March 29 Update: The proposed rule now has been published in the Federal Register.

Labor Secretary Alexander Acosta

The Department of Labor announced a proposed rule Thursday that it said will clarify the amounts that employers should include and exclude when they calculate overtime pay rates for employees working more than 40 hours per week.

It would be the first update to regulations governing regular rate requirements under the Fair Labor Standards Act in more than 50 years.

The proposed rule is being published in the Federal Register on Friday but was available Thursday as a 91-page PDF.

“Under current rules, employers are discouraged from offering more perks to their employees, as those perks may be vaguely defined in calculating an employees’ regular rate of pay,” the department said in the announcement. “The proposed rule focuses primarily on clarifying whether certain kinds of perks, benefits, or other miscellaneous items must be included in the regular rate. Because these regulations have not been updated in decades, the proposal would better define the regular rate for today’s workplace practices.”

Under the proposal, employers may exclude the following from an employee’s regular rate of pay when calculating the overtime rate 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 they are not incurred “solely” for the employer’s benefit;
  • Reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements;
  • Discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
  • Benefit plans, including accident, unemployment and legal services; and
  • Tuition programs, such as reimbursement programs or repayment of educational debt.

The proposed rule also includes additional information meant to be clarification about other forms of compensation, including payment for meal periods and “call back” pay.

The deadline for commenting on the proposal is May 28.