The U.S. Department of Labor (DOL) yesterday announced its final rule on perks and benefits under the Fair Labor Standards Act (FLSA), defining what forms of payment are eligible for the time and one-half calculation when determining overtime rates.
Under FLSA, covered, nonexempt workers must be paid overtime at no less than one and one-half times their regular rate of pay if working over 40 hours in a workweek. Previously, employers were uncertain about the role that perks and benefits play when calculating the regular rate of pay. The new rule clarifies which perks and benefits must be included in the regular rate of pay, and those that employers can offer without risk of additional overtime liability.
Under the FLSA, covered, nonexempt workers must be paid overtime at no less than one and one-half times their regular rate for hours worked in excess of 40 in a workweek. Certain goods and services provided to the employee count towards the calculation of the regular rate. Today’s Final Rule specifies certain perks or benefits that will not affect the regular rate.
Referencing the significant expansion of employee compensation packages since 1950, (from an average of 5%, then to 33% today), sick leave and scheduling laws like the Fair Workweek Ordinance (read more about Chicago’s Fair Workweek Ordinance here), the updates expressly restrict certain requirements and penalties for FLSA overtime purposes. The exclusions follow many employment trends, as the DOL seeks to “modernize” the regulations.
Perks and benefits that are excluded from the rate of regular pay include:
Other important notes:
As a result, there will likely be an increase in certain perks and benefits offered to employees, as those excluded from FLSA calculations will be of interest to employers looking to motivate and reward workers. The DOL anticipates an economic impact of $281 million in reduced litigation fees over the next decade.
The Final Rule will publish on December 16, 2019, in the Federal Register, with an effective date of January 15, 2020.