Even the most well-intentioned employer who wants to comply with the FLSA will have trouble, as there are many gray, nuanced provisions and regulations in this law, especially on overtime computation.  One of these is the requirement to include non-discretionary bonuses in the overtime calculation of non-exempt workers.  That may now be changing as the USDOL has issued a notice of proposed rulemaking, one proposal of which states that employers do not have to include these bonuses or other quasi-monetary benefits they receive from their employers.

The agency has stated that the new rules are intended curb the “fears” that prevent employers “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 agency also wants to update these rules as the proposals would clarify the meaning of the term “regular rate” in the modern world of work.

First, there must be a notice of proposed rulemaking.  The comment period has opened and will close on May 28.  Now, the FLSA mandates that employers include, in employee regular rates for purposes of overtime computation, “all remuneration for employment paid to, or on behalf of, the employee.”  There are currently some exclusions but now there would be more.

The new rule would exclude from regular rate calculations any cash outs of unused PTO time.  The rule also would exclude the cash amounts given for perks such as onsite health treatment by chiropractors and massage therapists, employer-provided gym memberships, employee discounts on purchases of company products and amounts given for tuition reimbursement.  Most significantly, the rule provides for the exclusions of some sums given as “bonuses.”  The rule would take out of the includible amounts such sums paid for being the employee of the month honors or a sum given for “unique or extraordinary efforts.”

The Takeaway

The proposal probably can be fairly characterized as pro-employer.  Exclusion of these items in the regular rate will result in lower overtime calculations.  On the other hand, some of these items (e.g. gym memberships) were likely never intended by the drafters of the regulations to be included.

I think it’s progress…