The U.S. Department of Labor (“DOL”) Wage and Hour Division (“WHD”) announced three new opinion letters that address compliance issues related to the “regular rate” calculations under the Fair Labor Standards Act (“FLSA”).  The letters provide clarification on the DOL’s final rule on regular rate requirements, effective last month.

• FLSA2020-3 determined that longevity awards given to city employees should be included in the regular rate of pay.  The DOL reasoned that the awards were nondiscretionary because the resolution stated that the employees “shall” be entitled to receive them.  If the resolution instead stated that employees “may” be entitled to the awards, they would be discretionary and thus, not included in the regular rate.
  
  
• FLSA2020-4 addressed whether a referral bonus should be included in the regular rate of pay.  The first installment of the bonus would be paid at the time of hiring the new employee.  The second installment would be paid on the one-year anniversary of the new employee assuming both the referring and referred employees are still working at the company.  The DOL determined that the first installment would not be included in the regular rate of pay since (1) participation in the recruitment would be strictly voluntary; (2) the employee’s recruitment efforts would not involve a significant amount of time; and (3) recruitment activities would be limited to after-hours and not part of work.
  
  On the other hand, because the second installment was contingent on the referring employee remaining employed for one year, the DOL determined that it seemed more like a longevity bonus, which should be included in the regular rate. However, the DOL noted that the second installment could still be excluded from the regular rate as a “payment in the nature of gifts as a reward for service” if it met all the conditions for that exclusion under 29 CFR § 207(e)(1). Such a bonus could still be excluded from the regular rate of pay if it is not paid pursuant to a contract.

• FLSA2020-5 addresses whether the regular rate for a non-exempt employee must include amounts that the Internal Revenue Code (“IRC”) requires be included in the employee’s taxable gross income when the employer contributes to group-term life insurance coverage of over $50,000 for the employee.  The DOL noted that there is no presumption that income taxable under the IRC must be included in the regular rate, and an employer’s contributions to a group-term life insurance policy are excludable under Section 207(e)(4) of the FLSA regulations as contributions irrevocably made by an employer pursuant to a bona fide benefit plan.

An opinion letter is a written opinion by the WHD on how a particular law applies to the specific facts presented by the person or entity requesting the letter.  Employers can visit this webpage to learn how to request an opinion letter or determine whether existing agency guidance already addresses their questions.