U.S. Department of Labor Releases New Proposed Overtime Calculation Rules

April 5, 2019

The Wage and Hour Division of the U.S. Department of Labor has released a proposed rule to clarify the types of compensation that must be included in an employee’s regular rate, which in turn affects the computation of the appropriate overtime rate. In what the Department of Labor describes as an effort to “both provide clarity and better reflect the 21st-century workplace,” the proposal largely focuses on whether fringe benefits and perks must be included in the regular rate.  The proposed rule is the second in as many weeks from the Department of Labor, the first of which set forth a new test for “white collar” overtime exemptions, which we previously discussed here.

This proposal is also part of a larger effort by the Department of Labor to establish uniform standards against the backdrop of newly-passed state and local laws requiring paid sick leave time and laws requiring advanced scheduling, spread of hours, and on-call compensation. The proposed rule provides that all paid leave time, whether classified as vacation, sick, or PTO, is excludable from the regular rate, including leave buybacks and lump sum payouts.  Likewise, premium compensation or penalties payable due to scheduling, spread of hours, on-call, or similar laws would be excludable from regular rate.

In calculating overtime compensation, the proposal would specifically exclude certain fringe benefits from computation of the regular rate:

  • Cost of providing onsite treatment from specialists, such as chiropractors, massage therapists, personal trainers, or counselors;
  • Cost of employee gym access and memberships, whether on or offsite;
  • Cost of wellness programs such as health risk assessments, biometric screenings, and vaccination clinics;
  • Employee discounts on products or services which are not tied to hours worked or services rendered; and
  • Tuition programs and reimbursement programs, including those for online courses and continuing-education programs.

Like the recent “white collar exemption” proposal, a comment and review period will follow before any changes are implemented.  We will provide additional updates as the comment period on both proposed rules progresses.

This Labor & Employment Update is intended to keep readers current on developments in the law, and is not intended to be legal advice. If you have any questions, please contact authors Michael D. Jones at 215.851.8461 or mdjones@eckertseamans.com, or any other attorney at Eckert Seamans with whom you have been working.

© Eckert Seamans Cherin & Mellott, LLC, 2019, all rights reserved.


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Michael D. Jones

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