In an upcoming proposed rule, the U.S. Department of Labor (DOL) is expected to sharpen the definition of "regular rate" of pay. The rule is intended to reduce litigation over how to determine overtime compensation.

When calculating overtime under the Fair Labor Standards Act, employers must pay nonexempt employees an overtime rate of 1 1/2 times their regular rate of pay for all hours worked in excess of 40 in a workweek. An employee's regular rate is determined by dividing the total pay for employment in any workweek by the total number of hours an employee actually worked.

DOL regulations identify only a few types of payments that may be excluded from the regular rate when calculating overtime, including discretionary bonuses, gifts, and irrevocable benefits payments. The DOL also might explain whether newer forms of remuneration, such as ride-hailing services and supplemented child care costs, should be included in the regular rate, according to Steven Suflas and Elliot Griffin, attorneys with Ballard Spahr in Denver and Philadelphia, respectively.

"These new methods, which are outside of what people may generally think in terms of compensation, might have motivated the DOL to reconsider the current rule and address some of the more modern trends," they stated.

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