- The U.S. Department of Labor (DOL) has answered three questions about whether certain bonuses and benefits must be included in employees' "regular rate of pay" for overtime purposes, it announced March 26.
- The advice, issued in the form of opinion letters, clarifies the agency's recent update to its regular rate regulations implementing the Fair Labor Standards Act (FLSA).
- The first, FLSA2020-3, concluded that a longevity bonus was required, rather than discretionary, and therefore had to be included in employees' regular rate of pay. FLSA2020-4 opined that a first installment of a referral bonus (when the new employee was hired) was not part of the regular rate, but the second part (dependent on the new employee staying for at least a year) must be included. Finally, in FLSA2020-5, DOL said an employer's contributions to a group-term life insurance policy did not have to be included in the regular rate if it met certain statutory and regulatory requirements.
DOL opinion letters give stakeholders the opportunity to ask a question and receive a response that experts have said is a full affirmative defense in the event the writer is involved in litigation. While they can also be helpful for other employers facing lawsuits, some recent rulings have called their value into question. Opinion letters were discontinued during the Obama administration but reinstated by the Trump administration.
These most recent letters pertain to the new rule updating the regular rate of pay standard used for calculating overtime that went into effect in January. In the rule, DOL clarified when certain employer benefits may be excluded when calculating overtime pay for a non-exempt employee, including reimbursements, bona fide meal periods, some benefit plan contributions, state and local scheduling law payments and more. The rule also explains how employers may determine whether a bonus is discretionary or nondiscretionary.
Employers considering changes to employees' regular rates also may need to ensure that any applicable state laws align with the new federal standard. Case law eventually may assist, too, but as the rule is still relatively new, guidance from the judiciary may take some time.