Free snacks: Department of Labor issues new final rule regarding "regular rate of pay"

For years, employers have struggled to determine how to calculate overtime compensation under the Fair Labor Standards Act (FLSA). The basic premise is relatively straightforward: for each hour worked in excess of the 40th hour in a given week, employers must pay their nonexempt employees at least one and one-half times their “regular rate of pay” for each hour worked. However, difficulties often arise when an employer is required to determine what a nonexempt employee’s regular rate of pay is during a given time period.

Even if nonexempt employees are not paid by the hour (i.e., salary or commission based pay), employers must calculate their employees’ pay in a per-hour format for purposes of determining their regular rate and ultimately their overtime pay.

Do employee “perks” factor in?

When the FLSA’s regular rate provisions were put into place over 60 years ago, the compensation employers provided to their employees was relatively straightforward. Typically, it consisted of traditional wages, paid time off and possibly contributions to insurances plans. Nowadays, the benefits employers offer their employees are greatly expanded and can include “perks” such as complimentary snacks, training or tuition benefits, gym memberships, employee discounts and parking benefits. For years, employers have been looking for guidance on how these modern-day perks should be accounted for in the regular rate determination.

Fortunately for employers, the United States Department of Labor (DOL) recently issued a final rule for calculating a nonexempt employee’s regular rate of pay. The DOL clarified that the aforementioned perks can generally be excluded when determining a nonexempt employee’s regular rate. Thus, according to the DOL, an employer does not need to add in the value of these perks when determining its nonexempt employees’ regular rates and, ultimately, how much overtime compensation these employees are entitled to receive.

For more information on overtime compensation, consult with a Chuhak & Tecson Employment law attorney for best practices and procedures.

For more information contact Ryan Haas (312 855 4614), principal and general counsel.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.