DOL Modernized Regulations for Payments Excluded from Pay Rate Used to Calculate Overtime

DOL Modernized Regulations for Payments Excluded from Pay Rate Used to Calculate Overtime

The Fair Labor Standards Act (FLSA) and associated Department of Labor (DOL) regulations have established for decades that all compensation (whether in the form of payments, benefits, or perks), in addition to an hourly non-exempt employee’s base hourly rate, must be included in the formula used to calculate the specific rate (known as the regular rate of pay) to pay 1.5x overtime unless the compensation is specifically excluded by the FLSA or DOL regulations. For the first time in over 60 years, the DOL updated its exclusions regulations to stay in step with today’s workforce total compensation package arrangements. The updated regulations took effect on January 15, 2020, and they are generally favorable to employers because they elaborate on exclusions of categories of payments and benefits that were not contemplated or in wide use six decades ago, such as exclusion of employer-paid gym memberships, onsite wellness specialist treatments, or PTO (paid time off), as opposed to just vacation/holiday and statutory reporting time premiums for significantly early shift dismissals.