On December 16, 2019, the U.S. Department of Labor published a Final Rule clarifying whether certain benefits and other payments must be included in the “regular rate” for purposes of overtime pay. I’ve posted about this numerous times (one recently). Recall, a “discretionary bonus” must truly be discretionary in order for an employer to not have to include that pay as a part of the employee’s regular rate (which the increases amount due for overtime). If you’ve heard of the company that recently gave its employees a cut of a $10 million holiday bonus – THAT is a discretionary bonus (did you seek the surprised look on their faces?!).
However, there are other types of pay and bonuses and perks that the DOL has clarified do not need to be included into the “regular rate,” similar to a discretionary bonus:
- Parking benefits, wellness programs, onsite specialist treatment, gym and fitness access/classes, employee discounts on goods and services, tuition benefits and adoption assistance.
- Payments for unused paid leave such as PTO, vacation, sick & safe time.
- Payments for certain penalties under state and local scheduling laws.
- Reimbursed expenses such as cell phones, exam fees, membership dues.
- Sign-on bonuses and longevity bonuses.
- Office coffee and snacks to employees as gifts.
- Discretionary bonus (which is not new), but clarifies that the label given a bonus does not determine whether its discretionary (which I know you already know because you’ve been reading my blog!).
- Contributions to benefit plans for accident, unemployment legal services or other events that could cause future financial hardship or expenses.
- Call-back pay no longer needs to be “infrequent and sporadic” to be excluded (but yet can’t be prearranged and regular).
Of course, this is just a summary, and there are always exceptions to the rule (and exceptions to the exceptions), and nuances. The actual Final Rule provides many examples. Accordingly, before attempting to exclude pay from the regular rate, you should always check the law first! Happy Holidays!