Tuition Reimbursement and the FLSA

Today’s FLSA question: Our city reimburses firefighters’ tuition costs for college classes related to fire science. In order to qualify for the reimbursement program, participating firefighters must have at least two years of service with our department prior to taking any classes, and they must earn a grade of “B” or better in the class. The city reimburses all money firefighters spent on tuition and course books at the end of the year. Does the city need to include this tuition reimbursement money in the firefighters’ regular rate for FLSA overtime purposes?

Answer: Generally speaking, “all remuneration for employment paid to, or on behalf of, the employee” must be included in the regular rate. However, as you most likely are aware, there are a few exceptions to this general rule. One of these exceptions allows expense reimbursements “incurred in the furtherance of the employer’s interests” excluded from an employee’s regular rate of pay.

Now, is an employee’s college tuition an expense in the furtherance of the employer’s interests?

This is one of those questions that varies depending on the individual facts and circumstances surrounding each situation. Unfortunately, the dreaded answer “It depends” comes into play. . . Let’s take a closer look.

Section 207(e)(2) of the FLSA states: “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” can be excluded from the regular rate of pay. Additionally, Department of Labor (DOL) regulations provide several examples of the types of reimbursements that can be excluded from the regular rate under §207(e)(2). These include reimbursements for purchasing equipment and tools on behalf of the employer, maintaining and purchasing required uniforms, and expenses related to business travel, such as food and lodging. See 29 C.F.R. §778.217 for more.

Historically, there has been surprisingly little guidance available on whether tuition reimbursements could qualify as “other expenses. . .in the furtherance of [the] employer’s interests.” However, in 2015, the U.S. District Court for the Middle District of Tennessee finally examined that precise question. In White v. Publix Super Mkts., Inc., a group of supermarket employees wanted holiday pay, various bonuses, and tuition reimbursements included in the regular rate of pay. The court ultimately found tuition reimbursement programs can be excluded from the regular rate “depending on . . . how they are structured.”

The court looked at the following factors to determine Publix’s tuition reimbursement program was in the furtherance of the employer’s interests and could be rightfully excluded from the employee’s regular rate:

• The employer seeks some indication that the employee requesting tuition reimbursement has a commitment to the company.
• The courses are not provided by the employer itself.
• The courses relate to the employee’s current position or potential career path.
• The student must meet a specified level of success in the course.

Finally, one last point. The reimbursement also must be “reasonably approximate” to the actual expense incurred. So even if your organization’s tuition reimbursement program can be rightfully excluded from the regular rate, it must also be reasonable. For example, if a firefighter pays $2,000 in tuition and fees for a college class, yet the fire department issues a reimbursement of $5,000 for this class, it would not be considered reasonably approximate to the expense incurred. In this example, the excess, or $3,000, would need to be included in the regular rate of pay.

To get back to your question: If the expense reimbursement is intended to further the employer’s interest and is reasonably approximate to the actual expense incurred by the employee, then the reimbursement can be excluded from the regular rate. Based on the facts you provided above, it looks as if you can exclude the tuition reimbursement from the firefighter’s regular rate.

As you can see, a somewhat simple question can get complicated rather quickly when it involves the FLSA. This is one of many reasons the FLSA for Fire Departments seminar is a three-day class! There is only one seminar left for 2018. For more information click here.

Here is a copy of the court’s decision in White v. Publix.

White v. Publix FLSA Order