OMB Clears Time-and-a-Half Rule

December 12, 2019

On November 4, the U.S. Department of Labor announced a proposed rule that would allow job creators to offer bonuses or other incentive-based pay to employees whose hours vary from week to week. The proposal would clarify that payments in addition to the fixed salary are compatible with the use of the fluctuating workweek method under the Fair Labor Standards Act (FLSA).

The proposed rule would allow employers to exclude bonuses, travel expenses, and other incidental payments from an employee’s base rate from which time-and-a-half is calculated. The change would effectively lower overtime pay, but DOL says it will encourage employers to offer perks without risking unexpected costs later.

The proposed rule would allow employers to exclude from overtime calculations the cost of wellness programs, unused vacation and sick leave, expense reimbursements, bonuses, tuition assistance and other benefits like legal services.

In this Notice of Proposed Rulemaking (NPRM), the Department:

  • Proposes to revise its existing fluctuating workweek regulation at 29 CFR 778.114;
  • Clarifies the regulation by expressly stating that any bonuses, premium payments, or other additional pay of any kind are compatible with the fluctuating workweek method of compensation and that such payments must be included in the calculation of regular rate unless excludable under FLSA sections 7(e)(1)-(8);
  • Adds examples to better illustrate how the regulation works operationally;
  • Revises the regulation to increase readability; and
  • Proposes a title change to the regulation to better reflect the purpose of the subsection.

The NPRM (RIN Number: 1235-AA31) will be available for review and public comment for 30 days. The Department encourages interested parties to submit comments on the proposed rule at: Regulations.gov.