Final Rule: FLSA Updates for Hourly Workforce Employers

September 9, 2020 - minute read

More than eight months have passed since the start of 2020 and the COVID-19 pandemic. For many, the time has passed with unprecedented speed. However, it has also resulted in significant workforce management challenges and unrelenting change to compliance standards for employers.

Since the U.S. Department of Labor (DOL) has taken steps to help employers comply with the Fair Labor Standards Act (FLSA), let’s review the final rule updates and their impact on your hourly workforce operations.

DOL Final Rule: Exemptions

The DOL’s rulings have come in multiple waves since the start of this year. In January, the DOL provided guidance on the types of employee benefits that can be excluded from a nonexempt employee’s regular rate. The new rule clarified the perks and benefits you should include, as well as which you can provide without including them in “regular pay.”

To be clear, “regular rate” typically refers to the complete compensation of an employee’s efforts, including both nondiscretionary and discretionary add-ons. That said, you may exclude discretionary bonus payments from a nonexempt employee’s regular rate.

The DOL states that employers may exclude the following from an employee’s regular pay:

  • Pay for unused paid leave (including paid sick leave and paid time off);
  • Penalties stemming from state and local scheduling law violations;
  • Reimbursement of cellphone plans, credentialing exam fees, organization membership dues, and travel;
  • Sign-on or longevity bonuses, gifts, and other discretionary perks;
  • Contributions to benefits, including accident, unemployment, and legal services; and
  • Other benefits i.e. parking, wellness programs, on-site specialist treatment, gym and fitness memberships, discounts on retail goods and services, tuition, and more.

In addition, the final rule clarified that employers can incorporate nondiscretionary incentive payments spanning multiple workweeks into nonexempt employees’ standard pay rate. Specifically, the DOL recommends computing bonuses into overtime pay by dividing bonuses equally between each week of the bonus period. Be sure to only include workweeks in which the additional pay was earned.

For a full analysis, check out the DOL’s Highlights of The Final Rule on Regular Rate Under The FLSA.

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Final Rule: Joint Status

The DOL issued another final rule notice in January to revise its rules on joint employer status under the FLSA. Why is this important? If you are a joint employer or manage multiple contractors, you can be held equally liable for any FLSA wage and hour requirements as the other organizations or entities your employees are benefiting. This includes things like upholding proper minimum wage or payment of overtime to non-exempt employees.

The update provided guidance on determining joint employer status for this type of situation, as well as the factors not to use when determining joint employer status. For a complete breakdown of joint status criteria and examples, click here. You can also view the official summary of the rules here.

Final Rule: Fluctuating Workweek Method

Finally, in May, the DOL clarified calculating bonuses and other incentive-based pay for salaried, nonexempt employees whose hours vary from week to week. The DOL iterated that payments, in addition to a fixed salary, are compatible with the use of the fluctuating workweek method under the FLSA. This is good news for those of you who need increased flexibility in scheduling and managing payroll costs during COVID-19. For the hourly workforce, this will most likely apply to hourly workforce managers and administrative or HR-oriented staff.

The rule states that employers can pay bonuses, premium payments, and other types of pay—such as commissions, hazard pay, shift differentials, productivity bonuses, weekend rates, etc.— to salaried employees using the fluctuating workweek method. Check out our blog, “Alert! New Fluctuating Workweek Rule from the Department of Labor” to learn requirements and exceptions for using this method successfully.

For additional insight, view the full “Rule for Fluctuating Workweek Method of Computing Overtime” here.

Ease Compliance with Human Capital Management

Each of these updates is intended to make FLSA compliance easier on employers and promote ease for employers to compensate employees. That’s still easier said than done in the current compliance and operational climates.

Luckily, EPAY System’s Human Capital Management solution can help. Our system provides seamless payroll management and compliance management for businesses like yours. That includes the ability to effectively adapt to new legislative rules and complex circumstances unique to hourly, distributed workforces.

Our workforce management solution delivers accurate time and labor tracking, interactive data, and easily configurable pay rules for overtime needs, blended rates, and changes in compliance like those mentioned above. Check out our product overview, or watch our 2-minute demo today.

Filed Under: Compliance HR Management