The U.S. Department of Labor (DOL) has added a proposed ruleto its regulatory agenda that would provide revisions to the Fair Labor Standard Act's (FLSA) regulations related to calculating overtime pay for workers with fluctuating workweeks that would provide employers with additional flexibility.
Under the FLSA, some employers are permitted to use an alternative method to calculate overtime pay for employees whose hours fluctuate from week to week.
However, according to the DOL, "[the new rule] provides an alternative method for calculating overtime pay under the Fair Labor Standards Act for employees whose work hours fluctuate from week to week. Currently, this method is not available to employers who compensate their employees with bonuses and other incentive-based pay. The Department proposes to revise these regulations to grant employers greater flexibility to provide additional forms of compensation to employees whose hours vary from week to week."
In general, according to current federal law, employers may utilize a "fixed salary" from which to determine an employee's regular rate. This rate is then used to calculate the time-and-a-half overtime pay rate for that employee.
In explaining its reasoning to revise this, the DOL notes that this method is not available to employers who pay employees bonuses or other incentive-based pay. As a result, the DOL wants to revise the regulations in order to provide greater flexibility to employers in this regard.
Under the proposed regulatory change, DOL is proposing changes to how workers' regular rates of pay are calculated in order to clarify which payment forms (bonuses, incentives, etc.) can be included, or must be excluded, in this calculation.
As a result, the new regulation could reduce the amount of overtime pay to which workers are entitled. However, it could also provide incentives for employers to improve their benefits programs. For example, the new regulation would allow employers to exclude the costs for certain wellness programs, and payments for unused paid leave time, from their calculations.
As part of standard protocol, the DOL will publish a Notice of Proposed Rulemaking in the Federal Register later this year, and the proposal will be subject to a public comment after it is published.