# Regular Rate Under the Fair Labor Standards Act > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-26447 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** December 16, 2019 - **Citation:** 84 FR 68736 ## Text DEPARTMENT OF LABOR Wage and Hour Division 29 CFR Parts 548 and 778 RIN 1235-AA24 Regular Rate Under the Fair Labor Standards Act AGENCY: Wage and Hour Division, Department of Labor. ACTION: Final rule. SUMMARY: The Fair Labor Standards Act (FLSA or Act) generally requires that covered, nonexempt employees receive overtime pay of at least one and one-half times their regular rate of pay for time worked in excess of 40 hours per workweek. The regular rate includes all remuneration for employment, subject to the exclusions outlined in section 7(e) of the FLSA. In this final rule, the Department of Labor (Department) updates a number of regulations on the calculation of overtime compensation both to provide clarity and to better reflect the 21st-century workplace. These changes will promote compliance with the FLSA, provide appropriate and updated guidance in an area of evolving law and practice, and encourage employers to provide additional and innovative benefits to workers without fear of costly litigation. DATES: This final rule is effective on January 15, 2020. FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-free number). Copies of this final rule may be obtained in alternative formats (Large Print, Braille, Audio Tape or Disc), upon request, by calling (202) 693-0675 (this is not a toll-free number). TTY/TDD callers may dial toll-free 1-877-889-5627 to obtain information or request materials in alternative formats. Questions of interpretation and/or enforcement of the agency's regulations may be directed to the nearest WHD district office. Locate the nearest office by calling WHD's toll-free help line at (866) 4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time zone, or visit WHD's website for a nationwide listing of WHD district and area offices at http://www.dol.gov/whd/america2.htm. SUPPLEMENTARY INFORMATION: I. Executive Summary The FLSA generally requires covered employers to pay nonexempt employees overtime pay of at least one and one-half times their regular rate for hours worked in excess of 40 per workweek. The FLSA defines the regular rate as “all remuneration for employment paid to, or on behalf of, the employee”—subject to eight exclusions established in section 7(e). 1 Part 778 of CFR title 29 contains the regulations addressing the calculation of the regular rate of pay for overtime compensation under section 7 of the FLSA. 1 See 29 U.S.C. 207(e). The Department promulgated the majority of part 778 of CFR title 29 more than 60 years ago, when typical compensation often consisted predominantly of traditional wages, paid time off for holidays and vacations, and contributions to basic medical, life insurance, and disability benefits plans. 2 Since that time, the workplace and the law have evolved, but the Department has only made minor updates to part 778 since 1950. 3 2 See U.S. Bureau of Labor Statistics, An Overview of Employee Benefits, Occupational Outlook Quarterly (U.S. Bureau of Labor Statistics), Summer 2005, at 20, available at https://www.bls.gov/careeroutlook/2005/summer/art02.pdf. 3 See, e.g., 33 FR 986 (Jan. 26, 1968) (codified at 29 CFR 778.0 through 778.603); 36 FR 4699 (Mar. 11, 1971) (updating 29 CFR 778.214 to clarify that advance approval by the Department is not required for plans providing benefits within the meaning of 29 U.S.C. 207(e)(4)); 36 FR 4981 (Mar. 16, 1971) (updating 29 CFR 778.117 to clarify commission payments that must be included in the regular rate); 46 FR 7308 (Jan. 23, 1981) (updating 29 CFR part 778 to increase the dollar amounts used as examples in the regulations, to respond to statutory amendments affecting other parts of the FLSA, and to modify § 778.320 to clarify that pay for nonworking time does not automatically convert such time into hours worked); 46 FR 33515-2 (June 30, 1981) (correcting errors in the January 1981 update in 29 CFR 778.323, 778.327, 778.501, 778.601); 56 FR 61100 (Nov. 29, 1991) (updating 29 CFR 778.603 to address statutory amendment adding section 7(q) regarding maximum-hour exemption for employees receiving remedial education); 76 FR 18832 (Apr. 5, 2011) (updating §§ 778.110, 778.111, 778.113, and 778.114 to reflect statutory changes to the minimum wage; updating § 778.200 to reflect amendments made by the Worker Economic Opportunity Act; updating § 778.208 from “seven” to “eight” types of remuneration excluded when computing the regular rate). First, employee compensation packages, including employer-provided benefits and “perks,” have expanded significantly. The Bureau of Labor Statistics (BLS) estimated that fringe benefits comprised only 5 percent of employees' total compensation in 1950. 4 Today, such benefits make up approximately one-third of total compensation. 5 Many employers, moreover, now offer various wellness benefits or perks, such as fitness classes, nutrition classes, weight loss programs, smoking cessation programs, health risk assessments, vaccination clinics, stress reduction programs, and training or coaching to help employees meet their health goals. 4 Yung-Ping Chen, The Growth of Fringe Benefits Implications for Social Security, Monthly Labor Review Vol. 104 No. 11, November 1981, https://www.bls.gov/opub/mlr/1981/11/art1full.pdf (“cash payroll as a percentage of total compensation declined steadily over the last 30 years, falling from 95 percent in 1950, to 92.2 percent in 1960, 89.7 percent in 1970, and 84.2 percent in 1980”). 5 Bureau of Labor Statistics News Release, Employer Cost for Employee Compensation—March 2019, June 18, 2019, (“Wages and salaries cost employers $25.22 [per hour] while benefit costs were $11.55.”), https://www.bls.gov/news.release/pdf/ecec.pdf. Both law and practice concerning more traditional benefits, such as sick leave, have likewise evolved in the decades since the Department first promulgated part 778. For example, instead of providing separate paid time off for illness and vacation, many employers now combine these and other types of leave into paid time off plans. Moreover, in recent years, a number of state and local governments have passed laws requiring employers to provide paid sick leave. In 2011, for example, Connecticut became the first state to require private-sector employers to provide paid sick leave to their employees. 6 Today, several states, the District of Columbia, 7 and various cities and counties 8 require paid sick leave, and many other states are considering similar requirements. 6 See 2011 Conn. Legis. Serv. P.A. 11-52 (West). 7 See Ariz. Rev. Stat. secs. 23-364, 23-371 et seq.; Cal. Lab. Code secs. 245, 2810.5; 2011 Conn. Legis. Serv. P.A. 11-52 (West); D.C. Code sec. 32-131.01 et seq.; Me. Rev. Stat. Ann. tit. 26, sec. 636 (2019) (effective Jan. 1, 2021); Md. Code Ann., Lab. & Empl. section 3-1301 et seq. (West 2019); Mass. Gen. Laws ch. 149, sec. 148C, 148D; Mich. Comp. Laws secs. 408.961-974; 2019 Nev. Legis. Serv. 592 (West) (to be codified at Nev. Rev. Stat. Ch. 608 (2019) (effective Jan. 1, 2020); N.J. Stat. Ann. sec. 34:11D-1 et seq.; Or. Rev. Stat. sec. 653.601 et seq.; 28 R.I. Gen. Laws sec. 28-57-1 et seq.; 21 Vt. Stat. secs. 384, 481-485, 345; Wash. Rev. Code secs. 49.46.005, 49.46.020, 49.46.090, 49.46.100. 8 See, e.g., Austin, Tex., City Code ch. 4-19 (2018); Chi., Ill., Code ch. 1-24 (2017); Minneapolis, Minn., Admin. Code title 2, sec. 40.10 et seq. (2016); Phila., Pa., Code ch. 9-4100 (2015); N.Y.C., N.Y., Admin. Code sec. 20-911 (2013); Seattle, Wash., Mun. Code ch. 14.16 (2011); Westchester County, N.Y., Laws of Westchester County ch. 585 (2018). Recently, several states and cities have also begun considering and implementing scheduling laws. In the last 5 years, for example, New York, San Francisco, Seattle, and other cities have enacted laws imposing penalties on employers who change employees' schedules without the requisite notice, and various state governments are considering and beginning to pass similar scheduling legislation. 9 Some of these laws expressly exclude these penalties from the regular rate under state law, 10 but questions remain for employers determining how these and other penalties may affect regular rate calculations under federal law. 9 See Chi., Ill., Fair Workweek Ordinance (July 24, 2019) (effective July 1, 2020); N.Y.C., N.Y., Admin. Code 20-1222 (2017); Phila., Pa., Code ch. 9-4600 (2018) (effective Jan. 1, 2020); Seattle, Wash., Mun. Code ch. 14.22.050 (2017); SB 828, 79th Leg. Assemb., 2017 Reg. Sess. (Or. 2017); see also Emeryville, Cal., Mun. Code 5-39.01 (2017); S.F., Cal., Police Code art. 33G (2015). 10 See, e.g., Or. Rev. Stat. Ann. sec. 653.412(7)(d) (“Regular rate of pay” does not include “[a]ny additional compensation an employer is required to pay an employee under ORS 653.442 [right to rest between work shifts] or 653.455 [compensation for work schedule changes].”). The Department published a notice of proposed rulemaking (NPRM) in the Federal Register on March 29, 2019 (84 FR 11888 (Mar. 29, 2019)), inviting comments about proposed updates to its regulations in part 778 to reflect changes in the modern workplace and to provide clarifications that reflect the statutory language and WHD's enforcement practices. Additionally, the Department proposed minor clarifications and updates to part 548 of title 29, which implements section 7(g)(3) of the FLSA. Section 7(g)(3) permits employers, under specific circumstances, to use a basic rate to compute overtime compensation rather than a regular rate. 11 Comments were initially due on or before May 28, 2019. In response to a request for an extension of the time period for filing written comments, the Department extended the deadline to June 12, 2019 (84 FR 21300 (May 14, 2019)). The Department received approximately 80 timely comments. 11 See 29 U.S.C. 207(g)(3). After considering the comments, the Department has decided to adopt the NPRM's proposed changes with some modifications. The final rule clarifies when payments for forgoing unused paid leave, payments for bona fide meal periods, reimbursements, benefit plan contributions, and certain ancillary benefits may be excluded from the regular rate. The final rule also revises certain sections of the existing regulation to more closely align with the Act. Additionally, the final rule incorporates, with modification, the proposed clarifications and updates to part 548. The final rule incorporates numerous suggestions from commenters, including adding examples of excludable state and local scheduling law payments to § 778.222, which addresses “other payments similar to call-back pay”; providing additional guidance in the preamble about how to determine whether a bonus is discretionary or nondiscretionary; revising language at §§ 778.202 and 778.205 to reflect that excludable overtime premium payments may be made pursuant to a “written or unwritten employment contract, agreement, understanding, handbook, policy, or practice”; and referencing state or local minimum wage laws as well as Federal law in the regulations at part 548 of title 29 discussing the basic rate. The Department's estimated economic impact of this final rule follows below. The Department qualitatively estimates the potential benefits associated with reduced litigation at $281 million over 10 years, or $28.1 million per year. The Department quantitatively estimates the one-time regulatory familiarization cost of this final rule at $30.5 million, which results in a 10-year annualized cost of $3.6 million at a discount rate of 3 percent or $4.3 million at a discount rate of 7 percent. This final rule is considered an Executive Order (E.O.) 13771 deregulatory action. Details on the estimated reduced burdens and cost savings of this final rule can be found in the rule's economic analysis. II. Background A. The FLSA and Regular Rate Regulatory History Congress enacted the FLSA in 1938 to remedy “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers[,]” which burdened commerce and constituted unfair methods of competition. 12 In relevant part, section 7(a) of the FLSA requires employers to pay their employees overtime at one and one-half times their “regular rate” of pay for time worked in excess of 40 hours per workweek. 13 When enacted, however, the FLSA did not define the term “regular rate.” 12 29 U.S.C. 202(a); see Fair Labor Standards Act of 1938, Public Law 75-718, ch. 676, 52 Stat. 1060 (codified as amended at 29 U.S.C. 201-219). 13 29 U.S.C. 207(a). The statutory maximum in 1938 was 44 hours per workweek; in 1939, it was 42 hours per workweek; and in 1940, it was 40 hours per workweek. See Public Law 75-718, 52 Stat. at 1063. Later that year, WHD issued an interpretive bulletin addressing the meaning of “regular rate,” which WHD later revised and updated in 1939, and again in 1940. The 1940 version of the bulletin stated, among other things, that an employer did not need to include extra compensation paid for overtime work in regular rate calculations. 14 It also specified that the regular rate must be “the rate at which the employee is actually employed and paid and not . . . a fictitious rate which the employer adopts solely for bookkeeping purposes.” 15 14 See Interpretive Bulletin No. 4 ¶ 13 (Nov. 1940). 15 Id. ¶ 18. In 1948, the Supreme Court in Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, addressed whether specific types of compensation may be excluded from the regular rate, or even credited towards an employer's overtime payment obligations. The Court held that an overtime premium payment, which it defined as “[e]xtra pay for work because of previous work for a specified number of hours in the workweek or workday whether the hours are specified by contract or statute,” could be excluded from the computation of the regular rate. 16 Permitting an “overtime premium to enter into the computation of the regular rate would be to allow overtime premium on overtime premium—a pyramiding that Congress could not have intended.” 17 The Court also held that “any overtime premium paid, even if for work during the first forty hours of the workweek, may be credited against any obligation to pay statutory excess compensation.” 18 By contrast, the Court noted, “[w]here an employee receives a higher wage or rate because of undesirable hours or disagreeable work, such wage represents a shift differential or higher wages because of the character of work done or the time at which he is required to labor rather than an overtime premium. Such payments enter into the determination of the regular rate of pay.” 19 16 334 U.S. at 450 n.3, 465-66. 17 Id. at 464. 18 Id. at 464-65. 19 Id. at 468-69. Following the Bay Ridge decision, in 1948, the Department promulgated 29 CFR part 778, concerning the regular rate. 20 This regulation codified the principles from Bay Ridge that extra payments for hours worked in excess of a daily or weekly standard established by contract or statute may be excluded from the regular rate and credited toward overtime compensation due, and that extra payments for work on Saturdays, Sundays, holidays, or at night that are made without regard to the number of hours or days previously worked in the day or workweek must be included in the regular rate and may not be credited toward the overtime owed. 21 It noted, however, that when extra payments for work on Saturdays, Sundays, holidays, or nights are contingent on the employee having previously worked a specified standard number of hours or days, such payments are true overtime premium payments that may be excluded from the regular rate and credited toward overtime compensation due. 22 The Department also explained that payments “that are not made for hours worked, such as payments . . . for idle holidays or for occasional absences due to vacation or illness or other similar cause” may be excluded from the regular rate, but could not be credited against statutory overtime compensation due. 23 20 See 13 FR 4534 (Aug. 6, 1948). 21 See 29 CFR 778.2 (1948). 22 See id. 23 Id. In 1949, Congress responded to the Bay Ridge decision by amending the FLSA to identify two categories of payments that could be both excluded from the regular rate and credited toward overtime compensation due. 24 The first category was extra compensation for work on Saturdays, Sundays, holidays, or the sixth or seventh day of the workweek paid at a premium rate of one and one-half times the rate paid for like work performed in nonovertime hours on other days. The second category was extra compensation paid pursuant to an applicable employment contract or collective bargaining agreement for work outside of the hours established therein as the normal workday (not exceeding eight hours) or workweek (not exceeding 40 hours) at a premium rate of one and one-half times the rate paid for like work performed during the workday or workweek. 25 24 See Public Law 81-177, ch. 352, 63 Stat. 446 (July 20, 1949). These provisions are currently codified at 29 U.S.C. 207(e)(6)-(7). 25 See id. On October 26, 1949, Congress again amended the FLSA. 26 The amendments added, among other things, a comprehensive definition of the term “regular rate.” 27 “Regular rate” was defined to include “all remuneration for employment paid to, or on behalf of, the employee[,]” 28 with the exception of an exhaustive list of seven specific categories of payments that could be excluded from the regular rate. 29 Those categories of excludable payments were: (1) Gifts and payments on special occasions; (2) payments made for occasional periods when no work is performed such as vacation or sick pay, reimbursements for work-related expenses, and other similar payments that are not compensation for hours of employment; (3) discretionary bonuses, payments to profit-sharing or thrift or savings plans that meet certain requirements, and certain talent fees; (4) contributions to a bona fide plan for retirement, or life, accident, or health insurance; (5) extra compensation provided by a premium rate for certain hours worked in excess of eight in a day, 40 hours in a workweek, or the employee's normal working hours; (6) extra compensation provided by a premium rate for work on Saturdays, Sundays, regular days of rest, or the sixth or seventh days of the workweek; and (7) extra compensation provided by a premium rate pursuant to an employment contract or collective bargaining agreement for work outside of the hours established therein as the normal workday (not exceeding eight hours) or workweek (not exceeding 40 hours). 30 The October 1949 amendments also added a provision specifying that the last three of these categories are creditable against overtime compensation due. 31 26 See Fair Labor Standards Amendments of 1949, Public Law 81-393, ch. 736, 63 Stat. 910. 27 Id. Sec. 7, 63 Stat. at 913-14. This provision is currently codified at 29 U.S.C. 207(e). 28 Id. 29 See id. 63 Stat. at 913-14. These provisions are currently codified at 29 U.S.C. 207(e)(1)-(7). 30 See id. The excludable categories of payments in sections 7(d)(6) and (7) in the October 1949 amendments were essentially the same as those that had been added in the July 1949 amendments as sections 7(e)(1) and (2); the October 1949 amendments eliminated them from section 7(e). 31 See id. Public Law 81-393, 63 Stat. at 915. This provision is currently codified at 29 U.S.C. 207(h) (payments described in sections 7(e)(5)-(7) are creditable). In 1950, the Department updated part 778 to account for the 1949 amendments to the FLSA. 32 These regulations explained general principles regarding overtime compensation and the regular rate, including the principle that each workweek stands on its own for purposes of determining the regular rate and overtime due. 33 The regulations also provided methods for calculating the regular rate under different compensation systems, such as salary and piecework compensation. 34 They further elaborated on the seven categories of payments that are excludable from regular rate calculations, and provided several examples. 35 The regulations also addressed special problems and pay plans designed to circumvent the FLSA. 36 32 See 15 FR 623 (Feb. 4, 1950) (codified at 29 CFR 778.0 through 778.27). 33 See 29 CFR 778.2 (1950). 34 See 29 CFR 778.3(b) (1950). 35 See 29 CFR 778.5 through 778.8 (1950). 36 See 29 CFR 778.9.17, 778.21 through 778.23 (1950). In 1961 and 1966, Congress made a few minor, non-substantive language changes and redesignated certain sections. 37 In 1968, the Department updated part 778, principally to clarify the statutory references, update the amounts used to illustrate pay computations, and reorganize the provisions in part 778. 38 Over the next several decades, the Department periodically made minor changes and updates to part 778. 39 37 In 1961, Congress made non-substantive language changes to sections (d)(5) and (7). See Fair Labor Standards Amendments of 1961, Public Law 87-30, sec. 6, 75 Stat. 65, 70. In 1966, Congress redesignated section 7(d) as section 7(e). See Fair Labor Standards Amendments of 1966, Public Law 89-601, Title II, sec. 204(d)(1), 80 Stat. 830, 836. Additionally, section 7(g), which provided that extra compensation paid pursuant to sections 7(d)(5), (6), and (7) could be credited against overtime compensation due under section 7(a), was moved to section 7(h). See id. 38 See 33 FR 986 (Jan. 26, 1968) (29 CFR 778.0 through 778.603). 39 See 36 FR 4699 (Mar. 11, 1971) (updating § 778.214 to clarify that advance approval by the Department is not required for plans providing benefits within the meaning of section 7(e)(4)); 36 FR 4981 (Mar. 16, 1971) (updating § 778.117 to clarify commission payments that must be included in the regular rate); 46 FR 7308 (Jan. 23, 1981) (updating part 778 to increase the dollar amounts used as examples in the regulations, to respond to statutory amendments affecting other parts of the FLSA, and to modify § 778.320 to clarify that pay for nonworking time does not automatically convert such time into hours worked); 46 FR 33515-02 (June 30, 1981) (correcting errors in the January 1981 update in §§ 778.323, 778.327, 778.501, 778.601); 56 FR 61100 (Nov. 29, 1991) (updating § 778.603 to address statutory amendment adding section 7(q) regarding maximum-hour exemption for employees receiving remedial education). In 2000, Congress added another category of payments that could be excluded from the regular rate, currently contained in section 7(e)(8). 40 This amendment permitted an employer to exclude from the regular rate income derived from a stock option, stock appreciation right, or employee stock purchase plan, provided certain restrictions were met. 41 Congress also amended section 7(h) to state that, except for the types of extra compensation identified in sections 7(e)(5), (6), and (7), sums excluded from the regular rate are not creditable toward minimum wage or overtime compensation due. 42 In 2011, the Department updated part 778 to reflect the 2000 statutory amendments and to modify the wage rates used as examples to reflect the current minimum wage. 43 40 See Worker Economic Opportunity Act, Public Law 106-202, sec. 2(a)(3), 114 Stat. 308 (2000). 41 See id. 42 See id. 43 See 76 FR 18832 (Apr. 5, 2011) (updating §§ 778.110, 778.111, 778.113, 778.114, 778.200, 778.208). Currently, the FLSA's definition of “regular rate” and the eight categories of excludable payments are contained in section 7(e) of the Act. 44 The Department's regulations concerning the regular rate requirements are contained in 29 CFR part 778. As noted above, the last comprehensive revision to part 778 was in 1968. 45 44 See 29 U.S.C. 207(e). Additionally, section 7(h) states that only payments excludable from the regular rate pursuant to sections 7(e)(5), (6), and (7) may be credited against the employer's overtime obligation and that all other excludable payments ( i.e., payments that qualify as excludable under sections 7(e)(1), (2), (3), (4), and (8)) are not creditable). See 29 U.S.C. 207(h). 45 See 33 FR 986 (29 CFR 778.0 through 778.603). While section 7(a) defines the general overtime entitlement in terms of an employee's regular rate, under certain circumstances, the FLSA permits employers to use a “basic rate,” rather than the regular rate as defined in section 7(e), to calculate overtime compensation. 46 Congress added this provision, currently contained in section 7(g), in 1949—at the same time that Congress added the definition of “regular rate” to the FLSA. 47 The requirements an employer must meet to use a basic rate are set forth in that same section 7(g). 48 46 29 U.S.C. 207(g). 47 See Public Law 81-393, 63 Stat. at 914-15. In 1966, Congress redesignated section 7(f) as section 7(g), with section numbers (1)-(3) remaining the same; no substantive changes were made. See Public Law 89-601, 80 Stat. at 836. 47 29 U.S.C. 207(g)(1)-(3). 48 See id. In 1955, the Department promulgated 29 CFR part 548 to establish the requirements for authorized basic rates under section 7(g)(3). 49 It amended various sections of the part 548 regulations several times over the next 12 years to reflect statutory amendments to other parts of the FLSA, including increases to the minimum wage. 50 The Department has not updated any of the regulations in part 548 since 1967, more than a half-century ago. 49 See 20 FR 5678 (Aug. 6, 1955). The regulations interpreting sections 7(g)(1)-(2) are at 29 CFR 778.415 through 778.421. 50 See 21 FR 338 (Jan. 18, 1956); 26 FR 7730 (Aug. 18, 1961); 28 FR 11266 (Oct. 22, 1963); 31 FR 6769 (May 6, 1966); 32 FR 3293 (Feb. 25, 1967). B. The Department's Proposal On March 29, 2019, the Department issued its proposal to update and revise a number of regulations in parts 548 and 778. 51 The Department's proposal focused primarily on clarifying whether certain kinds of “perks,” benefits, or other miscellaneous payments must be included in the regular rate. These clarifications included confirming that the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, and payments for tuition programs, such as reimbursement programs or repayment of educational debt, may be excluded from an employee's regular rate of pay. The Department also proposed to clarify that payments for unused paid leave, including paid sick leave, may be excluded from an employee's regular rate of pay; that reimbursed expenses need not be incurred “solely” for the employer's benefit for the reimbursements to be excludable from an employee's regular rate and that reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System and meet other regulatory requirements may be excluded from an employee's regular rate of pay; that employers do not need a prior formal contract or agreement with the employee(s) to exclude certain overtime premiums described in sections 7(e)(5) and (6) of the FLSA; and that pay for time that would not otherwise qualify as “hours worked,” including bona fide meal periods, may be excluded from an employee's regular rate unless an agreement or established practice indicates that the parties have treated the time as hours worked. Additionally, the Department proposed to provide examples of discretionary bonuses that may be excluded from an employee's regular rate of pay under section 7(e)(3) of the FLSA and to clarify that the label given to a bonus does not determine whether it is discretionary. The Department also proposed to provide additional examples of benefit plans, including accident, unemployment, and legal services, that may be excluded from an employee's regular rate of pay under section 7(e)(4) of the FLSA. 51 84 FR 11888. The Department proposed two substantive changes to the existing regulations. First, the Department proposed to eliminate the restriction in 29 CFR 778.221 and 778.222 that “call-back” pay and other payments similar to call-back pay must be “infrequent and sporadic” to be excludable from an employee's regular rate, while maintaining that such payments must not be so regular that they are essentially prearranged. Second, the Department proposed to update its “basic rate” regulations, which are authorized under section 7(g)(3) of the FLSA, as an alternative to the regular rate under specific circumstances. Under the current regulations, employers using an authorized basic rate may exclude from the overtime computation any additional payment that would not increase total overtime compensation by more than $0.50 per week on average for overtime workweeks in the period for which the employer makes the payment. The Department proposed to update this regulation to change the $0.50 limit to 40 percent of the Federal minimum wage—currently $2.90. In developing this rule, the Department was mindful of the Supreme Court's recent guidance that, to determine the scope of an exemption under the FLSA, the statutory text must be given a “fair reading” rather than a narrow reading because the FLSA's exemptions are “as much a part of the FLSA's purpose as the [minimum wage and] overtime-pay requirement[s].” Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018). As the Third Circuit recently noted in a regular rate case, “that is as should be expected, because employees' rights are not the only ones at issue and, in fact, are not always separate from and at odds with their employers' interests.” U.S. Dep't of Labor v. Bristol Excavating, Inc., 935 F.3d 122, 135 (3d Cir. 2019). Approximately 80 individuals and organizations timely commented on the NPRM during the 75-day extended comment period that ended on June 12, 2019. The Department received comments from a broad array of constituencies, including small business owners, employer and industry associations, individual workers, worker advocacy groups, unions, non-profit organizations, law firms, professional associations, and other interested members of the public. The majority of comments supported the Department's efforts to clarify the regular rate regulations. All timely received comments may be viewed on www.regulations.gov, docket ID WHD-2019-0002. Some commenters appear to have mistakenly filed comments intended for this rulemaking into the dockets for the Department's rulemakings concerning overtime (docket ID WHD-2019-0001) or joint employer status (docket ID WHD-2019-0003) under the FLSA. The Department did not consider these misfiled comments in this rulemaking. The Department has carefully considered the timely-submitted comments on the proposed changes. Some of the comments were general statements of support or opposition. See Bloomin' Brands; International Bancshares Corporation (IBC); Independent Bakers Association (IBA); National Demolition Association (NDA); National Federation of Independent Businesses (NFIB); International Association of Firefighters (Association of Firefighters); and various individual commenters. The Department received a number of comments that are beyond the scope of this rulemaking. These include, for example, a request to address whether restricted stock units are excludable under 29 U.S.C. 207(e)(8) of the Act, which permits an employer to exclude from the regular rate income derived from a stock option, stock appreciation right, or employee stock purchase plan. See Semiconductor Industry Association (SIA); National Association of Manufacturers (NAM); the Chamber of Commerce (Chamber); Partnership to Protect Workplace Opportunity (PPWO); ERISA Industry Committee (ERIC); American Benefits Council. Similarly, some commenters urged the Department to require that any payment that must be included in the regular rate must count towards the overtime salary threshold under 29 CFR part 541. See American Hotel and Lodging Association (AHLA); PPWO; College and University Professional Association for Human Resources (CUPA-HR). The Department did not raise these issues in its proposal, and they are therefore out of scope of this rulemaking. Some commenters raised issues that are the subject of other on-going rulemaking efforts by the Department. For example, commenters raised concerns regarding the fluctuating workweek regulation at 29 CFR 778.114. See Associated Builders and Contractors; AHLA; Chamber. The Department is currently engaged in rulemaking to revise this specific regulation. 52 Therefore, the Department does not address these issues in this final rule. 52 See Fluctuating Workweek Method of Computing Overtime, Notice of Proposed Rulemaking, 84 FR 59590 (Nov. 5, 2019). Significant issues raised in the comments on the Department's proposal are discussed below, along with the Department's response to those comments. III. Final Regulatory Provisions The Department finalizes its proposals to update the regulations in parts 778 and 548 to clarify the Department's interpretation in light of modern compensation and benefits practices. The sections below discuss, in turn, each category of excludable compensation that the Department has addressed in this final rule. A. Excludable Compensation Under Section 7(e)(2) Many of the Department's regulatory updates in this final rule clarify the type of compensation that is excludable from the regular rate under FLSA section 7(e)(2). Section 7(e)(2) permits an employer to exclude from the regular rate three distinct categories of payment: First, “payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause”; second, “reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer's interests and properly reimbursable by the employer”; and third, “other similar payments to an employee which are not made as compensation for his hours of employment.” 53 In this Preamble, these clauses are referred to as: The “occasional periods when no work is performed” clause; the “reimbursable expenses” clause; and the “other similar payments” clause. The Department's regulations interpreting section 7(e)(2) are contained in §§ 778.216 through 778.224. 53 29 U.S.C. 207(e)(2). 1. Pay for Forgoing Holidays or Leave The initial clause of section 7(e)(2) of the FLSA permits an employer to exclude “payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar causes” from the regular rate. 54 Section 778.218 addresses this statutory provision and provides that payments for such time that “are in amounts approximately equivalent to the employee's normal earnings” are not compensation for hours of employment and are therefore excludable from the regular rate. 55 54 See id. 55 29 CFR 778.218; see FOH 32d03g (“Payment for absences charged against leave under a bona fide plan granting the employee a specified amount of annual, vacation, or sick leave with pay need not be included in the regular rate of pay, if the sum paid is the approximate equivalent of the employee's normal earnings for a similar period of working time. Payments for such absences may be excluded regardless of when or how the leave is taken.”). Section 778.219 addresses a related issue: The exclusion of payments for working on a holiday or forgoing vacation leave, as distinct from the exclusion of payments for using leave. 56 It explains that if an employee who is entitled to “a certain sum as holiday or vacation pay, whether he works or not,” receives additional pay for each hour worked on a holiday or vacation day, the sum allocable as the holiday or vacation pay is excluded from the regular rate. 57 In other words, when an employee works instead of taking a holiday or using vacation leave, and receives pay for both the hours of work performed as well as the holiday or vacation leave that he or she did not take, the amount paid for the forgone holiday or vacation leave may be excluded from the regular rate. In its current form, § 778.219 addresses only pay for forgoing holidays and vacation leave but does not address sums paid for forgoing the use of other forms of leave, such as leave for illness. As explained in the NPRM, WHD has addressed payments for forgoing sick leave in its Field Operations Handbook (FOH). The FOH states that the same rules governing exclusion of payments for unused vacation leave also apply to payments for unused sick leave. 58 Therefore, when “the sum paid for unused sick leave is the approximate equivalent of the employee's normal earnings for a similar period of working time,” such payments are excludable from the regular rate. 59 56 See 29 CFR 778.219. 57 29 CFR 778.219(a). 58 See FOH 32d03e(b). 59 Id. To clarify and modernize the regulations, the Department proposed to update § 778.219 to address payments for forgoing both holidays and other forms of leave. The Department noted in the NPRM that it is aware that many employers no longer provide separate categories of leave based on an employee's reason for taking leave—such as sick leave and vacation leave. Instead, employers provide one category of leave, which is commonly called paid time off. The Department explained that it saw no reason to distinguish between the types of leave when determining whether payment for forgoing use of the leave is excludable from the regular rate. Rather, the central issues are whether the amount paid is approximately equivalent to the employee's normal earnings for a similar period of time, and whether the payment is in addition to the employee's normal compensation for hours worked. Accordingly, the Department proposed to clarify that occasional payments for forgoing the use of leave are treated the same regardless of the type of leave. The Department therefore proposed to revise the title of § 778.219, clarify in § 778.219(a) that payments for all forms of unused leave are treated the same for purposes of determining whether they may be excluded from the regular rate, and add an example concerning payment for forgoing the use of paid time off. The NPRM noted that the proposed changes reflected the Department's longstanding practice of applying the same principles to payments of unused holiday, vacation, and sick leave. 60 The NPRM stated that the proposed changes would ensure the consistent application of the same principles across differing leave arrangements. 61 The Department also proposed to clarify that payments for forgoing the use of leave are excludable from the regular rate regardless of whether they are paid during the same pay period in which the previously scheduled leave is forgone or during a subsequent pay period as a lump sum. 60 See FOH 32d03e. 61 See, e.g., Balestrieri v. Menlo Park Fire Prot. Dist., 800 F.3d 1094, 1103-04 (9th Cir. 2015) (holding that annual leave comprised of both sick and vacation leave need not be included in the regular rate under section 7(e)(2)). The NPRM explained that such payments need not be included in the regular rate under section 7(e)(2) for the same reason that payments for unused vacations or holidays need not be included; it makes no difference that payments for unused annual leave or paid time off may include unused sick leave. See also WHD Opinion Letter FLSA2006-18NA, 2006 WL 4512960 (July 24, 2006) (holiday payments made to employees when they forgo holidays need not be included in the regular rate pursuant to section 7(e)(2)); WHD Opinion Letter FLSA2004-2NA, 2004 WL 5303030 (Apr. 5, 2004) (cashed-out accrued vacation time need not be included in regular rate pursuant to section 7(e)(2)). A number of commenters representing both employers and employees addressed this proposal. See, e.g., Center for Workplace Compliance (CWC); International Municipal Lawyers Association (IMLA); Wood Floor Covering Association (WFCA); National Public Labor Employer Relations Association (NPELRA); Chamber; National Employment Law Project (NELP); Association of Firefighters; the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). Many supported the changes as proposed. See, e.g., Associated Builders and Contractors; Seyfarth Shaw (Seyfarth); PPWO; Society for Human Resource Management (SHRM); National Automobile Dealers Association (NADA); Society of Independent Gasoline Marketers of America (SIGMA); NDA. SHRM stated that the proposal harmonizes the regulation “with the realities of the modern workplace” by treating all forms of leave in the same manner. NPELRA commented that the proposal “makes common sense.” NELP expressed general agreement with the proposal. WFCA asked that the regulation specify that the payout of unused leave is still excludable from the regular rate even if the amount of leave accrued is based on the number of hours worked. Rather than accruing leave on a periodic basis ( e.g., per pay-period), WFCA noted that many employees accrue leave based on the number of hours worked and that some states require the calculation of leave to be based on hours worked. In response to this comment, the Department notes that neither WHD in its guidance, nor the courts that have addressed this issue, have determined that pay for forgoing leave is excludable or not excludable on the basis of how the paid leave was accrued. Additionally, the Department recognizes that employers may use a variety of bases for determining leave amounts, such as hours or days worked or length of service. Therefore, the Department has concluded that the proposed regulatory language need not be modified as suggested. The method of computation or accrual of paid leave is not determinative. Under the language in the regulation finalized in this rule, the fact that paid leave may be accrued on an hourly basis would not disqualify pay for forgoing such leave from being excludable from the regular rate. NELP, while generally agreeing with the Department's proposed amendments to § 778.219, requested clarification that regardless of the type of leave, it still must comply with the statutory requirements that it be “occasional” and “similar to vacation, holiday or illness” in order to be excluded from the regular rate. The Department acknowledges NELP's concern but does not believe that any modification to the proposed regulatory text in § 778.219 is necessary. Given the statutory language in section 7(e)(2) that, to be excludable, this form of payment must be made “for occasional periods when no work is performed due to vacation, holiday, illness, . . . or other similar cause,” 62 the Department believes that this is already clear and therefore further clarification in the regulation is unnecessary. 62 29 U.S.C. 207(e)(2); see also 29 CFR 778.218. CWC suggested that the Department add an example illustrating the difference between attendance-based incentive bonuses, which must be included in the regular rate, and valid payments for forgoing leave, which can be excluded. The Department declines to modify the regulatory text as suggested. As discussed in the NPRM, in some situations, employers may make payments to encourage attendance at work rather than compensating employees for forgoing the use of leave. Attendance bonuses are typically non-discretionary bonuses that must be included in the regular rate because they are made “pursuant to [a] contract, agreement, or promise causing the employee to expect such payments[.]” 63 An important distinction between an excludable leave buy-back payment and a non-excludable attendance bonus is that an excludable buy-back payment results in the employee no longer having that leave available to use, i.e., the employee's leave balance is diminished by the amount of leave “bought back.” In contrast, where an employee receives an additional payment that does not affect his or her leave balance, or the payment is otherwise tied to factors that are not related to the holiday, vacation, or illness period, such payment may be an attendance bonus that is not excludable from the regular rate. As CWC noted in its comment, the distinction between an excludable payment for forgoing leave and an attendance bonus is usually very fact specific. 64 Because this issue is more appropriately addressed through subregulatory guidance, the Department declines to amend the regulation as suggested. The Department notes, however, that § 778.219(a), as adopted in this final rule, does not affect § 778.211(c), which addresses the exclusion of discretionary bonuses from the regular rate pursuant to FLSA section 7(e)(3)(a). 65 63 29 U.S.C. 207(e)(3); see 29 CFR 778.211(c); see also 84 FR 11888, 11892 n. 57. 64 See WHD Opinion Letter FLSA2009-19, 2009 WL 649021 at *4 (Jan. 16, 2009) (concluding that vacation buy-back payments were excludable, but stipends for nonuse of sick leave encouraged employees not to use or abuse sick leave and therefore were a form of attendance bonus that was not excludable); WHD Opinion Letter FLSA2006-18NA, 2006 WL 4512960, at *2 (July 24, 2006) (holiday payments made to employees when they forgo holidays need not be included in the regular rate because the employees continued to receive compensation at their customary rate for hours worked in addition to receiving holiday pay); WHD Opinion Letter FLSA2004-2NA (April 5, 2004) (cashed-out accrued vacation time need not be included in the regular rate because such payments were made at employees' applicable hourly rate and in addition to receiving their customary payment for hours worked). 65 See 29 U.S.C. 207(e)(3)(a); 29 CFR 778.211(c). A few commenters addressed the requirement that the pay for forgoing the leave be approximately equivalent to the employee's normal earnings. See Chamber; NPELRA; Association of Firefighters. The Chamber asserted that there was no statutory basis for requiring that the payment for the forgone leave be approximately equivalent to the employee's normal earnings for the amount of time covered by the forgone leave and therefore argued that this requirement be removed entirely. NPELRA requested that the proposed regulatory language in § 778.219 be modified to permit exclusion of a payment for an employee's unused leave where that payment is a percentage of the amount that would normally be paid to the employee when using the leave. NPELRA stated that instead of paying 100 cents on the dollar, employers should be permitted to pay a percentage of accrued leave, which is often based on a calculation negotiated with union representatives and takes into account time-in-service and the total amount of sick leave that an employee has accrued. NPELRA provided an example in which an employee with 20 or more years of service would be paid out for his or her unused sick leave at 20 percent if the employee had accrued between 1 and 125 hours of leave, 40 percent for 126 to 255 hours, 60 percent for 256-380 hours, and 80 percent for 381-607 hours. By contrast, Association of Firefighters commented that the Department did not provide any definition of what constitutes an “approximate equivalent” amount and expressed concern that buy-back payments at “sub-premium” rates will now be permitted. The Department declines to modify the language in proposed § 778.219 to either remove the requirement that payments be made in amounts “approximate[ly] equivalent” or to provide a formulaic definition as to what constitutes an “approximate equivalent.” As an initial matter, the Department notes that this requirement is currently required under § 778.218, which addresses the statutory provision providing for exclusion of payments for occasional periods when no work is performed due to vacation, holiday, and illness. Section 778.218 has long provided that payments for such time that “are in amounts approximately equivalent to the employee's normal earnings,” are not compensation for hours of employment and are therefore excludable from the regular rate. 66 Given that § 778.219's exclusion of pay for forgoing leave is derived from § 778.218, the well-established inclusion of this requirement in the latter warrants its inclusion in the former. Additionally, requiring excludable payments for forgoing leave to be approximately equivalent to the employee's normal earnings helps ensure that the payments are true leave buy-back payments rather than attendance bonuses, which are generally considered to be non-discretionary bonuses that must be included in the regular rate. The example provided by NPELRA, which results in buying back sick leave in amounts that are not approximately equivalent to the employee's normal earnings for a similar period of working time, illustrates why this requirement is necessary. In that example, some of the forgone sick leave is “bought back” at only 20 percent of the dollar value of that leave. For these reasons, the Department has decided to adopt § 778.219 as proposed. 66 29 CFR 778.218; see FOH 32d03g (“Payment for absences charged against leave under a bona fide plan granting the employee a specified amount of annual, vacation, or sick leave with pay need not be included in the regular rate of pay, if the sum paid is the approximate equivalent of the employee's normal earnings for a similar period of working time. Payments for such absences may be excluded regardless of when or how the leave is taken.”). Association of Firefighters and the AFL-CIO contended that the Department's proposal to permit the exclusion of pay for forgoing sick leave is contrary to two appellate cases. 67 First, the court in Chavez relied on § 778.219—and in particular, its explicit reference to pay for vacation leave but lack of reference to pay for sick leave—to conclude that vacation-leave buy-back payments were excludable, but that sick-leave buy-back payments must be included in the regular rate. 68 In characterizing the Department's position on this issue, however, the court did not acknowledge WHD's statement in the FOH that the same rules governing exclusion of payments for unused vacation leave also apply to payments for unused sick leave. 69 Moreover, in citing a 2009 WHD opinion letter, 70 the court did not consider the fact-specific nature of the buy-back program at issue there, which, as discussed above, functioned as an attendance bonus. Nothing in the current language in § 778.219 or the 2009 opinion letter state that a sick-leave buy-back payment can never be excluded from the regular rate. In the second case, Acton, the court neither cited nor discussed the language in section 7(e)(2) that permits exclusion of payments for occasional periods when no work is performed due to vacation, holiday, or illness, or § 778.219, which interprets this statutory provision. Instead, the court mistakenly applied § 778.223 to determine whether buy-back payments were similar to call-back pay, and ultimately concluded that the sick-leave buy back must be included in the regular rate as it constitutes compensation for the general work duty of regular attendance over a significant period of an employee's work tenure. 71 Thus, the court's decision in Acton does not inform the proper interpretation of the statutory exclusion of payments for occasional periods when no work is performed due to vacation, holiday, or illness contained in section 7(e)(2) and explained in § 778.219. 72 Contrary to these two cases, the Department agrees with both the conclusion and underlying reasoning in Balestrieri v. Menlo Park Fire Protection District. 73 There, the court held that buy back payments for annual leave, which included both sick and vacation leave, need not be included in the regular rate. While acknowledging that some sick-leave buy-back programs, such as the one at issue in the 2009 WHD opinion letter, could function like an attendance bonus and therefore require their inclusion in the regular rate, the annual leave that was bought back in Balestrieri did not differentiate between sick leave and vacation leave. As a result, any portion of the annual leave that could be attributed to sick leave did not function as an attendance bonus. 74 67 See Chavez v. City of Albuquerque, 630 F.3d 1300, 1309 (10th Cir. 2011); Acton v. City of Columbia, 436 F.3d 969, 977-78 (8th Cir. 2006). 68 See 630 F.3d at 1308-09. 69 See FOH 32d03e. 70 WHD Opinion Letter FLSA2009-19, 2009 WL 649021 (Jan. 16, 2009). 71 See 436 F.3d at 977. 72 See 29 U.S.C. 207(e)(2); 29 CFR 778.219. 73 See 800 F.3d 1094, 1103 (9th Cir. 2015). 74 See 800 F.3d at 1102-04. Lastly, IMLA requested that the Department provide an additional example to § 778.219(a) concerning the excludability of “holiday-in-lieu” pay from the regular rate. IMLA notes that some employees, particularly public sector emergency response personnel, work a set schedule without regard to holidays. Due to the nature of their work, such employees may be called upon to forgo a recognized holiday if their schedule requires them to work that day or if an emergency arises. IMLA states that the current regulations permit the excludability of such payments, but that several courts have nevertheless held that similar forms of “holiday-in-lieu” payments must be included in the regular rate. 75 75 See Hart v. City of Alameda, No. C-07-5845MMC, 2009 WL 1705612, at *3 (N.D. Cal. June 17, 2009) (holiday pay received by city police officers every pay period must be included in the regular rate); Lewis v. County of Colusa, No. 2:16-cv-01745-VC, 2018 WL 1605754, at *3 (E.D. Cal. Apr. 3, 2018) (defendant did not meet burden to show that biannual lump-sum holiday in-lieu payments to safety officers and dispatchers fall squarely within section 7(e)(2)); McKinnon v. City of Merced, No. 118CV01124LJOSAB, 2018 WL 6601900, at *5-8 (E.D. Cal. Dec. 17, 2018) (finding that payments are not excludable where it was “not apparent that Plaintiffs are in fact entitled to paid time off at the holidays which they are able to forego”). Current Department regulations support excluding holiday-in-lieu pay from the regular rate. Under 29 CFR 778.219, where an employee forgoes his or her holiday and works, and is paid for his or her normal work plus an additional amount for the holiday, the additional amount paid for working the holiday is not included in the regular rate. The Department applied this principle in a 2006 opinion letter concluding that holiday-in-lieu pay could be excluded from the regular rate where the employer provided nine “recognized” holidays and two “floating” holidays paid in a lump sum, and on occasion when employees forgo a holiday and work they received both pay for the hours worked and holiday pay. 76 The Department notes that it does not matter whether the employee voluntarily forgoes the holiday to work or is required to work the holiday by the schedule set for the employee. Nothing in this regulation makes the excludability of such payments dependent on the employee having the option to work or not work on the holiday. All that is required for the holiday-in-lieu pay to be excludable is that the employee is paid an amount for the holiday, in addition to being paid for his hours worked on the holiday. 77 In response to IMLA's comments, the Department has added an additional example to § 778.219(a) involving employees who work a set schedule irrespective of holidays to clarify the regulation. 76 FLSA2006-18NA, 2006 WL 4512960 (July 24, 2006). Cf. WHD Opinion Letter FLSA, 1999 WL 1788163, at *2 (Sept. 30, 1999) (payments received by employees were required to be included in the regular rate where employees were not entitled to take leave on holidays and instead received an additional 5 percent of base pay each pay period as “in lieu of holiday pay.”). 77 Thus, the Department disagrees with the McKinnon court's reliance on the word “forgo” in § 778.219 to mean that the employee must have the option of not working on the holiday for the holiday-in-lieu pay to be excludable. See McKinnon, 2018 WL 6601900 at *5. 2. Exclusion of Compensation for Bona Fide Meal Periods Section 778.218 addresses the clause of FLSA section 7(e)(2) concerning payments made for occasional periods when no work is performed and provides that when payments for such time “are in amounts approximately equivalent to the employee's normal earnings,” they are not compensation for hours of employment and may be excluded from the regular rate. 78 Section 778.218(b) states that this clause “deals with the type of absences which are infrequent or sporadic or unpredictable” and “has no relation to regular `absences' such as lunch periods nor to regularly scheduled days of rest.” 79 78 29 CFR 778.218; see 29 U.S.C. 207(e)(2). 79 29 CFR 778.218(b). Section 778.320 addresses “[h]ours that would not be hours worked if not paid for,” and identifies “time spent in eating meals between working hours” as an example. 80 Section 778.320(b) further states that even when such time is compensated, the parties may agree that the time will not be counted as hours worked. 80 See 29 CFR 778.320. The Department proposed to remove the reference to “lunch periods” in § 778.218(b) to eliminate any uncertainty about its relation to § 778.320 concerning the excludability of payments for bona fide meal periods from the regular rate. As one court noted, the existing regulations in §§ 778.218 and 778.320 “appear somewhat inconsistent” on the excludability from the regular rate of compensation for bona fide meal periods. 81 In 1986, WHD acknowledged in an opinion letter “that the reference to meal periods in section 778.218(b) of Part 778 may not be compatible with the position which is contained in section 778.320(b),” and indicated that the issue was under review. 82 The Department subsequently clarified in a 1996 opinion letter that pay provided for a bona fide meal period is excludable from the regular rate under § 778.320(b). 83 As explained in the NPRM, while the Department clarified its position in an opinion letter more than 20 years ago, it is nonetheless concerned that the language in § 778.218(b) may cause confusion concerning the excludability of pay for bona fide meal periods. Thus, to remove any ambiguity and to codify its interpretation in regulation, the Department proposed to delete the reference to “lunch periods” from § 778.218(b). 81 Smiley v. E.I. Dupont De Nemours & Co., 839 F.3d 325, 331 n.5 (3d Cir. 2016). 82 WHD Opinion Letter FLSA-937 (July 22, 1986). 83 See WHD Opinion Letter FLSA, 1996 WL 1031805 (Dec. 3, 1996); see also Ballaris v. Wacker Siltronic Corp., 370 F.3d 901, 909 (9th Cir. 2004) (holding that pay for a bona fide lunch period was “properly excluded from the calculation of the regular rate under 29 U.S.C. 207(e)(2) as interpreted by revised § 778.320”); WHD Opinion Letter FLSA, 1997 WL 998021 (July 21, 1997) (stating that pay for bona fide meal periods need not be included in the regular rate). Bona fide meal periods are not considered “hours worked” for purposes of the FLSA's minimum wage or overtime requirements, and employers are not required to pay for such time. 84 The Department proposed changing § 778.320 to clarify that the payment of compensation for bona fide meal periods alone does not convert such time to hours worked unless agreement or actual course of conduct establish that the parties have treated the time as hours worked. The Department explained in the NPRM that, in the Department's enforcement experience, the treatment of bona fide meal breaks is frequently not subject to formal agreement and is often established by informal policy or course of conduct. Payments for such periods need only be included in the regular rate when it appears from all the pertinent facts that the parties have treated compensated bona fide meal periods as hours worked. The NPRM noted that the proposal would clarify the existing requirements and not substantively change either the calculation of the regular rate or the determination of hours worked. 84 See 29 CFR 785.19. The Department received many comments supporting these changes and no comments opposed to the changes. See, e.g., NDA; Associated Builders and Contractors; NADA; CWC; SHRM; PPWO. Accordingly, the Department adopts the changes to §§ 778.218(b) and 778.320 as proposed. 3. Additional Examples of “Other Similar Causes” As noted above, § 778.218 addresses the clause of FLSA section 7(e)(2) that permits employers to exclude certain payments for occasional periods when no work is performed “due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause.” 85 Section 778.218(d) lists examples that qualify as “other similar causes,” including “absences due to jury service, reporting to a draft board, attending a funeral of a family member, [and] inability to reach the workplace because of weather condition.” 85 29 CFR 778.218; see 29 U.S.C. 207(e)(2). The Chamber requested that the Department “add paid family medical leave as an example in § 778.218(d), and paid leave for military service; voting; attending child custody or adoption hearings; attending school activities; donating organs, bone marrow, or blood; voluntarily serving as a first responder; and any other paid leave required under state or local laws.” Upon review, the Department believes these are all examples of non-routine absences that fall within the meaning of “other similar causes” in FLSA section 7(e)(2). Accordingly, the Department is adding these causes for absences in the list of examples of “other similar causes.” The Department further believes that attending any funeral, not just the funeral of a family member, is an “other similar cause” under FLSA section 7(e)(2). Therefore, the Department is deleting “of a family member” from the text of § 778.218(d). 4. Reimbursable Expenses The second clause of section 7(e)(2) excludes from the regular rate “reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer's interests and properly reimbursable by the employer[.]” 86 Section 778.217 currently states that “[w]here an employee incurs expenses on his employer's behalf or where he is required to expend sums solely by reason of action taken for the convenience of his employer, section 7(e)(2) is applicable to reimbursement for such expenses.” 87 The Department promulgated this section in February 1950. 88 86 29 U.S.C. 207(e)(2). 87 29 CFR 778.217(a). 88 See 15 FR 623. While § 778.217, in its current form, limits reimbursable expenses to those “solely” in the interest of the employer, the statutory language does not include this limitation. Instead, the FLSA simply excludes all expenses incurred “in the furtherance of [the] employer's interests[,]” 89 and, as explained further below, neither the Department nor the courts have since restricted excludable expenses to only those that “solely” benefit the employer. As explained in the NPRM, the Department is concerned that this single use of the word “solely” in § 778.217 may be interpreted as more restrictive than what the FLSA actually requires. The Department therefore proposed to remove the word “solely” from § 778.217(a) to clarify its interpretation of the reimbursable expenses clause of section 7(e)(2). The Department noted that this proposed clarification was consistent with the other subsections of § 778.217, as well as court rulings and the Department's opinion letters—which have not required that excludable expenses solely benefit the employer. 89 29 U.S.C. 207(e)(2). Section 778.217(d) also discusses expenses that are excludable from the regular rate. The Department explained in the NPRM that this paragraph emphasizes only whether such payments benefit the employer or the employee; it does not require them to “solely” benefit one party or the other. Thus, payments for expenses that are “incurred by the employee on the employer's behalf or for his benefit or convenience” merit exclusion from the regular rate, but reimbursements for expenses “incurred by the employee for his own benefit,” such as “expenses in traveling to and from work, buying lunch, paying rent, and the like,” are not excluded from the regular rate under the “reimbursable expenses” clause of section 7(e)(2). 90 90 29 CFR 778.217(d). The NPRM noted that this is consistent with the illustrative examples in § 778.217(b) of reimbursable expenses that may be excluded from the regular rate, which include “purchasing supplies, tools, materials, or equipment on behalf of his employer,” travel expenses, including living expenses away from home, incurred while traveling for work for the employer's benefit, and the cost of “supper money” to an employee in a situation where “he or she would ordinarily leave work in time to have supper at home, but instead must remain to work additional hours for the employer's benefit.” See 29 CFR 778.217(b)(1), (2), (4). Similarly, as the NPRM explained, the Department's opinion letters do not analyze whether an expense is incurred solely for the employer's convenience when discussing whether it may be excluded from the regular rate. Instead, the opinion letters analyze simply whether expenses benefit the employer. 91 Furthermore, since 1955, the Department's policy in WHD's FOH has mirrored the statutory requirement that “expenses incurred by an employee in furtherance of his/her employer's interests” may be excluded from the regular rate, regardless of whether they “solely” benefit one party or the other. 92 91 For example, the cost of food for eating meals during travel out of town for work is for the employer's benefit; therefore, such reimbursement may be excluded from the regular rate. See WHD Opinion Letter FLSA2004-3, 2004 WL 2146923 (May 13, 2004); see also WHD Opinion Letter FLSA-828 (July 19, 1976) (“[r]eimbursement to an employee for expenses incurred on behalf of an employer” would not become part of the regular rate); WHD Opinion Letter FLSA-940 (Mar. 9, 1977) (regular rate shall not include “reimbursement for expenses where an employee incurs out of pocket expenses on the employer's behalf”); WHD Opinion Letter FLSA, 1985 WL 1087356, at *2 (July 12, 1985) (reimbursement must be for “expenses incurred by the employee on the employer's behalf or convenience”). 92 FOH 32d05a(a). In the NPRM, the Department pointed out that, consistent with the Department's practice and guidance, courts have not analyzed whether the expenses at issue were incurred solely for the employer's convenience when determining whether they are excludable from the regular rate. Instead, courts have emphasized the statutory requirement that the expenses need only benefit the employer. 93 93 See, e.g., Berry v. Excel Grp., Inc., 288 F.3d 252, 253-54 (5th Cir. 2002) (concluding that reimbursements of travel expenses were primarily for the employer's benefit; therefore, such expenses were excluded from the regular rate); see also Sharp v. CGG Land, Inc., 840 F.3d 1211, 1215 (10th Cir. 2016) (“[T]he proper focus under § 778.217(b)(3) is whether the $35 payments are for reimbursement of travel expenses incurred in furtherance of the employer's interests . . . .”); Brennan v. Padre Drilling Co., Inc., 359 F. Supp. 462, 465 (S.D. Tex. 1973) (per diem for traveling expenses is “expended by the employee in the furtherance of his employer's interest”). All of the comments regarding this proposal were supportive and agreed that the limitation imposed by the word “solely” in the current regulation could be overly restrictive and is not required by the FLSA. See Associated Builders and Contractors; CWC; Chamber; Fisher Phillips; NADA; PPWO; Seyfarth; SHRM; SIGMA. Two of these commenters also asked that the Department add a new sentence explicitly stating that “business expenses need not be solely or primarily incurred for the employer's benefit.” See Associated Builders and Contractors; Chamber. The Department has decided to finalize its proposal to remove the word “solely” from § 778.217(a) to better align the regulations with the FLSA. As explained above, the FLSA does not impose a limitation on the proportion of benefit to the employer in order for reimbursed expenses to be excludable. The Department does not believe it is necessary to further add a sentence stating that business expenses need not be “solely or primarily incurred for the employer's benefit” in order to be excludable. The removal of the term “solely” adequately aligns the regulations with the statute. The Department also proposed to clarify section 7(e)(2)'s requirement that only “reasonable” and “properly reimbursable” expenses may be excluded from the regular rate when reimbursed. Current § 778.217(b)(3) permits employers to exclude from the regular rate “[t]he actual or reasonably approximate amount expended by an employee who is traveling `over the road' on his employer's business, for transportation . . . and living expenses away from home, [or] other [such] travel expenses[.]” Section 778.217(c) cautions that “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.” Two commenters asked the Department to clarify that specific reimbursable expenses are excludable from the regular rate. See NADA; AHLA. These requests included “cell phone reimbursement,” “non-mandatory credentialing exam fees,” “organization membership dues,” and reimbursements for the cost of tools. These are clearly not compensation for hours of employment, but instead are expenses taken on by employees for the employer's convenience or benefit. Because “[t]he actual amount expended by an employee in purchasing . . . tools” is already included in the regulation's illustrations of excludable reimbursements, the Department believes sufficient guidance is available regarding tool reimbursements. 94 However, to provide additional clarity regarding cell phone reimbursement, exam fees, and membership dues, the Department has decided to revise the language of the illustration provided at § 778.217(b)(1) to make clear that these too are excludable reimbursements. 94 See 29 CFR 778.217(b)(1). The NPRM proposed additional explanation of what is “reasonable”—and thus not “disproportionately large”—by referring to the Federal Travel Regulation. The Department explained that it believes that the amounts set in the Federal Travel Regulation are not excessive and are easily ascertained, given its “two principal purposes” of “balanc[ing] the need to assure that official travel is conducted in a responsible manner with the need to minimize administrative costs” and “communicat[ing] the resulting policies in a clear manner to Federal agencies and employees.” 95 The Department thus proposed to add regulatory text explaining that a payment for an employee traveling on his or her employer's business is per se reasonable if it is at or beneath the maximum amounts reimbursable or allowed for the same type of expense under the Federal Travel Regulation and meets § 778.217's other requirements. Those other requirements include that the reimbursement be for the “actual or reasonably approximate amount” 96 of the expense, that the expense be incurred on the employer's behalf, and that the expense not vary with hours worked. 97 The proposed regulatory text also clarified that a reimbursement for an employee traveling on his or her employer's business exceeding the Federal Travel Regulation limits is not necessarily unreasonable. As the NPRM explained, a payment may be more than that required “to minimize administrative costs” yet still within the realm of reasonable business and industry norms. 95 41 CFR 300-1.2. Those amounts are published online annually by the General Services Administration. See Plan and Book, GSA, www.gsa.gov/travel/plan-and-book (last visited Aug. 23, 2019). 96 Gagnon v. United Technisource, Inc., 607 F.3d 1036, 1041-42 (5th Cir. 2010), provides a helpful contrast to a properly excludable reimbursement. There, multiple facts indicated that the employee's purported “per diem” was simply a scheme to avoid paying overtime. Those facts included the per diem's rise over time without any clear connection to travel or other expenses, its variance by the hour, its cap at 40 hours per week, and its payment in combination with a well-below-market wage. 97 See, e.g., Baouch v. Werner Enters., Inc., 908 F.3d 1107, 1116 (8th Cir. 2018) (“Per diem payments that vary with the amount of work performed are part of the regular rate.”), petition for cert. filed, (U.S. June 13, 2019) (No. 18-1541). A number of commenters supported the Department's proposal to state in the regulatory text that reimbursements for travel expenses are per se reasonable if they do not exceed the rates in the Federal Travel Regulation. See, e.g., NDA; PPWO; SIGMA; SHRM; Chamber. Several commenters noted that the Federal Travel Regulation rates are below market rate, and that in many cases expenses exceeding that amount may still be reasonable. To address this issue, some commenters recommended that the Department finalize proposed paragraph (c)(3) stating that costs exceeding the Federal Travel Regulation may still be reasonable, and two recommended that the Department develop additional guidance about the Federal Travel Regulations after issuance of the final rule. See AHLA; CWC; Chamber; SIGMA; SHRM. Two commenters noted that many employers use Internal Revenue Service (IRS) guidelines for reimbursement of employee travel expenses, and suggested that the final rule also state that expenses not exceeding the IRS's guidelines for reimbursement of employee travel expenses are per se reasonable. See NDA; PPWO. The Department has decided to modify the language in proposed § 778.217(c)(2) to state that payments equal to or less than the Federal Travel Regulation rates or the substantiation amounts for travel expenses permitted by the IRS under 26 CFR 1.274-5(g) and (j) are per se reasonable and not disproportionately large. 98 The Department has also decided to finalize the regulatory language in proposed § 778.217(c)(3) noting that § 778.217(c)(2) does not create an inference that amounts in excess of the Federal Travel Regulation rates or the rates set by the IRS on travel expenses are per se unreasonable. 99 98 Under the authority of 26 U.S.C. 274(d), 26 CFR 1.274-5(g) and 26 CFR 1.274-5(j), the IRS Commissioner has prescribed special per diem methods under which a taxpayer may use a specified amount in lieu of substantiating the actual costs of certain travel while away from home. IRS guidelines regarding special per diem and meals and incidental expenses (M&IE) methods are set forth in Revenue Procedure 2011-47, 2011-42 I.R.B. 520, 2011 WL 4503974 (Oct. 17, 2011). The IRS publishes the special per diem rates in an annual notice. See Notice 2019-55 (2019-42 IRB 937) (or successor), available at: https://www.irs.gov/pub/irs-drop/n-19-55.pdf. Revenue Procedure 2011-47 provides optional substantiation methods (for example, meal and incidental expenses only per diem allowance, special rules for the transportation industry, and the high-low substantiation method). 99 See id. 5. Other Similar Payments Section 7(e) requires “all remuneration for employment” be included in the regular rate, subject to that section's eight listed exclusions. Section 7(e)(2) consists of three clauses, each of which address a distinct category of excludable compensation. As discussed above, the first excludes “payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause.” The second excludes “reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer's interests and properly reimbursable by the employer.” The third clause of section 7(e)(2) excludes from the regular rate “other similar payments to an employee which are not made as compensation for his hours of employment.” As explained in the NPRM, “[o]ther . . . payments” are “similar” to those in the first two clauses of section 7(e)(2) because they are “not made as compensation for [an employee's] hours of employment.” The first two clauses share the essential characteristic of having no connection to the quantity or quality of work performed. The “other similar payments” clause thus excludes payments not tied to an employee's hours worked, services rendered, job performance, or other criteria linked to the quality or quantity of the employee's work. 100 100 See Reich v. Interstate Brands Corp., 57 F.3d 574, 578 (7th Cir. 1995) (“The word `similar' then refers to other payments that do not depend at all on when or how much work is performed.”); Minizza v. Stone Container Corp., 842 F.2d 1456, 1461 (3d Cir. 1988) (“[W]e interpret the phrase `other similar payments' by reading each clause of section 207(e)(2) separately. The phrase `other similar payments . . . not made as compensation for hours of employment' does not mean just other payment for idle hours or reimbursements, the two types of payments set forth in the two preceding clauses of the section, but payments not tied to hours of compensation, of which payments for idle hours and reimbursements are only two examples.”). But see Flores v. City of San Gabriel, 824 F.3d 890, 899 (9th Cir. 2016) (“the `key point' ” for exclusion under the third clause “is whether the payment is `compensation for work' ” (quoting Local 246 Utility Workers Union of Am. v. S. Cal. Edison Co., 83 F.3d 292, 295 (9th Cir. 1996)); Acton, 436 F.3d at 976 (“Section 207(e)(2), properly understood, operates not as a separate basis for exclusion, but instead clarifies the types of payments that do not constitute remuneration for employment for purposes of section 207.”). The NPRM explained that, in a sense, every benefit or payment that an employer gives an employee is “remuneration for employment.” 101 Certainly benefits like paid vacation or sick leave are seen as such by many employers and employees. But the section 7(e)(2) exclusions make clear that whether or not they are remuneration, they are “not made as compensation for [the employee's] hours of employment” because they have no relationship to the employee's hours worked or services rendered. This interpretation gives meaning to the third clause. It allows employers to provide benefits unconnected to the quality or quantity of work, even if those benefits are remuneration of a sort. 101 Cf. Minizza, 842 F.2d at 1460 (“Employers have a finite amount to spend for the labor component of their product or service. This sum can be allocated solely as compensation on an hourly basis (in which event the payment would be fully includable in the `regular rate'), or it can assume any number of other forms . . . (in which case the payments may or may not be includable), in any ratio the parties care to set.”); Sec'y U.S. Dep't of Labor v. Bristol Excavating, Inc., No. 17-3663, 2019 WL 3926937, at *3 (3d Cir. Aug. 20, 2019) (clarifying that not all payments relating to employment, regardless of source, qualify as remuneration for employment and that, in the context of third-party payments, a “payment qualifies as remuneration for employment only when the employer and employee have effectively agreed it will.”). The NPRM further explained that interpreting the third clause as simply a restatement of the “remuneration” requirement would contravene basic principles of statutory interpretation. Such an interpretation would equate the unique phrases “all remuneration for employment” and “compensation for [the employee's] hours of employment,” even though Congress used different words and thus, presumably, meant different things. This is especially so when considering that one phrase uses the word “employment” when the other uses the term “hours of employment.” Such an interpretation would also render the third clause redundant, another disfavored result. And it would be difficult to reconcile with the first clause of section 7(e)(2), in which the payments are clearly remuneration yet excludable from the regular rate. The NPRM also explained that payments to employees are not excludable under the “other similar payments” clause merely because the payments are not specifically tied to an employee's hours of work. 102 “Other similar payments” cannot be simply wages in another guise. When a payment is a wage supplement, even if not tied directly to employee performance or hours worked, it is still compensation for “hours of employment.” For example, payments such as production bonuses, 103 and the cost of furnished board, lodging, or facilities, 104 which “though not directly attributable to any particular hours of work are, nevertheless, clearly understood to be compensation for services” 105 are not excludable under this provision. Similarly, payments that differ only in form from regular wages by, for instance, being paid in a monthly lump sum or as hardship premiums, are better characterized as wages or bonuses than as “other similar payments” excludable from the regular rate. The other similar payments clause cannot be interpreted so broadly as to “obliterate[ ] the qualifications and limitations” placed on excludable payments specifically addressed in section 7(e)'s various other sections, which could render such limits “superfluous.” 106 102 See Local 246, 83 F.3d at 295 n.2 (“Even if payments to employees are not measured by the number of hours spent at work, that fact alone does not qualify them for exclusion under section 207(e)(2).”); Featsent v. City of Youngstown, 70 F.3d 900, 904 (6th Cir. 1995) (“7(e)(2) does not exclude every payment not measured by hours of employment from the regular rate.”); Reich, 57 F.3d at 577 (“We cannot read § 7(e)(2) in isolation . . . . It is one among many exemptions, and a glance at a few of the others shows that § 7(e)(2) cannot possibly exclude every payment that is not measured by the number of hours spent at work.”). 103 See 29 CFR 778.211(c). 104 See 29 CFR 778.116. 105 29 CFR 778.224(a). 106 Reich, 57 F.3d at 578. The NPRM stated that the Department's interpretation has considerable support in the case law, citing multiple decisions. First, the Third Circuit held in Minizza v. Stone Container Corp. that two lump sums paid to select employees to induce them to agree to a collective-bargaining agreement were excludable as an “other similar payment” because they were not compensation for hours worked or services rendered. 107 The court interpreted the clause to exclude “payments not tied to hours of compensation, of which payments for idle hours and reimbursements are only two examples.” 108 The court's decision that these payments were not compensation for employment rested in part on the fact that the “eligibility requirements were not meant to serve as compensation for service, but rather to reduce the employers' costs,” but also in part on the fact that “the eligibility terms themselves [for the lump sums] [did] not require specific service”—it did “not matter how many hours an employee worked during that period, nor how many hours he might work in the future.” 109 107 Minizza, 842 F.2d at 1461-62. 108 Id. at 1461. 109 Id. at 1460-61; see also id. at 1462 (“If the payments were made as compensation for hours worked or services provided, the payments would have been conditioned on a certain number of hours worked or on an amount of services provided.”). Second, the Seventh Circuit espoused a similar understanding in Reich v. Interstate Brands Corp. 110 There, the court held that regular, planned $12 payments to bakers who worked weeks without two consecutive days off could not be excluded from the regular rate under section 7(e)(2). The court reasoned that the payments were materially no different from a higher base rate to compensate the bakers for taking on an unpleasant schedule. 111 “Other similar payments” are different, wrote the court. “The word `similar' . . . refers to other payments that do not depend at all on when or how much work is performed.” 112 110 57 F.3d 574. 111 See id. at 578-79. 112 Id. at 578. Similarly, the Sixth Circuit has held that pay differentials based on employees' education level, shift differentials, and hazardous pay are compensation for services rendered, unlike payments that “are unrelated to [employees'] compensation for services and hours of service.” 113 Some circuit courts have interpreted the “other similar payments” not to exclude payments that are “compensation for work.” 114 The Department concurs with these courts to the extent that they have used these or similar phrases to capture the idea that the regular rate includes payments tied to work performance or that function as a wage supplement. But insofar as these courts have equated “compensation for work” with “remuneration for employment,” 115 that is difficult to reconcile with the text of the FLSA. As explained above, the FLSA uses two different phrases, “remuneration for employment” and “compensation for hours of employment,” each of which should be given distinct content. And just as importantly, the first clause of section 7(e)(2) excludes vacation and sick leave, which is clearly remunerative; “other similar payments” to employees can be remunerative too. 113 Featsent, 70 F.3d at 904-06. 114 See, e.g., Flores, 824 F.3d at 899. 115 See Acton, 436 F.3d at 976 (“the language `not made as compensation for [the employee's] hours of employment' posited in § 207(e)(2) is but a mere re-articulation of the `remuneration for employment' requirement set forth in the preambulary language of § 207(e)”). Accordingly, the NPRM explained, the proposed clarifications would promote a clear yet flexible standard for employers and employees to order their affairs. Payments are “other similar payments” when they do not function as formulaic wage supplements and are not tied to hours worked, services rendered, job performance, or other criteria linked to the quality or quantity of the employee's work, but are conditioned merely on one being an employee. Conditions not tied to the quality or quantity of work performed, such as a reasonable waiting period for eligibility 116 or the requirement to repay benefits as a remedy for employee misconduct, are permitted. This standard also clarifies that there is space for a variety of creative benefits offerings, and encourages their provision to wide groups of employees instead of reserving them only for FLSA-exempt employees. 116 See Minizza, 842 F.2d at 1460 (“A review of the eligibility terms reflects a requirement only that a payee achieve the status of an active employee for a specified period of time prior to receipt. It does not matter how many hours an employee worked during that period, nor how many hours he might work in the future.”). Section 778.224 addresses miscellaneous items that are excludable from an employee's regular rate under the “other similar payments” clause of section 7(e)(2) because they are “not made as compensation for . . . hours of employment[.]” 117 Section 778.224(b) currently provides a brief, nonexhaustive set of examples of “other similar payments” excludable from an employee's regular rate: “(1) Sums paid to an employee for the rental of his truck or car[;] (2) Loans or advances made by the employer to the employee[;] [and] (3) The cost to the employer of conveniences furnished to the employee such as parking space, restrooms, lockers, on-the-job medical care and recreational facilities.” 118 The NPRM noted that the Department added this set of examples to the part 778 regulations in 1950, 119 and has not substantively amended them since. The regulation makes clear that “it was not considered feasible” to provide an exhaustive list of excludable “other similar payments” given the “variety of miscellaneous payments [that] are paid by an employer to an employee under peculiar circumstances.” 120 117 29 U.S.C. 207(e)(2). 118 29 CFR 778.224(b). 119 See 15 FR 623 (1950) (codified at 29 CFR 778.7(g); relocated in 1968 to 29 CFR 778.224(b)). 120 29 CFR 778.224(a). The Department explained in the NPRM that it continues to believe that providing a comprehensive list of all “other similar payments” excludable under section 7(e)(2)'s third clause is infeasible. Nonetheless, the Department recognized that an updated list would further help employers understand their legal obligations by addressing some of the innovative changes in compensation practices and workplace environments that have occurred since the Department added this set of examples in 1950. Therefore, the Department proposed clarifying in § 778.224(b) that the following items may be excluded from an employee's regular rate under the “other similar payments” clause of section 7(e)(2). a. Specialist Treatment Provided Onsite; Gym Access, Gym Memberships, and Fitness Classes; Wellness Programs; Discounts on Retail Goods and Services The Department proposed clarifying in § 778.224(b)(3) that employers may exclude from the regular rate the cost of providing onsite treatment from specialists such as chiropractors, massage therapists, personal trainers, counselors, Employment Assistance Programs, or physical therapists. 121 As explained in the NPRM, such specialist treatment resembles “on-the-job medical care,” which § 778.224(b)(3) already identifies as an excludable “convenience furnished to the employee.” 122 Employers that provide onsite specialist treatment do so for a variety of reasons, including to raise workplace morale, promote employee health, and reduce healthcare costs. 121 This proposal is not intended to affect the circumstances under which receiving medical attention at the direction of the employer is considered to be hours worked. See 29 CFR 785.43. 122 29 CFR 778.224(b)(3). The Department also proposed clarifying in § 778.224(b)(3) that the cost of providing employees with gym access, gym memberships, and fitness classes, whether onsite or offsite, is excludable from the regular rate. 123 These fitness benefits, the Department explained, resemble “recreational facilities,” which § 778.224(b)(3) already identifies as an excludable convenience provided to employees. According to one survey, a substantial number of employers provided fitness benefits. 124 Employers may provide such conveniences for many reasons, including to raise workplace morale, promote employee health, and reduce healthcare costs. 123 In circumstances where maintaining a certain level of physical fitness is a requirement of the employee's job, the cost to the employer of providing exercise opportunities is a facility furnished “primarily for the benefit or convenience of the employer,” as described in § 531.3(d). Facilities furnished for the employer's benefit do not qualify as wages or remuneration for employment and thus need not be included in the regular rate. 124 See Soc'y for Human Res. Mgmt., 2018 Employee Benefits: The Evolution of Benefits 23 (2018), available at https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/2018%20Employee%20Benefits%20Report.pdf . The Department proposed adding an example in § 778.224(b)(4) to clarify that employers may exclude from the regular rate the cost of providing certain health promotion and disease prevention activities, often known as wellness programs. The NPRM noted that examples of some common wellness programs include health risk assessments, biometric screenings, vaccination clinics (including annual flu vaccinations), nutrition classes, weight loss programs, smoking cessation programs, stress reduction programs, exercise programs, and coaching to help employees meet health goals. 125 Wellness programs are often provided to employees enrolled in an employer-sponsored health insurance plan, but some employers offer wellness programs to employees regardless of their health insurance coverage. The NPRM stated that workplace wellness programs are similar to “on-the-job medical care” and “recreational facilities,” conveniences that the regulations already specify are excludable from an employee's regular rate. 126 Employers may provide such programs to, for example, reduce health care costs, reduce health-related absenteeism, and improve employee health and morale. 125 See, e.g., Soc'y for Human Res. Mgmt., “How to Establish and Design a Wellness Program,” https://www.shrm.org/resourcesandtools/hr-topics/pages/howtoestablishanddesignawellnessprogram.aspx (last accessed Aug. 26, 2019). 126 29 CFR 778.224(b)(3). The Department also proposed adding an example in § 778.224(b)(5) to confirm that discounts on retail goods and services may be excluded from the regular rate of pay as long as they are not tied to an employee's hours worked or services rendered. The NPRM cited a survey that indicated that many employers provide employees with an option to purchase these types of goods or services at a discounted price relative to their full retail value. 127 Such discounts are commonly available to employees regardless of their quality or quantity of work, and it is solely the employees' choice whether to purchase anything under the discount. When these discounts are available to employees regardless of their hours worked or services rendered, and are not tied to any duties performed, they qualify as “other similar payments” under section 7(e)(2). 128 The NPRM pointed out that more than 50 years ago, the Department stated that such employee discounts are not included in the regular rate of pay. In a 1962 opinion letter, the Department found that the value of “concessions granted to employees . . . on charges for telephone service” was “not part of wages includible in the regular rate of pay”—in part because “[s]uch concessions appear to be similar to discounts on merchandise offered by many retail establishments to their employees which [the Department] do[es] not regard as wages.” 129 The NPRM explained that discounts like these are not fungible cash but merely a lower price on the employer's offerings. They appeal only to the employees who want to use them and are limited to the offered selection of goods or services. Employees must expend their own funds to avail themselves of the discounts. The discounts are presumably limited in their value, since employers likely do not offer discounts that would materially harm their business. And employers may also place conditions on the discounts to protect their interests by, for instance, requiring that discounted restaurant meals be eaten on the premises to prevent abuse. 127 See Soc'y for Human Res. Mgmt., “2018 Employee Benefits: The Evolution of Benefits,” at 31 (June 2018), https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/2018%20Employee%20Benefits%20Report.pdf (from 2014 to 2018, employers offering an employee discount on company services ranged from 31 percent to 34 percent, and employers offering employer-sponsored personal shopping ( e.g., retail) discounts ranged from 11 percent to 19 percent). 128 See Reich, 57 F.3d at 578 (payments under section 7(e)(2) are those “that do not depend at all on when or how much work is performed”); Minizza, 842 F.2d at 1462 (payments under section 7(e)(2) all “share the essential characteristic . . . of not being compensation for hours worked or services rendered”). 129 WHD Opinion Letter FLSA, 1962 DOLWH LEXIS 217 (Oct. 31, 1962). The Department received numerous comments in support of these clarifications, with many commenters noting that the additional clarity provided by the additional examples in § 778.224(b) will allow employers to provide these types of benefits to employees more frequently. See, e.g., Chamber; National Association of Health Underwriters (NAHU); HR Policy Association (HR Policy); SHRM; Seyfarth; NFIB. By contrast, a few commenters expressed concerns with this proposed clarification. See, e.g., National Employment Lawyers Association (NELA); NELP. NELA opposed this proposed clarification, suggesting that the Department instead state that such payments “may be excluded from the regular rate only after a case by case analysis using applicable principles.” NELP similarly expressed concern that the added examples created per se categorical exclusions of types of benefits. The Chamber asked the Department to add the following language to § 778.224(a): “Payments are `similar' when the amount of the payment is not dependent on hours worked, production, or efficiency and when the amount of the payment is unaffected by the quantity or quality of work performed.” The Department agrees that such a statement would provide further clarity and notes that the NPRM defined “other similar payments” in a comparable manner as “payments not tied to an employee's hours worked, services rendered, job performance, credentials, or other criteria linked to the quality or quantity of the employee's work.” 130 Three items in the NPRM's list of criteria not linked to the quality or quantity of work—“hours worked, services rendered, [and] job performance”—closely correspond with “hours worked, production, or efficiency” from the Chamber's proposal. The NPRM also listed “credentials.” But upon further reflection, the Department believes that, unlike the other listed criteria, credentials are not necessarily linked to the quality or quantity of an employee's work. 130 84 FR 11894. Additional pay for education credentials is generally connected with work quality or quantity, and therefore not excludable under § 778.224, as “education advancement . . . enhances the quality of an employee's job performance.” 131 However, because the connection between an employee's education credentials and his or her quality or quantity of work may vary, the Department declines to include “credentials” in the regulatory text as an example of a criterion inextricably linked to the quality or quantity of the employee's work. 132 In contrast, hours worked, services rendered, and job performance are necessarily linked to work quality or quantity, and therefore, these are appropriate examples for the regulatory text. Accordingly, the Department has revised § 778.224(a) using language adapted from the NPRM to clarify that “other similar payments” are “payments that do not depend on hours worked, services rendered, job performance, or other criteria that depend on the quality or quantity of the employee's work.” The Department has also revised § 778.224(b)(5) to remove language similar to that added in § 778.224(a) so as to avoid duplicative text. 131 See Featsent v. City of Youngstown, 70 F.3d 900, 904 (6th Cir. 1995) (additional pay for education degrees was not excludable under § 778.224). 132 See, e.g., Duplesse v. Cty. of Los Angeles, 714 F. Supp. 2d 1045, 1053-54 (C.D. Cal. 2010) (additional pay for credentials were excludable from the regular rate for firefighters who were not regularly assigned to positions involving those credentials). To provide additional clarity, the Department is adding to § 778.224(a) two examples of conditions identified in the NPRM as being unconnected to the quality or quantity of work performed: “reasonable waiting period for eligibility” and “the requirement to repay benefits as a remedy for employee misconduct.” 133 The Department is also adding an additional example of a condition that is unconnected to the quality or quantity of work to § 778.224(a): “limiting eligibility on the basis of geographic location or job position.” Payments that depends on location—for instance, offering benefits for employees in certain states or cities—are not related to work quality or quantity. Nor do payments that depend on an employee's job position—for instance, offering a signing bonus to engineers but not salespersons. 133 84 FR 11895. Relatedly, in response to NELA's and NELP's comments, the Department believes that the addition of the above language to § 778.224(a) makes clear that the proposed examples in § 778.224(b) do not change the existing statutory analysis that the Department uses for determining whether a payment is properly excluded, but instead simply add examples of categories of payments that may be excluded as “other similar payments.” The Department will still look to see if a benefit plan labeled a “wellness plan,” for example, meets the statutory requirements of section 7(e)(2) and corresponding regulatory requirements to determine whether the benefit is tied to hours worked, services rendered, job performance, or other criteria linked to the quality or quantity of the employee's work. The benefit must be conditioned only on being an employee, although conditions unconnected to the quality or quantity of work, such as a reasonable waiting period for eligibility, are permissible. Furthermore, as explained in the NPRM, the benefit cannot be simply wages in another guise. When a payment is a wage supplement, even if not tied directly to employee performance or hours, it is still compensation for “hours of employment.” The additional examples that the Department has added to § 778.224(b) do not change these requirements or the Department's analysis regarding the appropriate treatment of these benefits. Commenters also identified numerous commonly provided employee perks and asked the Department to clarify whether these items would be excludable under section 7(e)(2). The Department believes several of the items raised would be excludable and are consistent with the Department's proposal. These include discounts on employer-provided hotel rooms and travel, and non-mandatory credentialing classes. See AHLA; NADA. AHLA asked the Department to clarify that beverage discounts, food discounts, hotel room discounts, and travel discounts are excludable from the regular rate as an “other similar payment.” In the NPRM, the Department proposed that discounts on employer-provided goods and services are excludable from the regular rate as “other similar payments.” As noted in the NPRM, such discounts are not fungible cash—they offer a lower price on certain offerings and are typically non-transferable. Further, employees have discretion as to whether or not to purchase anything under a discount, thereby receiving the benefit. Provided these beverage discounts, food discounts, hotel room discounts, and travel discounts are not tied to an employee's hours worked, services rendered, or other conditions related to the quality or quantity of work performed, they are excludable from the regular rate under the proposed language in § 778.224(b)(5). NADA asked the Department to clarify that the cost to the employer of paying for non-mandatory credentialing classes for employees is excludable from the regular rate under section 7(e)(2). To be excludable as an “other similar payment” under section 7(e)(2), these non-mandatory credentialing classes may not be compensation for hours worked, services rendered, or other conditions related to the quality or quantity of work performed. The Department believes the language proposed in the NPRM sufficiently addresses this issue, and as a result does not modify its proposal. As such, no further changes to § 778.224 have been made to address these comments. However, the Department found that modifications would be helpful to add clarity with regards to the exclusion of other items raised by the commenters. For example, some commenters asked the Department to clarify in the final rule that the cost to employers of providing mental health wellness programs and financial wellness programs are excludable along with the cost of providing physical wellness programs. See ERIC; HR Policy. As ERIC noted in its comment, “many employers . . . offer mental health and financial wellness plans as an integrated package with physical wellness plans.” Further, HR Policy's comment stated that such benefits “assist the employee in managing work-life balance . . . and are to the mutual benefit of both the employer and the employee.” The NPRM explained that workplace wellness programs are similar to “on-the-job medical care” and “recreational facilities,” conveniences that the regulations already specify are excludable from an employee's regular rate. The Department finds no meaningful difference between mental health and financial wellness programs and the wellness programs included in the NPRM. Accordingly, the Department clarifies in the final rule that the cost of providing such mental health and financial wellness programs are excludable from the regular rate as an “other similar payment.” AHLA asked the Department to clarify that parking benefits, in addition to the parking spaces explicitly listed under § 778.224(b)(3)(i), are excludable from the regular rate. Parking benefits provide parking spaces for employees near the business premises of their employer. As explained under § 778.224(a), section 7(e)(2) of the FLSA does not “permit the exclusion from the regular rate of payments such as . . . the furnishing of facilities like board and lodging . . . .” The Department interprets facilities to include certain “transportation furnished employees between their home and work.” 134 Accordingly, the Department has long acknowledged that employer-provided parking spaces are excludable from the regular rate but commuter subsidies are not. It is the Department's view that parking benefits are analogous to an employer-provided parking space, and distinguishable from commuter subsidies. Parking benefits are conveniences provided by an employer so that the employee may have a parking spot near the business premises of the employer. The employee still bears the cost of the actual transportation between their home and work—purchasing and maintaining a vehicle, insurance, and gasoline, etc. To remove ambiguity, the Department modifies its proposal to clarify in the final rule that parking benefits, like parking spaces, are excludable from the regular rate. 134 29 CFR 531.32(a). Some of the items identified by commenters fit within statutory exclusions other than section 7(e)(2). First, a few commenters asked the Department to clarify whether adoption or surrogacy assistance benefits are excludable from the regular rate. See Chamber; SHRM; Seyfarth; PPWO. The term “adoption assistance” encompasses a wide variety of benefits. These benefits might include financial assistance, legal services, information and referral services, and paid or unpaid leave. Adoption assistance takes many forms, some of which are excludable under other statutory exceptions. Legal services are excludable under section 7(e)(4) to the extent they meet the requirements of § 778.215, and paid leave is excludable under section 7(e)(2) as “occasional periods when no work is performed.” Additionally, the costs of providing adoption assistance in the form of information and referral services or financial assistance for non-legal services may be excluded under section 7(e)(2)'s “other similar payments” clause. These benefits are not tied to an employee's hours worked, services rendered, or other criteria linked to the quality or quantity of work performed. The Department amends its final rule to include this clarification. Unlike adoption assistance, surrogacy assistance tends to consist solely of payment of or reimbursement for medical expenses, typically outside of a medical plan. Such payments may therefore be considered a wage under section 3(m) of the FLSA, which is not excludable from the regular rate. Some commenters asked the Department to clarify that the cost of providing “snacks,” “office coffee,” “meals,” or “pantry services” are excludable from the regular rate. See HR Policy; National Automatic Merchandising Association (NAMA); Chamber. While commenters suggested these costs are excludable under section 7(e)(2)'s “other similar payments” clause, Department practice and case law already supports exclusion of many of these costs from the regular rate as gifts under section 7(e)(1). Section 7(e)(1) excludes “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency.” As the Department explained in the NPRM, because the first clause, “sums paid as gifts,” is separated from the second clause by a semicolon, the first clause addresses a separate set of excludable benefits from that in the second clause. 135 There may be some overlap between “sums paid as gifts” and “payments in the nature of gifts made at Christmas time, on special occasions, or as a reward for services,” but the categories are not coextensive. 135 See Harris v. Best Buy Stores, L.P., No. 15-CV-00657-HSG, 2016 WL 4073327, at *6 (N.D. Cal. Aug. 1, 2016). Specifically, sums under the first clause are those “paid as gifts”—that is, paid with the express understanding that they are a gift—as opposed to sums under the second clause, which are not expressly given as a gift, but are nevertheless “in the nature of gifts” because of their timing. The second clause in 7(e)(1) therefore expands the universe of excludable gifts from sums that are obviously “paid as gifts” to include those that are also “in the nature of gifts,” but limits the latter category to those made at Christmas time, on special occasions, or as rewards for service. In either case, however, the payments must not be measured by or dependent on hours worked, production, or efficiency. 136 136 29 CFR 778.212. The FLSA defines “wage” as “the reasonable cost . . . [of] board, lodging, or other facilities” and thus the cost of providing meals is included in the regular rate. 137 However, if snacks or other food are provided as a gift, or in the nature of a gift, and are “not measured by hours worked, production, or efficiency,” they may be excluded from the regular rate. 138 Courts have specifically found the cost to an employer of providing food items to employees, aside from regularly provided meals, to be excludable from the regular rate as gifts under section 7(e)(1). 139 137 29 U.S.C. 203(m); 29 CFR 778.116; 29 CFR 531.29 and 531.32. 138 WHD Opinion Letter FLSA, 1999 WL 1002365 (Feb. 12, 1999). 139 Rau v. Darling's Drug Store, Inc., 388 F. Supp. 877, 879 (W.D. Pa. 1975). See also Lemus v. Denny's Inc., No. 10CV2061-CAB (WVG), 2015 WL 13740136, at *11 (S.D. Cal. July 31, 2015) (finding employer-offered food discounts to be gifts since employees are entitled to receive the discount as soon as they begin working and the employer does not dictate whether or how the employee may use the discount); Rodriguez v. Taco Bell Corp., No. 1:13-CV-01498-SAB, 2013 WL 5877788, at *5-6 (E.D. Cal. Oct. 30, 2013) (finding meal provided through discount meal policy not excludable from the regular rate, but noting that a similar meal policy may qualify as a gift if available to all employees at any time without restrictions based upon the number of hours worked). When an employer provides snacks or food to employees as a gift, the cost of providing such snacks or food is properly excludable from the regular rate under the first clause of section 7(e)(1). This commonly arises in situations where an employer provides employees with office coffee and snacks, the value of which is minimal. These are provided without regard to hours worked, production, or efficiency, and the cost of such provision is excludable from the regular rate. Unlike snacks, meals furnished by an employer are generally considered to be wages. 140 However, when a meal is provided by an employer to employees on a special occasion, such as a celebratory pizza lunch, the cost to the employer of providing such food is properly excludable from the regular rate under the second clause of section 7(e)(1). The Department adds language to § 778.212(c) to clarify this in the final rule. 141 140 29 U.S.C. 203(m); 29 CFR 531.29 and 531.32. 141 The provision of meals by an employer using an authorized basic rate under section 7(g)(3) of the FLSA to compute overtime rather than a regular rate is discussed infra. Some commenters also requested clarification that prizes, such as coffee cups and t-shirts, provided in connection with contests or raffles are excludable from the regular rate as “other similar payments” under section 7(e)(2). See SHRM; PPWO; Seyfarth. As with snacks and special occasion meals, the Department believes that the gift provision in section 7(e)(1) already provides for their exclusion from the regular rate as sums “paid as gifts”—that is, paid with the express understanding that they are a gift—the amounts of which are not measured by or dependent on hours worked, production, or efficiency. 142 Because “the subsections of § 7(e) are not mutually exclusive,” 143 there may be areas of overlap between payments that are excludable under section 7(e)(1) and those excludable under section 7(e)(2). Thus, in addition to being excludable as gifts under section 7(e)(1), small items such as coffee mugs or t-shirts provided to an employee may also be properly excludable as an “other similar payment” under section 7(e)(2), so long as its provision does not depend on hours worked, services rendered, job performance, or other criteria that depend on the quality or quantity of the employee's work. 142 Prizes that are not paid as gifts, but are awards for activities not normally part of an employee's job, may be excludable from the regular rate under 29 CFR 778.332. 143 Reich, 57 F.3d at 578. The Reich court cautioned, however, that “we hesitate to read § 7(e)(2) as a catch-all, one that obliterates the qualifications and limitations on the other subsections and establishes a principle that all lump-sum payments fall outside the `regular rate,' for then most of the remaining subsections become superfluous.” Id. Similarly, several commenters asked the Department to provide guidance on the excludability of sign-on bonuses, suggesting they might be excludable under section 7(e)(2) as an “other similar payment” or under 7(e)(3) as a discretionary bonus. See ERIC; AHLA; Associated Builders and Contractors; NADA; Seyfarth; SHRM; PPWO. Most of these commenters suggested that such payments are excludable under 7(e)(3) as a discretionary bonus. Such comments are addressed in that section of the preamble. ERIC suggested that sign-on bonuses, notwithstanding the inclusion of a clawback provision, are properly excludable under section 7(e)(2)'s “other similar payments” clause and following the Third Circuit's reasoning in Minizza. 144 See also NADA. In that case, the court found that lump sum payments to employees to induce ratification of a collective bargaining agreement were excludable as an “other similar payment” because such payments were unrelated to hours of employment or service. 145 Since a sign-on bonus with no clawback provision is granted before any work is performed, such payment is unrelated to hours worked or services provided and may be excluded under section 7(e)(2). 144 Minizza, 842 F.2d at 1458-62. 145 See id. at 1462. While still labeled a sign-on bonus, a sign-on bonus with a clawback provision is substantively different from a sign-on bonus that is paid free and clear. As explained by the Sixth Circuit in Featsent v. City of Youngstown, longevity bonuses are dependent on length of service and therefore do not fall within the section 7(e)(2) exception. 146 Since a sign-on bonus with a clawback provision is essentially a longevity bonus, these may not be excluded under section 7(e)(2). However, case law already supports exclusion of certain longevity bonuses under section 7(e)(1) as a gift provided as a reward for future service. The Department's regulations permit exclusion of such bonuses provided that the requirements of § 778.212 are satisfied. A sign-on bonus with no clawback provision is clearly provided on a special occasion as a reward for future service, and is not measured by or dependent on hours worked, production, or efficiency. A clawback provision that makes such a bonus dependent on length of employment does not necessarily impact its excludability under section 7(e)(1). As courts have noted, longevity payments are properly excludable from the regular rate under 7(e)(1) when employees receive these payments as a reward for tenure, and the payments are not, for example, made pursuant to a city ordinance or policy, or collective bargaining agreement. 147 The Department's existing regulation at § 778.212(c) supports this interpretation, stating that gift payments may “vary with the amount of the salary or regular hourly rate of such employees or according to their length of service with the firm so long as the amounts are not measured by or directly dependent upon hours worked, production, or efficiency.” 148 It follows that “length of service” is not necessarily “directly dependent on hours worked.” As such, the Department does not amend its final rule because it believes this interpretation is already clear. In brief, sign-on bonuses with no clawback provision are excludable from the regular rate; sign-on bonuses with a clawback provision pursuant to collective bargaining agreement (CBA), or city ordinance or policy are included in the regular rate; and sign-on bonuses with a clawback provision not pursuant to a CBA, city ordinance or policy, or other similar document that complies with § 778.212, are excludable from the regular rate. 146 70 F.3d 900, 905 (6th Cir. 1995); see WHD Opinion Letter WH-527, 1986 WL 383427, at *2 (Apr. 21, 1986) (“[W]here an employee must be on the payroll in order to receive a future bonus payment, . . . such a condition [is] an inducement for an employee to continue in employment until the time the payment is to be made” and therefore the payment is not an excludable “other similar payment.”). But eligibility requirements that are “not meant to serve as compensation for service” and “do not require specific service” do not preclude payments from being excludable under section 7(e)(2). Minizza, 842 F.2d at 1460-61. Courts and the Department have also concluded that longevity bonuses are not excludable discretionary bonuses under section 7(e)(3) when made pursuant to a collective bargaining agreement or city ordinance. See O'Brien v. Town of Agawam, 350 F.3d 279, 295 (1st Cir. 2003) (longevity pay paid pursuant to a collective bargaining agreement does not qualify as an excludable discretionary bonus and therefore must be included in the regular rate); WHD Opinion Letter, 1986 WL 1171142, at *2 (Aug. 26, 1986) (same); WHD Opinion Letter (Nov. 8, 1985) (same). 147 See Moreau v. Klevenhagen, 956 F.2d 516, 521 (5th Cir. 1992), aff'd, 508 U.S. 22 (1993); Shiferaw v. Sunrise Senior Living Mgmt., Inc., 2016 WL 6571270, at *26 (C.D. Cal. Mar. 21, 2016) (finding an employer's tenure-based “Long Term Service Awa [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2019-26447. Public record. Not legal advice.