The FLSA defines “regular rate of pay” as the total of all payments made by the employer to, or on behalf of, an employee. The regular rate of pay may be more than the minimum wage, but it cannot be less.” 29 C.F.R. § 778.108. Following are examples of compensation paid to non-exempt employees that are included in determining the regular rate of pay:
- On-call pay. 29 C.F.R. § 778.223.
- Non-Discretionaly Bonuses promised for accuracy of work, good attendance, continuation of the employment relationship, incentive, production and quality of work. 29 C.F.R. § 778.208.
- Contest prizes. 29 C.F.R. § 778.330.
- Employee lunch or meal expenses paid by the employer (29 C.F.R. § 778.217(d)), unless the expense is incurred on the employer’s behalf or for the employer’s benefit (for example, supper money while working late or meal expenses while out of town on business. 29 C.F.R. § 778.217(b).
- Salary increases, including retroactive increases.
- Shift differentials, hazardous-duty pay and longevity pay. Featsent v. City of Youngstown, 859 F. Supp. 1134 (N.D. 1993).
- Traveling expenses of employees going to and from work, if they are paid by the employer (29 C.F.R. § 778.217(d)), unless the expenses are incurred on the employer’s behalf or for the employer’s benefit (for example, travel expenses due to temporary movement of the work location or expenses for traveling “over the road”). 29 C.F.R. § 217(b).
Additionally, compensation to employees may take the form of employer contributions to employee flexible benefit plans, which are known also as “cafeteria” plans. Cafeteria plans are governed by Section 125 of the Internal Revenue Code. The question of whether cafeteria plan benefits must be included in an employee’s regular rate was addressed in the case of Madison v. Resources for Human Development Inc., Civil Action No. 97-7402 (E.D. Pa. Jan. 8, 1999). In the case, the court ruled that “certain employer contributions to the workers’ cafeteria plans should have been included in the employee’s regular rates.” Principally, this was because the employees were given the choice to receive the employer’s contributions, in whole or in part, in cash. Under FLSA rules (29 C.F.R. § 778.215(a)(5)), “such cash components to benefit plans, including cafeteria plans, are permitted only in limited circumstances,” none of which existed in Madison.
Following are examples of payments that need not be included in the regular rate of pay:
- Absence pay for infrequent or unpredictable absences, such as vacation, illness, bereavement, disaster relief payments or jury leave. 29 C.F.R. § 778.218.
- Discretionary bonuses. 29 C.F.R. § 778.211.
- Holiday pay, if it is equivalent to regular earnings. 29 C.F.R. §§ 778.203(d), 778.218.
- Premium pay, such as time compensated at time and one-half. 29 C.F.R. § 778.201(a).
- Idle time beyond the control of the employer due to machinery breakdown, supplies failing to arrive and weather conditions making it impossible to work. 29 C.F.R. § 778.218(c).
- Severance pay. 29 C.F.R. § 778.224.
- Pension, profit-sharing, thrift and savings plan payments qualifying under the U.S. Department of Labor’s administrative regulations. 29 U.S.C. § 207(e)(3)(b); 29 C.F.R. §§ 549.0(a)&(b), 778.213.
- Call back premium pay. 29 C.F.R. § 778.221.
- Travel expenses, if business trips are taken by the employee. 29 U.S.C. § 207(e)(2).
- Show-up or reporting pay (paying a minimum amount for coming to work) to the extent pay exceeded hours worked. 29 C.F.R. § 778.220.
- Weekly overtime pay, in any amount. 29 C.F.R. § 778.201.
- Health and welfare fund benefits received by the employee. 29 C.F.R. § 778.215.
- Death benefits. 29 C.F.R. § 778.218.
- Employer-paid disability benefits, hospitalization, medical care, retirement benefits, workers’ compensation, or other employer-paid health and welfare contributions, including all insurance premiums. 29 C.F.R. § 778.214.
- Reasonable uniform allowances. 29 C.F.R. § 217(b)(2).
- Payment made to an employee for periods of absence due to the use of accrued compensatory time. 29 C.F.R. § 553.26(c).
- Tuition reimbursement. Wage and Hour Opinion Letter, Sept. 17, 1993.
- Automobile reimbursement. Wage and Hour Opinion Letter, Dec. 12, 1988.
Chapter 32 of the DOL Field Operations Handbook identifies other forms of pay that may be excluded from the computation of the regular rate of pay, including sums paid as gifts, payments for suggestions, new business contest awards, fringe benefits paid in cash, report and call-back pay, reimbursement of employee expenses, and the employer’s share of board and lodging cost.