Let's stop punishing employers who want to help employees with free gas, meals or child care

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Employers are struggling to fill over 11 million open jobs. Employees are struggling to pay for child care, gas, and even food. And then, there is the struggle of paying off those student loans for many Americans. 

I have a solution: Employers could offer benefits – voluntarily, not mandated – such as free or subsidized child care, elder care, public transportation, gas, meals, student loan repayments or college tuition. 

Employers will attract new employees back into the labor market. Employees get help overcoming the challenges of high gas prices, high inflation and unpaid student loans. A win-win. 

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But there is a huge roadblock called the Fair Labor Standards Act (and most state laws) which currently requires employers to pay added overtime on the value of such employee perks. 

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Yep, it’s true. Most folks think overtime pay is time and a half of an employee’s hourly rate. It is not. Overtime is calculated as 1.5 times an employee’s "regular rate" of pay. The "regular rate" is defined in the FLSA as "all remuneration for employment" unless specifically excluded under Section 7(e) of the Act. What that means in real English is 1.5 times all things of value – hourly pay, salary, commissions, bonuses, anything – that an employer gives its employees for working.  

Payments for health, accident and life insurance are excluded from the 1.5 calculation under the statute, as are retirement benefits. But that is it; most other employee perks trigger the overtime requirement. The regular rate definition and this list of excluded benefits was added to the FLSA in 1949. It’s time for an update. 

Today’s employee wants, needs, and demands more than just an hourly wage. Health insurance and paid time off is important and neither count towards overtime. But this old, outdated list of excluded benefits prevents employers from giving employees more perks.  

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Few employers have child care, student loan repayment, or commuting benefits. The threat of litigation and added overtime obligations stifles innovation for employee perks. An employer in Montana lost a lawsuit for not paying overtime when it provided its employees with public transportation subsidies. A California employer settled an overtime lawsuit for the sin of paying off student loans. 

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The federal government recognizes the value of such perks, providing them to its own employees. The Labor Department, for example, provides its own employees with child care subsidies or on-site child care, dependent care benefits, tuition reimbursement, fitness centers, public transit subsidies, and a "bicycle commuting reimbursement subsidy."  

But, of course, the federal government does not have to pay overtime on these perks as private employers do. Nope, the federal government does not use the "regular rate" formula; overtime for federal employees is limited to 1.5 times their hourly rate. 

It's time and already past time to apply the federal employee overtime calculation to private sector employees too.  We need to stop punishing employers who want to provide employees with free child care, free meals, free gas, or free educations by allowing the plaintiffs’ bar to sue them for such good deeds. 

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The Trump administration made a bit of progress on dismantling the perverse FLSA incentives, in one of the few regulations that did not get quickly withdrawn by the new Biden-led Labor Department. The Trump regulations clarified that employers need not pay added overtime on payouts of unused sick leave, pay for military leave, the value of wellness programs, discounts for employer-provided goods and services, and some sign-on bonuses.  

Those regulations, however, did not and could not go far enough because the Labor Department thought it was limited by the language in the FLSA itself. Public transit subsidies, free meals, and child care continue to require payment of added overtime. Whether overtime is due on student loan repayments and other educational benefits remains unclear, depending on the facts and circumstances of each program. 

Recently, Representatives Elise Stefanik, R-N.Y., Henry Cuellar, D-Texas, and Michelle Steel, R-Calif., introduced a bill to clear the way for employers to give employees free or subsidized child care and elder care. 

FILE – Representative Elise Stefanik, a Republican from New York and chair of the Republican House Conference, speaks during a news conference at the U.S. Capitol in Washington, D.C., U.S., on Thursday, May 20, 2021.  (Photographer: Samuel Corum/Bloomberg via Getty Images / Getty Images)

It’s a very short bill, H.R. 8388, the Empowering Employer Child Care & Elder Act, which would exclude "payments for reimbursements for child or dependent care services" from that definition of the "regular rate" in FLSA. 

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Every Democrat and Republican in the House and Senate should sign-up and get this bi-partisan bill passed quickly. 

State governors and legislators should do the same under state laws. How could any of our elected officials object to voluntarily provided, employer-funded childcare? 

Respectfully, though, I must suggest that H.R. 8388 does not go far enough. Yes, exclusion of payments for child and elder care from the 1.5 overtime calculation is an important first step. But let’s also stop punishing employers who want to help their employees with free gas or free meals or want to repay their employees’ student loans. 

Amazing employee benefits voluntarily offered by employers to get folks back to work. Voluntary, not mandated, and not paid through yet another taxpayer funded program.  

Come on man, let’s get to work! 

Tammy McCutchen served as the Wage & Hour Administrator at the Department of Labor under President George W. Bush. 

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