DOL Updates Regular Rate of Pay Rules

The U.S. Department of Labor (DOL), announced a new final rule that clarifies how to calculate an employee’s regular wage rate under the Fair Labor Standards Act (FLSA). The final rule became effective on Jan. 15, 2020.

Calculating the regular rate is an essential first step when determining an employee’s overtime compensation.

Under the FLSA, an employee’s regular rate includes all forms of compensation paid to that employee in a workweek. The final rule clarifies what qualifies as compensation.

The DOL’s stated objective with this rule is to provide more certainty for employers that offer additional perks to their employees, but aren’t sure of whether these benefits should be counted as income under the FLSA.

New Rule at a Glance

• The last updates to the regular rate calculation instructions were made over 60 years ago.
• The final rule accounts for newer forms of employee compensation and benefits.
• The final rule eliminates the “infrequent and sporadic” requirement to exclude call-back pay from the regular rate.

Employer Takeaway 

Employers should become familiar with this final rule and adjust their payroll practices to account for this new guidance on what should be considered compensation.