UPDATE: May 13, 2019: The U.S. Department of Labor has extended the deadline for public comments on its proposed rule to June 12, according to a notice to be published in the Federal Register Tuesday.

Dive Brief:

• The U.S. Department of Labor (DOL) will propose on Mar. 29 a formal update to regular rate of pay requirements under the Fair Labor Standards Act (FLSA), the agency announced Thursday.
• The FLSA's regular rate requirements spell out which payment forms employers can either include or exclude in the process of calculating the time and one-half overtime pay rate for an employee. According to DOL, a lack of clarity around which perks must be included in regular rate calculations has "discouraged [employers] from offering more perks to their employees." 
• The new notice of proposed rulemaking specifies that employers would be able to exclude several items out of regular rate pay calculations, including the cost of providing certain wellness programs and benefits, payments for unused paid leave, reimbursed expenses and discretionary bonuses among other items. The rule will be subject to a 60-day public comment period ending May 28, 2019.

Dive Insight:

The two federal regulations governing regular rate of pay — part 778 and part 548 of Title 29 in the Code of Federal Regulations — "have not been significantly revised in over 50 years," DOL said in a fact sheet. "[M]inor changes and updates," however, were made to part 778, including a 2011 shift to allow employers to exclude income derived from certain stock options, stock appreciation rights and employee stock purchase plans.

DOL last year announced its intent to update the regular rate requirements. Tammy McCutchen, former administrator at the agency's Wage and Hour Division and current shareholder at Littler Mendelson, told HR Dive in an interview the new rules would be a relief for employers, some of whom may have been discouraged from providing perks in the past due to the possibility of a lawsuit.

While the rules could reduce the amount of overtime pay to which workers are entitled, they also have the potential to improve employee benefits, experts told HR Dive. "These clarifications will assist employers with developing compensation and benefits programs and overtime rules that comply with the law," Liz Washko, a shareholder at Ogletree Deakins, told HR Dive in an emailed statement. "And they will benefit employees as the rules will provide employers with the freedom to expand compensation and benefit programs without concerns about the risks of FLSA noncompliance where there may be gray areas."

DOL's proposed rule emphasized that reimbursed expenses "need not be incurred 'solely' for the employer's benefit" to be excluded from an employee's regular rate. Pay for time that wouldn't otherwise qualify as hours worked under FLSA — like meal periods — would also be eligible for exclusion, per the rule. The agency also proposed to clarify exclusions for tuition programs, including student debt reimbursement programs, from the regular rate of pay.

McCutchen noted there were some notable perks omitted from DOL's rules. "Transit subsidies and childcare subsidies are not addressed here, nor are fluctuating workweek questions," she said. McCutchen said she encourages employers who would prefer DOL include these categories in the final rule to submit a public comment to that effect.