June 18, 2019

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DOL Proposes Updating Regular Rate Regulations

On March 28, 2019, the DOL proposed a rule designed to clarify and update the definition of the “regular rate” under Section 7(e) of the Fair Labor Standards Act (FLSA). The current rules have not been updated in decades, and have been the source of some confusion, so employers should welcome this development.

Absent an exemption, employers generally must pay overtime at a rate not less than one and one-half times the employee’s “regular rate” of pay for hours worked in excess of 40 in a workweek. Therefore, accurately calculating an employee’s “regular rate” of pay is essential in order for an employer to correctly pay overtime compensation. However, under the current rules, employers are sometimes unclear as to whether the value of certain perks, benefits, or miscellaneous items should be included when calculating the “regular rate.” The DOL’s proposed rule would provide some long-awaited clarity.

Specifically, the proposed rule would confirm that employers may exclude the following categories of compensation from an employee’s “regular rate” of pay:

  • the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services;

  • payments for unused paid leave, including paid sick leave;

  • reimbursed expenses, even if not incurred “solely” for the employer’s benefit;

  • reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and that satisfy other regulatory requirements;

  • discretionary bonuses;

  • Benefit plans, including accident, unemployment, and legal services; and

  • Tuition programs, such as reimbursement programs or repayment of educational debt.

The proposed rule also clarifies that payment for hours not worked, such as “call back” pay and payment for bona fide meal periods are excludable from the “regular rate” calculation.  Employers would be prudent to monitor the proposed rule and, if adopted, adjust their pay practices for non-exempt employees accordingly to ensure compliance. In the past, miscalculations of the “regular rate” have led to costly class action lawsuits.

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Mary Gambardella Litigation lawyer Wiggin Dana
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Mary brings decades of experience in helping clients comply with ever-changing labor laws and regulations, as well as in managing employment challenges such as sensitive terminations, sexual harassment, reductions in workforce, discrimination claims, and severance agreements. She is a proactive resource for clients seeking her counsel on a variety of human resource issues before they become a costly crisis, as well as a fierce advocate when crises arise.

Mary is Chair of the firm’s Labor, Employment and Benefits Department and regularly represents employers in...

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Lawrence Peikes Employment litigation lawyer Wiggin Dana
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Larry represents the interests of management in all aspects of the employer-employee relationship and is particularly experienced in litigation defense. He has advocated for employers in a wide range of employment cases—before arbitrators, mediators, and government agencies as well as in state and federal courts. In a field where most attorneys rarely appear before a judge, let alone a jury, Larry has successfully tried cases on both the federal and state levels. Despite his extensive courtroom experience, Larry is first and foremost dedicated to finding the best, most pragmatic business solutions to personnel relations challenges, with an eye toward avoiding litigation.

Larry's practice encompasses the full range of employment law issues, including workplace discrimination, sexual and other forms of harassment, wrongful discharge, wage-and-hour compliance, non-competition agreements, trade secret protection, and contract negotiations. Larry represents employers in administrative proceedings before such agencies as the U.S. Equal Employment Opportunity Commission; the Connecticut Commission on Human Rights and Opportunities; the New York State Division of Human Rights and its New York City counterpart; the National Labor Relations Board; the U.S., Connecticut, and New York Departments of Labor; and other administrative bodies charged to enforce federal and state labor laws.

When litigation proves unavoidable, Larry and his team of seasoned employment lawyers have an enviable record of success, disposing of lawsuits on motions, at trial, and by way of advantageous settlements. 

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