labor’s Wage and Hour Division issued final regulations that address whether certain fringe benefits and related payments can be excluded from the regular rate.
The final rule allows employers to exclude three general types of benefits from the regular rate calculation. First, payments to employees who agree to forgo accrued leave benefits are not considered part of the regular rate. Second, reimbursements for traveling expenses may be excluded. The third category involves a range of payments made to employees that are not compensation for hours worked.
This final group includes things like parking subsidies, gym memberships, tuition or student loan payment programs, cellphone plans, legal services benefits, and retention bonuses. These changes should provide employers with assurances that they will not be subject to claims for additional overtime compensation as a result of expanding these types of employee benefits. DOL issued a fact sheet explaining the changes that can be found here.
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