Public Comments | Unions and Labor Standards

EPI comments regarding the ‘regular rate’ under the Fair Labor Standards Act

Submitted online via https://www.regulations.gov/comment?D=WHD-2019-0002-0001

Amy DeBisschop
Acting Director of the Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor
Room S-3502
200 Constitution Avenue NW
Washington, DC 20210

Re: Comments on Regulatory Information Number (RIN) 1235-AA24: Regular Rate Under the Fair Labor Standards Act

Dear Ms. DeBisschop:

The Economic Policy Institute (EPI) submits these comments in response to the Department of Labor’s proposed rule, “Regular Rate Under the Fair Labor Standards Act.” EPI is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers, and assesses policies with respect to how well they further those goals.

EPI makes three points concerning this proposal.

1. The Fair Labor Standards Act (FLSA) requires employers to pay covered, nonexempt employees an overtime rate of 1.5 times their “regular rate of pay” for hours worked in excess of 40 in a workweek. It defines “regular rate of pay” broadly to include “all remuneration for employment paid to, or on behalf of, the employee” with the exception of a small number of specific exclusions, including “payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause; reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer; and other similar payments to an employee which are not made as compensation for his hours of employment.” The Department is proposing to add employer-provided tuition payments and reimbursement plans to the list of examples of “other similar payments” that may be excluded from the regular rate.

However, the Department’s current proposal lacks an analysis of whether a tuition program primarily benefits the employee or mutually benefits the employer and the employee. There are a wide variety of scenarios under which employers offer tuition benefits: employers may offer tuition benefits for discrete professional development courses, or broad reimbursement for any type of general education course, or retroactive limited educational loan repayment. They may specify the coursework that employees must pursue to be eligible for tuition payment, or require enrollment in a particular institution. EPI recommends either removing tuition benefits from the proposed revisions or setting forth factors to help determine when a tuition benefit is functioning like compensation for work. Such factors might include whether the employer has limited the institutions, subject matter, or courses that may be reimbursed or whether the benefit is contingent upon the employee’s perceived seriousness about a career with the company or maintenance of a certain GPA.

2. “Call-back pay”—additional compensation for calling an employee back to work without prearrangement to perform extra work after the employee’s scheduled hours have ended—can be excluded from the regular rate if the payments are “infrequent and sporadic.” The Department is proposing to remove the restriction that in order to be excluded from the regular rate, call-back pay must be “infrequent and sporadic.” The Department should withdraw this proposal and allow the language in the existing regulations to remain. When call-back payments are not infrequent and sporadic, then they are essentially compensation for work that is chronically irregular, and must be included in the regular rate.

This question is of increasing importance as a large share of employees, particularly low-wage hourly employees, regularly experience significant changes in their work schedule. For example, a national survey of early-career adults found that over a third (38 percent) know their work schedule only one week in advance or less.1 As such, in broadly excluding call-back payments or payments similar to call-back pay from the regular rate without any reference to the regularity of such payments, DOL will be creating an exception of real significance for certain categories of employees.

3. The FLSA permits employers to exclude from the regular rate certain premium payments for work in excess of—or outside of—specified daily or weekly standard work periods or for work on certain special days like weekends or holidays. Moreover, this extra compensation may be credited toward the overtime payments required by the Act. This premium pay is unique in that it is the only type of compensation that is excludable from the regular rate and also creditable toward overtime compensation.

While the FLSA does not require premium pay to be paid pursuant to a written contract in order to be excluded from the regular rate, the FLSA clearly requires that such premiums be paid pursuant to a legitimate, established agreement or policy so as not to create a means for employers to artificially lower the regular rate and avoid their full statutory overtime obligations. The Department is proposing to cut any reference to an employment agreement or contract to avoid any confusion that premium pay can only be excluded under written contracts or agreements. But instead of cutting these references as proposed, the Department should add language, such as “contract, handbook, policy, or explicit agreement or understanding.” This would clarify that even if premium pay need not be paid pursuant to a formal written contract, some form of prior agreement or understanding must exist between the employee and employer if the employer is to properly exclude premium pay from an employee’s regular rate and use it to take a credit against overtime obligations.

Thank you for the opportunity to submit comments on the NPRM. Please do not hesitate to contact me at 202- 533-2560 if you have questions.

Sincerely,

Heidi Shierholz
Senior Economist and Director of Policy

Economic Policy Institute


  1. Susan J. Lambert, Peter J. Fugiel, and Julia R. Henly, Precarious Work Schedules Among Early-Career Employees in the US: A National Snapshot, Research brief issued by EINet at the University of Chicago, August 2014.

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