Regular Rate, Sick Leave Incentives, and the FLSA

Today’s FLSA Question: I am the fire chief of a mid-sized municipal fire department. The most recent collective bargaining agreement with our firefighters contains an incentive plan designed to curb sick leave abuse. Firefighters and officers that use less than 72 hours of sick leave during a calendar year receive an additional 24 hours of paid leave during the following calendar year. After reading your article about sick leave buybacks and the regular rate of pay, I was concerned that we may need to include the money attributable to this paid time off in our firefighter’s regular rate? Do we?

Answer: Since this incentive plan provides firefighters with paid time off, in lieu of monetary compensation, there are no per se regular rate implications from this type of plan. The FLSA and Department of Labor (DOL) regulations specifically allows an employer to exclude pay received for “occasional periods where no work is performed due to vacation, holidays, or illness” from an employee’s regular rate. Here, the fire department is giving firefighters an extra paid day-off—similar to a vacation day—as a reward for not using sick time. As such, there are no regular rate implications from such an incentive.

The new updated DOL regular rate regulations only impact payments made directly to employees for unused sick leave.

  • For example, a fire department buys back 72 hours of sick leave at the firefighter’s regular hourly rate of pay. As a result of this buy-back two things occur: First, the firefighter no longer has 72 hours of sick leave in his or her sick leave account, and second, the firefighter receives an extra 72 hours of pay in his or her paycheck. Historically, in most jurisdictions, this extra money (the 72 hours of pay) needed to be included in the firefighter’s regular rate. The new DOL regulations allow employers to exclude this money from an employee’s regular rate. 

For more on the recent DOL regular rate update related to sick leave buy backs, click here.

Proper calculation of an employee’s regular rate is one of many topics discussed in depth at all of the FLSA for Fire Departments seminars. Time is running out to save $100 on the next class, which is being held in Kansas City, this May. Please consider joining us.

FLSA For Fire Departments, Kansas City, MO

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