March 26, 2020
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At the end of 2019, the U.S. Department of Labor (DOL) issued a final rule on regular rate requirements under the Fair Labor Standards Act (FLSA). The DOL recently published opinion letters clarifying how to calculate the regular rate in connection with the final rule.
- FLSA2020-3 – Longevity bonuses required to be paid to by a city ordinance are not discretionary gifts and must be included in the regular rate of pay. If a city ordinance made longevity bonuses discretionary rather than mandatory, and they are not measured by or dependent on hours worked, production, or efficiency, the bonuses may be excluded from the regular rate as gifts.
- FLSA2020-4 – A referral bonus paid in part at the point of hiring the referral, and in part after one year of the referral’s employment, falls into different categories based on qualifying elements set forth in the 2019 final rule. Specifically, where the first payment is the result of simply voluntarily referring candidates for hire, without connection to the employee’s job duties and based on social connections, it can be excluded from the regular rate. However, whether the second payment must be included in the regular rate depends on (1) if it is tied to the hours worked, production, and efficiency, and (2) if it is contractually enforceable.
- FLSA2020-5 – Employers must report imputed income from the cost of group-term life insurance over $50,000 in coverage, reduced by any amounts paid by the employee toward purchasing the insurance. Contributions made by an employer to a bona fide benefit plan, such as a life insurance plan, may be excluded from the regular rate as long as it satisfies the criteria in 29 U.S.C. 207(e)(4). Treatment for income tax purposes is irrelevant.
Opinion letters are responses from the WHD to submitted queries, are primarily informative in nature, and are published by the WHD to clarify or interpret existing regulations. In short, they act as a guide for employers to glean how the DOL would treat similar situations.
- Review regular rate calculations for consistency with the final rule and its interpretations.
- Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.
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