By way of background, the FLSA requires employers "to pay non-exempt employees who work more than 40 hours a week overtime of one and one-half times the employees' 'regular rate' of pay." Gagnon v. United Technisource, Inc., 607 F.3d 1036, 1041 (5th Cir. 2010); 29 U.S.C. § 207(a)(1). To determine the employees' "regular rate," the employer must look at the hourly rate actually paid for "all remuneration for employment."

“Other Similar Payments” Section 7(e)(2) of the FLSA identifies three categories of remuneration that are excluded from the regular rate: (1) 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; (2) reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his or her employer’s interests and properly reimbursable by the employer; and (3) other similar payments to an employee which are not made as compensation for his or her hours of employment. 29 U.S.C. § 207(e)(2). While the first two categories are fairly straightforward, the third is frustratingly vague. Courts generally have held that the “similar payments” exclusion applies to any compensation paid based on an individual’s general status of being an employee and not on the quality or quantity of his or her work.

On September 2, 2020, the Court of Appeals for the Fifth Circuit held that employees bear the burden of proof on whether bonuses should have been included in the regular rate of pay for purposes of calculating overtime compensation under the Fair Labor Standards Act (“FLSA”).The plaintiffs in Edwards v. 4JLJ, L.L.C. alleged that their employer failed to account for certain bonuses in calculating the regular rate of pay. Section 7(e) of the FLSA excludes eight categories of remuneration from the regular rate calculation, including bonus compensation if “both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly.” 29 U.S.C. § 207(e)(3). The Court of Appeals, considering the statutory language as well as the interpretive regulation at 29 C.F.R. § 778.211, noted that “[f]or a bonus to be excepted from the regular rate under § 207(e), the employer must maintain discretion over whether to give the bonus and the amount given.”

The County treated the residual cash payment as part of plaintiffs’ regular rate of pay when calculating their overtime pay, but did not include the value of the opt-out fee.Plaintiffs filed a class-action lawsuit, contending that the opt-out fee should be treated as part of their “regular rate” of pay for purposes of calculating their overtime compensation under the Fair Labor Standards Act (FLSA).The district court granted summary judgment for the County.Result:The Ninth Circuit affirmed, holding that the opt-out fee is not part of an employee’s regular rate of pay under the FLSA.The FLSA defines “regular rate” of pay to include all renumeration paid to or on behalf of an employee, subject to certain exceptions.One exception provides that regular rate of pay does not include “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, accident, or health insurance or similar benefits for employees.” 29 U.S.C. § 207(e)(4).The Court concluded that the opt-out fees fell under this exception to “regular rate” of pay.Plaintiffs raised three arguments against § 207(e)(4)’s applicability, each of which the Court rejected.First, Plaintiffs argued that § 207(e)(4) was irrelevant because their paystubs provided that they had received the entire Flex Credit as part of their “earnings,” and listed the opt-out fee as a “pre-tax deduction,” not a “contribution” within the meaning of § 207(e)(4).On this basis, Plaintiffs contended that the payment structure resembled that inFlores v. City of San Gabriel, 824 F.3d 890 (9th Cir. 2016), where the Ninth Circuit held that cash payments employees received in lieu of medical-benefits payments were not subject to § 207(e)(4).The Court rejected this analogy.It explainedFloresturned on the fact that the cash payments were not paid “to a trustee or third person,” as the statute required.Here, by contrast, the opt-out fees were directed to a third person.They thus did not “func

As Virginia employers prepare for the new Virginia Overtime Wage Act (VOWA), ambiguities found in the act demand attention from employers, both private and public. We previously summarized the basics of the act here, but as with most new laws, the practical effects of the VOWA are now being felt by employers as they form their compliance plans in anticipation of July 1, 2021.Much of the hand-wringing by employers appears tied to the interpretation of the phrase “pursuant to 29 U.S.C. § 207,” found in subsection B of the Act, republished here for context:For any hours worked by an employee in excess of 40 hours in any one workweek, an employer shall pay such employee an overtime premium at a rate not less than one and one-half times the employee’s regular rate, pursuant to 29 U.S.C. § 207.Some employers have interpreted this phrase to suggest that the variety of exceptions found under this Section 207 of the Fair Labor Standards Act (see 29 U.S.C. §§ 200 et seq.) remain intact and available for employers.

The eight general types of exceptions to regular rate inclusion are set forth in Section 207(e) of the FLSA regulations and include, in part, such forms of compensation as “sums paid as gifts,” “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,” andsums paid in recognition of services performed during a given period [i.e. bonuses] if [] both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly[.]29 U.S.C. § 207(e).For decades, it has been undisputed that the burden of demonstrating that an individual or position is exempt from the minimum wage or overtime provisions of the FLSA falls on the employer. See, e.g.Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190, 209 (1966) (noting that “the burden of proof respecting exemptions is upon the company”).

Blahnik v. Box Office Ticket Sales, LLC, 2017 U.S. Dist. LEXIS 45158 (N.D. Ill. Mar. 28, 2017). Plaintiffs were sales representatives employed by Box Office Ticket Sales, LLC (“BOTS”) who alleged they were denied overtime pay. BOTS and the other defendants argued that the plaintiffs were not entitled to additional overtime wages under the FLSA since they qualified as commissioned employees of retail or service establishment under 29 U.S.C. § 207(i) of the FLSA. For Section 207(i) to apply, three requirements must be met: (1) the employee must be employed by “a retail or service establishment;” (2) the employee’s regular rate of pay must exceed one and one half times the minimum wage; and (3) more than half of the employee’s compensation must come from commissions on goods or services sold. 29 U.S.C. § 207(i).

According to your letter, the employer takes the position that its payment to the employee should not be considered part of the employee's regular pay, because the employer is merely advancing the money to the employees for their convenience, and the employees do not have to perform any extra duties in order to receive the money.With limited exceptions, the FLSA provides that "regular rate" includes "all remuneration for employment paid to, or on behalf of, the employee." 29 U.S.C. 207(e), a review of the provision reveals that the "finder's fee" meets none of the exceptions for being excluded from an employee's regular rate of pay. 29 U.S.C. 207(e) (1) - 29 U.S.C. 207(e)(7).

According to your letter, the employer takes the position that its payment to the employee should not be considered part of the employee's regular pay, because the employer is merely advancing the money to the employees for their convenience, and the employees do not have to perform any extra duties in order to receive the money.With limited exceptions, the FLSA provides that "regular rate" includes "all remuneration for employment paid to, or on behalf of, the employee." 29 U.S.C. 207(e), a review of the provision reveals that the "finder's fee" meets none of the exceptions for being excluded from an employee's regular rate of pay. 29 U.S.C. 207(e) (1) - 29 U.S.C. 207(e)(7).

flexible benefit allowance every pay period, which they can use toward premiums for the county-sponsored health plan or union-sponsored plan. Those who opt out of coverage are also entitled to this monetary “flex credit” each pay period; however, a portion of this credit is deducted as a fee that the employer uses to fund the health plans.The flex credit appears on employees’ pay stubs as “earnings,” and the opt-out fee appears as a “before tax deduction.” After the county subtracts the opt-out fee from the flex credit, it pays the balance to employees in cash. The opt-out fee (and, thus, the residual cash payment to employees who opt out) varies from year to year. The county treated the net cash payment to opt-out employees as part of their regular rate of pay when calculating their overtime compensation; however, the county did not include the value of the opt-out fee in the regular rate calculation.A federal court in California held that the opt-out fee was excluded correctly under 29 U.S.C. § 207(e)(4), which excludes from the regular rate “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing health insurance.” The Ninth Circuit agreed.Not a Cash-in-Lieu PaymentThe plaintiffs cited Flores v. City of San Gabriel, 824 F.3d 890 (9th Cir. 2016) for the contention that the regular rate should include the opt-out fee. However, Flores distinguished between cash-in-lieu payments (which were to be included in the regular rate) and contributions to employees’ benefits (which may be included in the regular rate, depending on whether the program in question is a “bona fide plan” under Section 207(e)(4)). The plaintiffs argued that the opt-out fee is equivalent to a cash-in-lieu payment, but the appeals court said this reflects a misunderstanding of the nature of the opt-out fee. The opt-out fee does not function like the cash payment in Flores; instead, it is allocated to fund the health plans. The net cash payment does function l