Questions concerning the regular rate of pay present some of the most vexing wage and hour problems to public agencies. In Flores v. City of San Gabriel, 824 F.3d 890 (9th Cir. 2016), the Ninth Circuit held that cash paid in lieu of receiving medical insurance benefits must be included in the regular rate. This has the effect of increasing the overtime rate, sometimes dramatically.
Flores has spawned the next wave of FLSA litigation against public agencies. Dozens of agencies have been sued based on having medial in lieu programs similar to the one in San Gabriel. Additional lawsuits have been filed based on other pay types such as “holiday in lieu” pay and “sick leave incentive” pay. Courts have grappled with the Department of Labor’s (DOL) existing regulations, referring to them as “muddled” and admitting that the issues present “close questions.”
The DOL has finally announced that it will propose new regulations concerning the regular rate. As stated by the DOL, “the Department will propose to amend 29 CFR part 778, to clarify, update, and define regular rate requirements under section 7(e)(2) of this Act.” The projected date of publication is September 2018. This will trigger a comment period, and then DOL will eventually issue final regulations.
The new regulations present an important opportunity for clarification and reform in this difficult area of law. All agencies should be watching for the proposed regulations, and preparing to offer responsive comments. RPLG is working to coordinate communication to DOL, to ensure our comments are focused and that DOL fully understands the unique regular rate problems faced by local public agencies.
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