Employment Law Report

Payments and Perks: the DOL Announces a Proposal to Clarify What Qualifies as Overtime

By Marianna Michael

On Thursday, March 28, 2019, the U.S. Department of Labor (“DOL”) announced proposed changes to the overtime provisions of section 7(e) of the Fair Labor Standards Act.  In its current form, the statute generally requires employers to pay overtime if workers work more than 40 hours a week.  One exemption to the overtime rule includes the salary basis exemption, where employees generally must be paid at least $455 per week on a salary basis, unless they are outside sales employees, teachers and employees practicing law or medicine.

accounting-blur-budget-128867Overtime pay is equal to one and one half times the regular rate of pay.  In designating what is included under the regular rate of pay, the current provision makes a distinction between payments and perks.  With the proposed provision, the DOL seeks to clarify what qualifies as either a payment or perk in an attempt to discourage employers from offering incentives that are excluded from the calculation of overtime pay.

The proposed changes confirm that the following types of employer-provided benefits may be excluded from the regular rate of pay:

  • the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes and employee discounts on retail goods and services;
  • payments for unused paid leave, including paid sick leave;
  • reimbursed expenses, even if not incurred “solely” for the employer’s benefit;
  • reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and that satisfy other regulatory requirements;
  • discretionary bonuses;
  • benefit plans, including accident, unemployment and legal services; and
  • tuition programs, such as reimbursement programs or repayment of educational debt.

This proposal is published for public comments and will remain open until May 28, 2019.  Comments may be submitted to the Notice of Proposed Rulemaking at www.regulations.gov. More information is available here.

Marianna J. Michael
Marianna Michael is a member of the Firm’s Litigation & Dispute Resolution Service Team. She assists in the representation of a broad range of clients in a variety of cases including commercial disputes, employment matters, immigration law, and employee benefits matters. Read More