Almost coincident with the effective date of the DOL’s Wage and Hour Division’s overtime rules, which took effect on January 1, 2020 (see our prior Benefit Beat article), the Department of Labor issued another set of final rules, together with a Fact Sheet, on December 16, 2019, to clarify what constitutes a “regular rate of pay”. 

As a reminder, the Fair Labor Standards Act (FLSA) generally requires that nonexempt employees be paid overtime of at least one and one-half times their regular rate of pay for any hours worked in excess of 40 hours per workweek. An employee’s regular rate generally includes all remuneration for employment, with certain exceptions. 

The newly released FLSA rules, which take effect January 15, 2020, clarify the types of benefits and perks that are excludable in the “time and one-half” calculation when determining overtime rates.  Accordingly, following are types of benefits and other miscellaneous payments that are excludable in an individual’s regular rate of pay:

• Cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;
• Payments for unused paid leave, including paid sick leave or paid time off;
• Payments of certain penalties required under state and local scheduling laws;
• Reimbursed expenses such as cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred “solely” for the employer’s benefit;
• Bonuses, including certain discretionary, sign-on and longevity bonuses;
• Cost of office coffee and snacks to employees as gifts; and
• Contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.

Employers should work closely with their compensation advisers to ensure proper implementation of these rules.

The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.