DOL Proposes to Clarify Eligible Pay for Overtime

Though a different proposed overtime rule made headlines this spring, the U.S. Department of Labor (DOL) recently published a more modest proposal for the Fair Labor Standards Act (FLSA) on March 28, 2019. According to Notice of Proposed Rulemaking: Regular Rate, DOL hopes to clarify and update the decades-old regulations that help employers calculate the appropriate overtime pay for its employees.

The FLSA currently requires overtime at 1.5 times the “regular rate at which [he or she] is employed.” However, DOL believes the regulations may be unclear as to whether certain benefits and other payments are to be included in the “regular rate” for purposes of calculating overtime. Accordingly, the update to the rule would clarify several benefits that should not be counted as part of a typical employee’s regular rate, including:

  • Payments for used PTO
  • Reimbursement for expenses, even if expenses weren’t “solely” for the employer’s benefit
  • Discretionary bonuses
  • Tuition reimbursement and educational debt repayment
  • Benefit plans for accident coverage, unemployment and legal services

Additionally, the regular rate would exclude both show-up pay and call-back pay — provided that such payment is not “prearranged” on the basis of foreknowledge. On-call pay, however, may be included in the regular rate when paid for the performance of job duties.

With the proposed rule published to the Federal Register, the public may review and submit written comments at until May 28, 2019.

Note: Companies are responsible for ensuring their own compliance with overtime laws and regulations.