By Cheryl Pinarchick and Joshua Nadreau, Fisher Phillips | Jul 27, 2020

Incentivizing employees can be an important factor when it comes to an employer’s bottom line.  Several common misconceptions about the Fair Labor Standards Act (FLSA) have driven decisions regarding incentive payments for too long.

Over the last few months, the U.S. Department of Labor’s (DOL) Wage and Hour Division has clarified how the FLSA applies to incentive payments made to overtime-eligible employees. While a wake-up call for some employers, these are not really changes in the law per se.

Rather, the change is that by announcing these clarifications, the agency has provided employers with more knowledge and empowered them to explore compensation structures that include incentives.

Whether adding, removing, or tweaking incentive payments, employers will want to revisit these three aspects of the FLSA in light of recent developments.

1. Not Everything Increases the Regular Rate for Overtime Pay.

Usually, we are reminding employers that all wages are factored into the “regular rate” when paying time-and-a-half unless it falls within a specific exclusion. But this year, we have regulations that help employers understand those exclusions.

Among other things, the agency addressed the exclusion of “perks” (such as gym access/memberships, employee wellness programs, and on-site offerings) from the regular rate.

2. Salaried Employees Can Receive Bonuses, Too!

Examples are great, but sometimes, the particular facts are mistaken as an exacting checklist. Thankfully, the DOL has set this record straight!

If you are paying based on a fluctuating workweek (a salary for all hours worked, plus the overtime premium) and thought you wouldn’t have to also pay incentive pay (or vice versa), there now is a regulation specifically permitting fluctuating workweek and incentive pay. Just remember to pay the overtime premium (halftime) on both.

3. Is That Employee Actually Exempt from Overtime?

In another area where (decades-old) examples have taken on lives of their own, the FLSA’s commissioned-employee exemption has been interpreted as applying to a smaller subset of employees than the actual test dictates.

This exemption from overtime-only has a few prongs, but one that has caused many employers to not even consider it is the requirement that it be a “retail or service establishment.”

Several businesses that are commonly used by individuals today were deemed to be “lacking” the retail concept (including banks, dry cleaners, insurance agencies, tax preparers, and travel agencies, to name a few), making the exemption an uphill battle despite the fact that a particular establishment might meet all of the relevant factors.

Now the infamous list has been removed, and employers that can meet the “retail” test just might be able to use the exemption for qualifying employees.

Of course, there are more details to consider before making a change, including taking state law into account. But at a time when employers are looking at their bottom lines and still want to incentivize employees, these developments might provide just the right balance.

***** ***** ***** ***** ***** 

Source: HR Daily Advisor

https://hrdailyadvisor.blr.com/2020/07/27/if-i-knew-then-what-i-know-now-revisiting-incentive-payments-and-the-flsa/