November 08, 2024
DOL Issues 1st FLSA Opinion Letter of 2024
You know that under the Fair Labor Standards Act (FLSA) a non-exempt employee must be paid time and one half the employee’s “regular rate” of pay for all hours worked over 40 in a work week. The regular rate includes the employee’s hourly rate of play plus certain additional compensation like discretionary bonuses, incentive payments, shift differentials, and per diems.
What about expense reimbursement? On November 8, 2024, the DOL answered the question as to whether daily expense payments for tools and equipment may be excluded from an employees’ regular rate when calculating overtime pay. In this opinion letter, the employer explained that they offer mileage reimbursement at the IRS rate for business-related mileage, as well as a per diem for living and meal expenses for certain employees working out in the field. The employer also pays a per diem of $25 for employees’ use of their own tools.
In order for reimbursements to be excluded from an employee’s regular rate of pay, “only the actual or reasonably approximate amount of the expense is excludable from the regular rate. If the amount paid as ‘reimbursement’ is disproportionately large, the excess amount will be included in the regular rate.”
So, how does an employer determine if a per diem represents a “reasonably approximate amount of the expense?” The DOL provides some tips.
- If the employees do not actually incur ongoing expenses, “reimbursement payments provided for purported expenses are not excludable from an employee’s regular rate of pay.”
- Whether the employer requires any attestation that costs were incurred by the employee is a relevant consideration when assessing the excludability of reimbursement payments.
- DOL’s Wage & Hour Division does not require or endorse a specific method to approximate employees’ expenses for reimbursement. A DOL Opinion letter from 2020 gives some examples for doing so.
Practical application. If you provide any non-exempt employees with any flat reimbursement payments, such as for meals, expenses, travel, etc., consider the factors above and talk to your company’s legal counsel. Together, decide whether you may deduct or should include all or some portion of those payments in the employee’s regular rate of pay for overtime calculations.
