Stephanie Ferguson Stephanie Ferguson
Director, Global Employment Policy & Special Initiatives, U.S. Chamber of Commerce


December 13, 2019


The U.S. Department of Labor published today in the Federal Register the final rule for Regular and Basic Rates under the Fair Labor Standards Act (FLSA), marking a victory for non-exempt employees and their employers. The rule will help employers provide benefits and perks to their employees, helping with recruitment and retention without the fear of needless lawsuits.

Under the FLSA, employers must pay hourly employees 1.5 times their regular rate, or hourly wage, whenever they exceed 40 hours in a work week. Although this concept seems straightforward, the technicalities of the FLSA can be quite complicated, opening up the possibility of lawsuits over unintentional violations.

As an example, certain goods or services given to an employee might count as income. Theoretically, perks like gym memberships, fitness classes, tuition reimbursement, employee discounts, etc., could be rolled into an employee’s overall regular rate of pay. In turn, this “adjusted” regular rate of pay could be used when calculating payments for overtime work. Likewise, certain bonus payments and other types of compensation could also be included in the regular rate, and hence, overtime. Queue enterprising trial lawyers and needless litigation against well-meaning companies trying to give employees benefits they enjoy receiving.

With the release of the final Regular and Basic Rates Rule, which the Chamber strongly supported throughout the rulemaking process, the Department of Labor has made life easier for both workers and employers. Among the compensation that can be excluded from the regular rate are:

  • Wellness programs
  • Onsite specialist treatment
  • Gym access and fitness classes
  • Employee discounts on retail goods and services
  • Payments for tuition programs, such as reimbursement programs or repayment of educational debt
  • Payments for unused paid leave, including paid sick leave
  • Certain reimbursed expenses
  • Certain discretionary bonuses

Although the Chamber did not get everything it wanted, the rule is a win for both parties. Employers can continue to utilize effective recruitment and retainment tools integral to hiring the best talent, while employees will continue to enjoy the perks of working for successful businesses.

For a more in-depth analysis, see the final rulehereand the Chamber’s commentshere.

About the authors

Stephanie Ferguson

Stephanie Ferguson

Stephanie Ferguson is the Director of Global Employment Policy & Special Initiatives. Her work on the labor shortage has been cited in the Wall Street Journal, Washington Post, and Associated Press.

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