FLSA2020-5 — Excludability of an employer's contributions to a group-term life insurance policy from the regular rate of pay

U.S. Department of Labor
March 26, 2020
Dear Name*:
Wage and Hour Division
Washington, DC 20210
FLSA2020-5
This letter responds to your request for an opinion concerning whether certain benefits that are
imputed to an employee as income for tax purposes must be included in the employee's regular
rate when calculating overtime pay under the Fair Labor Standards Act (FLSA). Specifically,
you request an opinion addressing whether the regular rate for a non-exempt employee under the
FLSA must include amounts that the Internal Revenue Code (IRC) requires be included in the
employee's taxable gross income when the employer contributes to group-term life insurance
coverage of over $50,000 for the employee. This opinion is based exclusively on the facts you
have presented. You represent that you do not seek this opinion for any party that the Wage and
Hour Division (WHD) is currently investigating or for use in any litigation that commenced prior
to your request.
BACKGROUND
You explain in your letter that section 79 of the IRC requires employers to report as part of an
employee's taxable gross income on the employee's wage statement the cost of providing the
employee with group-term life insurance beyond $50,000 worth of coverage, reduced by any
amounts paid by the employee toward the purchase of such insurance. See 26 U.S.C. § 79; see
also Internal Revenue Service (IRS), Publication 15-B, "Employer's Tax Guide to Fringe
Benefits," 13 (2019). You refer to this taxable gross income that arises from such contributions
as "imputed income." You represent that your law office has "been presented, on numerous
occasions, with the issue of whether imputed income ... reported on an otherwise [FLSA] non­
exempt employee's wage statement in accordance with [IRC] § 79, should be included in any
such employee's 'regular rate."'
GENERAL LEGAL PRINCIPLES
The FLSA requires payment "at a rate not less than one and one-halftimes the regular rate at
which [ an employee] is employed" to all non-exempt workers for all hours worked in excess of
forty hours in a workweek. 29 U.S.C. § 207(a)(l). The regular rate includes "all remuneration
for employment paid to, or on behalf of, the employee," subject to eight statutory exclusions. Id.
at§ 207(e). In interpreting these exclusions, the Department is mindful of the Supreme Court's
guidance that to determine the scope of an exemption under the FLSA, the statutory text must be
given a "fair (rather than a narrow) interpretation" because the FLSA's exemptions are "as much
a part of the FLSA's purpose as the [minimum wage and] overtime-pay requirement[s]." Encino
Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018) (internal quotation marks and citation
omitted). "And that is as should be expected, because employees' rights are not the only ones at
issue and, in fact, are not always separate from and at odds with their employers' interests."
Sec'y US. Dep't of Labor v. Bristol Excavating, Inc., 935 F.3d 122, 135 (3d Cir. 2019).