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Labor & Employment News Alert – 2020: A New Year Full of New Rules

December 2, 2019

The Department of Labor has been busy this year. In addition to issuing the final rule raising the salary threshold for overtime exemptions, the DOL has recently announced a final rule clarifying and updating the regulations governing the “regular rate” requirements under the FLSA. These new regulations – which mark the first time in more than 50 years that the DOL has updated the regular rate definition – are to take effect January 15, 2020.

The FLSA generally requires overtime pay of at least one and on-half times the “regular rate” for hours worked in excess of 40 hours per workweek. Employers should know that an employee’s “regular rate” is not the same as his hourly rate. The regular rate regulations define what forms of payments employers must include and may exclude in this calculation when determining employees’ overtime rates. Currently, the regular rate includes hourly wages and salaries for nonexempt employees plus most bonuses, shift differentials, on-call pay, and commissions, and it excludes health insurance, paid leave, holiday and other discretionary bonuses, and certain gifts. For years, employers have been uncertain as to what perks and benefits they could offer without facing unknown overtime consequences by unintentionally raising an employee’s regular rate of pay. However, this new rule provides much needed clarity as to which benefits an employer may provide without facing such unintended negative consequences. One of the DOL’s goals in issuing this regulation was to encourage employers to “provide additional and innovative benefits to workers without fear of costly litigation.”

Specifically, the DOL clarified the regulations to confirm that employers may exclude the following benefits from an employee’s regular rate of pay:

  • Cost of providing certain parking benefits, wellness programs, onsite specialist treatments, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits, and adoption assistance;
  • Payments for unused paid leave;
  • Payments of certain penalties required under state and local scheduling laws;
  • Reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel (even if not incurred “solely” for the employer’s benefit);
  • Certain sign-on and longevity bonuses;
  • The cost of office coffee and snacks to employees as gifts;
  • Discretionary bonuses (noting that the label given to a bonus does not determine whether it is discretionary); and
  • Contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.


The new rule also provides helpful guidance and fact-based examples to illustrate the types of bonuses that are discretionary and may be excluded from an employee’s regular rate. The awarding of bonuses has previously been a tricky area for employers. Finally, the DOL also made two substantive changes to the existing regulations: (1) it eliminated the restriction that “call-back” pay and other similar payments must be “infrequent and sporadic” to be excludable from an employee’s regular rate (but maintained that they cannot be excluded if they are prearranged); and (2) it updated regulations related to the “basic rate” as an alternative to the regular rate calculation under specific circumstances.

While this new regular rate rule is different from the exempt salary threshold rule in that it is predominately explanatory in nature (the new salary rules hold the force of law), it is still important that employers understand how the newly-defined regular rate exclusions can impact their workforce. Significantly, employers who follow the new rule can show they made a good-faith effort to comply with FLSA.

And Don’t Forget! The new rule raising the salary threshold for overtime exemptions to $35,568 per year ($684 a week) takes effect on January 1, 2020. Click here to find more details on what you must do to comply by the deadline. As always, if you have any questions regarding this new influx of rules, let us know. We are here to help.


Breanna H. Young

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