Employers always have difficulty knowing what sums should be included in calculation of the regular rate and many employers unwittingly walk themselves into trouble by not knowing the intricacies of FLSA computation. Well, the USDOL is finally doing something about that. The agency just finalized a rule that allows employers to not include the cash value of many traditional “perks,” such as tuition benefits, cash-outs of accrued leave and certain bonuses.
The new rule makes it easier for employers to “more easily offer perks and benefits to their employees.” The rule will be final in approximately one month. The rule revises the sections of the regulations that deal with statutory exclusions from the regular rate. Currently, there are seven recognized exceptions to the inclusion rule but the revision greatly expands those exclusions to encompass things like payments for unused paid leave, cellphone and travel reimbursement, parking reimbursement, wellness plans and gym use.
Importantly, the rule also excludes signing and longevity bonuses and some “discretionary bonuses” as well. For example, some of the bonuses now excluded are those given for employee of the month or a bonus for “overcoming challenging or stressful situations.” The new rule is also expected to cut down on litigation.
The agency stated that it could not quantify the value of the new/additional benefits/perks that employers could now provide after the rule goes into effect. One commentator, Tammy McCutchen, stated that the new rule allows businesses to extend perks to their workers and not be afraid that a lawsuit will ensue. She stated that “because the regulations are so old, it really has opened up the door for plaintiffs’ attorneys to file lawsuits alleging that employees earned overtime on a lot of these great modern benefits.” Another commentator decried the fact that the new rule only mandates inclusion in the regular rate if the benefits are “anticipated” or “prearranged,” which places the onus on the employees, said this pro-worker commentator.
The Takeaway
The key is whether the employer is undertaking providing the benefit or perk to circumvent or evade the overtime obligations of the FLSA. In this regard, employer-furnished gym memberships do not seem to be related to work, while tuition benefits could be, depending on the circumstances. The important point is that the agency is adapting an eighty year old law to the realities of the modern workplace and providing more certainty for employers!
As the New Year dawns…