Joint Letter to DOL on Regular Rate Under the Fair Labor Standards Act

The Honorable Cheryl Stanton
Administrator
Wage and Hour Division U.S. Department of Labor
Room S–3502
200 Constitution Avenue, N.W.
Washington, DC 20210

Dear Ms. Stanton:

These comments on the proposal to update the regular rate regulations under the Fair Labor Standards Act (FLSA) are submitted on behalf of the Partnership to Protect Workplace Opportunity (PPWO). The PPWO consists of a diverse group of associations, businesses, non-profits and other stakeholders representing employers with millions of employees across the country in almost every industry who will be impacted by the proposed changes.

The PPWO applauds the Department’s efforts to address the regular rate regulations (Part 778) to provide clarity and better reflect the 21st-century workplace. The PPWO’s members believe that employees and employers alike are best served with a system that promotes maximum flexibility in structuring employee pay and benefits and clarity for employers when preparing total compensation packages. We also appreciate the Department’s efforts to review these issues as deregulatory actions under President Trump’s Executive Order 13771. Eliminating the regulatory burdens associated with providing otherwise very straightforward benefits is entirely appropriate and consistent with the President’s directive.

With the last substantive revision to Part 778 coming over 50 years ago, the regulatory language has failed to keep up with the wide variety of creative methods of compensation considered by employers. Benefits and compensation come together as “total rewards,” which is the lens through which employers typically view the amounts provided to employees for their service. Unfortunately, as the Department has not previously weighed in on a wide variety of issues, and as individual courts around the country have interpreted arcane (and, frankly, limited) statutory and regulatory language, there has been increased uncertainty of employers regarding certain items of total rewards and their treatment for regular rate purposes. Some of this uncertainty is created by one-off court decisions finding certain benefits to be included in the regular rate, while some of the uncertainty is due to cautious employers concerned that the economic analysis underpinning their decision to provide a benefit can be dramatically altered by a creative plaintiffs’ lawyer.

As a result of this uncertainty, many employers have made difficult decisions to eliminate certain benefits and/or choose not to provide them in the first place. Detailed data is unavailable, but, anecdotally, employers who belong to PPWO member groups have made decisions not to offer benefits such as:

• Anniversary bonuses;
• Public transportation subsidies;
• Discounts on gift cards;
• Discounts with vendor partners;
• Adoption assistance;
• Tuition reimbursement;
• Employer-provided or discounted meals;
• Non-cash awards (such as coffee cups, t-shirts);
• Participation in raffles; and
• Restricted stock units.

In addition, uncertainty with respect to the inclusion of bonuses in the regular rate of pay has resulted in the elimination of a wide variety of bonus programs. The PPWO thus supports the Department’s efforts to modernize the regular rate regulations, providing much-needed clarity to the regulated community. We now address the Department’s specific proposals.

Download the comment letter to read the full text.