The Regular Rate of Pay Under the FLSA: Statutory Exclusions

by Practical Law Labor & Employment

A Practice Note on calculating the regular rate of pay for nonexempt employees under the Fair Labor Standards Act (FLSA). This Practice Note provides guidance on the eight categories of payments that employers can lawfully exclude from the regular rate calculation, bearing in mind that employers carry the burden of proving an exclusion applies. It details which payments must be included, which can be excluded, and which can be credited toward statutory overtime pay. This Practice Note addresses the treatment of various compensation types, including discretionary and non-discretionary bonuses, gifts, premium pay, expense reimbursements, stock options, and employer contributions to benefit plans. It also covers complex issues like vacation and sick leave buybacks, commissions, and tips, incorporating the Department of Labor's (DOL) regulations to help employers ensure compliance.