The Division of Labor (DOL) has issued a Discover of Proposed Rulemaking (NPRM) to revise the laws governing the calculation of the common price beneath the Truthful Labor Requirements Act (FLSA).
The FLSA usually requires employers to pay non-exempt staff additional time pay at one-and-one-half occasions their “regular rate” for all hours labored over 40 in a given workweek. The common fee is defined, with a couple of exceptions, as all “remuneration for employment paid to, or on behalf of, the employee,” divided by the whole number of hours labored during that week. Employers typically wrestle, nevertheless, with correctly determining the common price when providing numerous advantages and different types of compensation to their staff in the trendy workplace.
The proposed laws, released on March 28, 2019, are lengthy and detailed, and public feedback have to be submitted by Might 28, 2019. We evaluation some highlights of the proposal under.
- 1 Vacation, Sick Time, Paid Time Off
- 2 “Bona Fide” Meal Durations
- 3 Reimbursement for Affordable Expenses
- 4 “Other Similar Payments”
- 5 Show-Up Pay
- 6 Name-Back Pay
- 7 Predictability Pay or Schedule Change Premiums
- 8 “Clopening” Pay
- 9 Discretionary Bonuses
- 10 Contributions Pursuant to Bona Fide Benefit Plan
- 11 Voluntary Premium Payments
- 12 The Laws are Not Exhaustive
- 13 What Happens Subsequent
Vacation, Sick Time, Paid Time Off
The proposed amendments handle the employer development of consolidating trip, sick, and private time into one category, known as “paid time off” (PTO). DOL clarifies that cost for PTO (when not worked), as well as payouts for unused PTO, needn’t be included in the common fee, as that is pay for non-working time.
“Bona Fide” Meal Durations
A proposed modification addresses the obvious contradiction that has arisen between 29 C.F.R. § 778.218(b) and 29 C.F.R. § 778.320 surrounding whether or not pay for “bona fide meal periods” is excludable from the common price.
Section 778.218 considerations payments made for occasional durations when no work is carried out. It supplies that when funds for such time “are in amounts approximately equivalent to the employee’s normal earnings,” they don’t seem to be compensation for hours of employment and may be excluded from the regular price. Part 778.218(b) additional supplies that this clause “deals with the type of absences which are infrequent or sporadic or unpredictable,” not with lunch durations or days of rest which are recurrently scheduled.
Part 778.320 addresses “hours that would not be hours worked if not paid for,” akin to “time spent in eating meals between working hours.” Part 778.320(b) states that even when such time is compensated, the events might agree the time won’t be counted as hours worked.
In mild of each the courts’ and the DOL’s personal recognition that Sections 778.218(b) and 778.320(b) “may not be compatible,” the DOL proposes to amend the laws to remove the reference to “lunch periods” in Part 778.218(b) to “eliminate any uncertainty about its relation to [Section] 778.320 concerning the excludability of payments for bona fide meal periods from the regular rate.”
Reimbursement for Affordable Expenses
Beneath present laws, employer reimbursement of expenses incurred by an employee for his or her personal profit, similar to commuting expenses, meals, lease, and so forth, have to be included in the regular price. Nevertheless, beneath Part 778.217 of the present laws, reimbursable expenses are excludable if they are incurred “solely” in the curiosity of the employer. The FLSA itself does not embrace this limitation. As an alternative, the Act excludes all expenses incurred “in the furtherance of [the] employer’s interests.” Because neither the courts nor the DOL have abided by the “solely” language, the proposed amendments would take away that phrase from Section 778.217.
Alongside these similar strains, the proposed amendments provide steerage on what constitutes a “reasonable” expense inside the which means of 29 C.F.R. 778.217(b) and excludable from the common price. For instance, if an employer pays the worker double for any bills the employee incurs, the overage may be thought-about wages. The DOL states that it’ll contemplate an expense to be per se affordable whether it is “at or beneath the maximum amounts reimbursable or allowed for the same type of expenses under the Federal Travel Regulation ….” While reimbursements exceeding these amounts won’t necessarily be deemed “unreasonable,” they won’t be thought-about per se affordable and have to be evaluated on a case-by-case basis.
“Other Similar Payments”
Section 7(e)(2) of the FLSA identifies three categories of remuneration which might be excluded from the common fee: (1) payments made for infrequent durations when no work is performed as a result of vacation, vacation, illness, failure of the employer to offer enough work, or different comparable cause; (2) affordable funds for traveling expenses, or other bills, incurred by an worker within the furtherance of his or her employer’s interests and properly reimbursable by the employer; and (3) different comparable funds to an worker which aren’t made as compensation for his or her hours of employment. 29 U.S.C. § 207(e)(2). Whereas the primary two classes are pretty simple, the third is frustratingly obscure.
Courts usually have held that the “similar payments” exclusion applies to any compensation paid based mostly on a person’s basic standing of being an employee and never on the quality or quantity of his or her work. The proposed amendments would add quite a lot of further examples to the non-exhaustive record of excludable benefits at present found in the laws to include “conveniences furnished to the employee,” corresponding to:
- “Treatment provided on-site from specialists such as chiropractors, massage therapists, physical therapists, personal trainers, counselors, or Employee Assistance Programs”;
- “Gym access, gym memberships, fitness classes, and recreational facilities”;
- Trendy “wellness programs” similar to health screenings, vaccinations, smoking cessation help, and vitamin courses;
- Reductions on employer-provided retail goods and providers; and
- “[T]uition benefits.”
These benefits cannot be tied to the “employee’s hours worked, services rendered, or other conditions related to the quality or quantity of work” (besides that an employer might require an preliminary waiting period for benefit eligibility or require reimbursement if the profit is misused).
Among the categories newly described, the carve-out for tuition assistance benefits doubtless would be the most fascinating to employers. It poses quite a lot of questions, nevertheless. For example, many employer tuition assistance packages are open solely to staff who have attained a sure number of years of service. The proposed laws do not clarify whether or not the allowance of an “initial waiting period” would include a coverage that requires two or three years of service before tuition reimbursement turns into obtainable. The DOL is looking for further info and feedback concerning the nature of employers’ tuition help plans and employers’ considerations in providing such plans.
Present DOL laws present that funds given by employers to staff for “show-up” pay is excluded from the common fee of pay beneath Section 7(e)(2) of the FLSA. Present-up pay describes a minimal cost given to staff who report back to work and are sent house due to lack of labor. For example, if an worker studies to work, works one hour, and is shipped house, some employers voluntary present show-up pay for a minimum quantity (e.g., 4 hours) of labor. Beneath some state laws, such minimum pay is required.
The proposed amendments make clear that current state and local laws, requiring “reporting pay” for employees who’re unable to work their scheduled hours because the employer subtracted hours from a daily shift earlier than or after the worker studies to obligation, can be handled as “show-up” pay beneath present laws. The DOL refers to proposed laws in Arizona, Connecticut, Illinois, Massachusetts, Maryland, New York, and Chicago.
Underneath Section 778.221 of the present laws, if an worker known as again to work after his regular shift ends, pay for the number of further hours the employee truly works, in fact, is included in his or her complete hours of labor and in calculation of the common fee. Nevertheless, any further pay the worker receives merely for being recalled to work may be correctly excluded from the common fee. For instance, if an employee returns to work for an emergency and works one hour, however is paid a minimal of 4 hours, the three further hours may be excluded from the regular fee.
The proposed amendments revise Part 778.221 to get rid of the requirement that call-back funds be acquired only on an “infrequent” or “sporadic” basis for the exclusion to apply (thus, arguably broadening the exclusion). The revision additionally notes the funds cannot be “so regular that they are essentially prearranged.”
For instance the point, the proposal supplies an example of an employee who known as in to help clean up a store after a roof leak and known as in three weeks later to cowl for a coworker who left for a family emergency. If the employee is given minimal call-back pay, the pay in excess of hours truly worked may be excluded, as these incidents were not prearranged. Nevertheless, if the worker known as in for “emergency help” during a busy interval for six out of eight weeks, the proposed laws present that the call-back pay can be “so regular” that it is, in effect, “prearranged” and cannot be excluded. In contrast, cost for durations when an worker is “on-call” have to be included in the common price, in accordance with DOL laws.
Predictability Pay or Schedule Change Premiums
A number of native jurisdictions, together with New York Metropolis and Seattle, have enacted laws requiring employers to pay staff a schedule change premium or penalty when an employer fails to offer staff with adequate notice (e.g., lower than 14 days) prior to the beginning of their shift or cancels a shift with out enough notice to an employee. As with call-back pay, the proposed laws present that these additional funds could also be excluded from the regular fee of pay underneath Section 207(e)(2) of the FLSA, so long as they don’t seem to be “so regular” that they’re “essentially prearranged.”
Just like predictability pay, the proposed laws present that additional payments given by employers to staff solely as a result of the workers are referred to as back to work earlier than the expiration of a specified variety of hours between shifts needn’t be included in the common price of pay. This type of compensation is usually referred to as “rest period” pay or “clopening” pay, as a result of an worker is required to work each a closing shift and the next opening shift without enough rest time between the shifts. Once more, to be excludable, such payments cannot be so widespread as to be prearranged.
An employer providing a bonus to non-exempt staff should decide whether the bonus ought to be included or excluded from the regular price of pay. The overall rule is that non-discretionary bonuses have to be included, while discretionary bonuses could also be excluded. (Discretionary bonuses are those where the very fact and the amount of the bonus are decided on the sole discretion of the employer at or near the top of the period to which the bonus corresponds.)
The proposed amendments search to “elaborate” on the kinds of bonuses which might be, and aren’t, discretionary, purportedly to add “clarity” for employers and staff.
The proposed laws reiterate that a bonus’s label shouldn’t be determinative. A brand new part (29 C.F.R. § 778.211(d)) expressly offers that “the label assigned to a bonus does not conclusively determine whether a bonus is discretionary under section 7(e)(3) of the Act.” Proposed Section 778.211(d) also lists further examples of bonuses that could be non-discretionary: (1) bonuses to staff who made unique or extraordinary efforts which are not awarded in accordance with pre-established standards (citing a case the place staff got “spot bonuses” for extraordinary contributions); (2) severance bonuses; (3) bonuses for overcoming challenging or annoying conditions (citing a 2008 DOL opinion letter addressing a bonus given to 911 operators); (four) employee-of-the-month bonuses; and (5) “other similar compensation.”
Contributions Pursuant to Bona Fide Benefit Plan
Section 7(e)(4) of the FLSA excludes from the regular price “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, accident, or health insurance or similar benefits for employees.” The prevailing DOL laws (i.e., 29 C.F.R. § 778.215(a)(2)) additional clarify that, to be excludable, “
The DOL’s proposed amendments try and update this regulation by adding more examples of the kinds of trendy benefit plans that could be excludable from the regular price of pay. The Department proposes including “accident, unemployment, and legal services” as further examples of contributions which are excludable from the common fee. The proposed amendments make clear that these examples, like the examples already offered in the regulation, must fulfill the opposite requirements outlined in Part 778.215. The DOL is inviting comments on whether there are different comparable benefit plans that likewise ought to be included as examples.
Voluntary Premium Payments
Section 207(e) of the FLSA permits employers to exclude from the common price certain extra time premium payments made for hours of work on particular days or in excess or outdoors of specified every day or weekly commonplace work durations. Particularly, premiums could also be excluded:
- For “hours worked in excess of eight in a day or in excess of the maximum workweek applicable to such employee [under Section 7(a)] or in excess of the employee’s normal working hours or regular working hours, as the case may be,” Section 207(e)(5);
- “[F]or work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in non-overtime hours on other days,” Part 207(e)(6); or
- “[I]n pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection [7(a)], where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek.” Section 207(e)(7).
Additionally, Section 207(h)(2) supplies that additional compensation of the kinds described in Sections 7(e)(5), (6), and (7) is creditable toward additional time compensation owed beneath Section 7(a). These are the one varieties of compensation excludable from the common price that also are creditable towards extra time compensation.
Present DOL laws (i.e., 29 CFR §§ 778.202, 778.203, 778.205, and 778.207) explain the requirements for excluding from the common price the additional time premiums described in Sections 207(e)(5) and (6). The DOL’s proposed amendments recommend removing from the prevailing laws any references to “employment agreements” or “contracts,” so as to remove any confusion that the extra time premiums described in Sections 207(e)(5) and (6) could also be excluded solely underneath written contracts or agreements. The DOL explained that this clarification is in step with the truth that neither Part 207(e)(5) nor Section 207(e)(6) requires that the extra time premiums be paid pursuant to a formal employment contract or collective bargaining settlement (versus Part 207(e)(7), which expressly requires such a contract or bargaining agreement). The DOL notes that this interpretation, which focuses more on the employer’s follow than on any formal settlement or contract, is in keeping with each its personal follow and with how most courts have interpreted the FLSA and present laws. Nevertheless, as a result of some courts have expressed confusion, the DOL is looking for to make clear its position in the laws.
The Laws are Not Exhaustive
As a result of compensation practices might range considerably and can proceed to evolve, the DOL notes, so long as the minimal wage and extra time requirements are glad, the FLSA does not prohibit the types of “remuneration” that an employer might pay. The DOL further explains that, whereas the eight classes of excludable funds enumerated in the present laws are exhaustive, until otherwise indicated, these laws do not include an exhaustive listing of permissible or impermissible compensation practices.Somewhat, the laws merely present examples of normal fee and extra time calculations that, by their phrases, might or might not adjust to the FLSA beneath Part 207(e).
Accordingly, the proposed amendments intend to specify that the examples of excludable cost varieties set forth in the laws will not be exhaustive and other cost varieties might exist that nonetheless qualify as excludable from the regular fee.
What Happens Subsequent
The 60-day period for the general public to touch upon the proposed amendments is underway and closes on Might 28, 2019. Following the remark period, the DOL probably will challenge a Ultimate Rule, although no date has been announced for doing so.
The DOL’s proposed amendments to the laws, whereas unlikely to remove all problems stemming from the oft-confounding regular price willpower, however should provide some much-needed and up to date steerage to employers of their efforts to adjust to the FLSA.
Jackson Lewis P.C. © 2019