Since Jan. 15, an updated U.S. Department of Labor (DOL) regulation has been in effect clarifying for employers which job benefits and perks to include in pay for purposes of calculating overtime due to nonexempt workers (usually hourly). The “regular rate of pay” is the basis from which one-and-one-half times pay is determined when overtime is due under the federal Fair Labor Standards Act (FLSA) for hours worked above 40 in a workweek.
The FLSA requires that normally overtime is 1.5 times a covered worker’s remuneration, subject to certain exclusions. The main question addressed in the rule change is what benefits must be added to wages to reach the regular rate of pay for purposes of overtime calculation.
As background, more than a half-century ago, the DOL issued the previous “regular rate of pay” rules for purposes of overtime calculation. At that time, most employees got wages plus maybe health insurance, paid holidays and pensions, depending on the profession.
Since then, job perks have evolved to include many new and different types, including potentially:
- Gym memberships
- Parking or transit costs
- Retail discounts
- Technology discounts or allowances
- Tuition reimbursement
- Wellness programs
- Adoption assistance
- And others
Reportedly, some employers were concerned about offering new, creative kinds of job perks because they did not know whether to include their value in the regular rate of pay. Part of the motivation for the revised regulations is to clarify includable benefits and pay so that employers can offer employees new kinds of benefits without this concern.
Excludable items
Under the new rules, here are some benefits that employers may exclude from the regular rate calculation:
- Gym memberships, access and fitness classes
- Wellness programs
- Certain tuition programs
- Adoption assistance
- Parking
- Discounts on retail
- Unused paid time off
- Employer-provided coffee and snacks
- Discretionary bonuses
- Some signing and longevity bonuses
- Some business expense reimbursement
- Gifts
- Premium pay for working outside of regular hours
- And others
New York employers should work with legal counsel to determine whether their calculation of regular rates of pay complies with the revised rules as well as to consider whether they want to offer any new benefits or perks, which the rules have now clarified as included or excluded. In addition, employers should request guidance about whether New York wage-and-hour laws apply to them and whether state law changes the rate calculation.
Similarly, a lawyer can advise a New York employee about whether their overtime rate is correctly calculated.
