DOL issues new guidance on overtime rules, reducing, but not eliminating, exposure to liability

The question of when and whether employees are entitled to overtime pay under federal law has often vexed private- and public-sector employers. Parts of the Fair Labor Standards Act (FLSA) are opaque and antiquated, and the interpretive guidance provided by U.S. Department of Labor (DOL) regulations has often left even experienced employment law practitioners in doubt about how to handle complex overtime issues.

The significant risks associated with FLSA violations, including liquidated damages for “willful” violations, a loose “willfulness” standard, attorneys' fees, and a two- or three-year statute of limitations depending on an employer's “good faith,” have provided a strong initiative for employers to settle questionable cases. The fact that DOL regulations are not a safe harbor protecting compliant employers from judicial scrutiny presents an additional risk.

DOL updates regs covering regular rate of pay

In December 2019, the DOL issued a final rule addressing which types of payments employers must include and exclude when calculating employees' regular rate of pay to determine overtime rates. The FLSA requires employers to pay nonexempt employees overtime at 1½ times their regular rate when they work more than 40 hours in a workweek. The regular rate isn't just an employee's hourly rate of pay but includes “all remuneration for employment” unless it's specifically excluded by Section 7(e) of the FLSA. “Remuneration” is a very broad term that implicates a broad range of payments. The DOL's new rule is intended to provide clarity by defining which perks and benefits are includable as “remuneration.”