Sponsors (9)
2 meetings related to this legislation
Last progress March 21, 2025 (10 months ago)
Introduced on March 21, 2025 by Mark B. Messmer
Referred to the House Committee on Education and Workforce.
Excludes the value of child or dependent care services that an employer provides from the regular‑rate calculation used to determine overtime pay under the Fair Labor Standards Act. In other words, when computing overtime for a covered workweek, employers would not have to count the monetary value of employer‑provided child or dependent care as part of the employee’s regular rate of pay. This change takes effect for workweeks beginning on or after the date the law is enacted. The immediate effect is to reduce the overtime pay base for employees who receive employer‑provided care (lowering the overtime dollars they receive) and to reduce employers’ overtime costs; it may also change employer incentives about offering in‑kind benefits versus cash pay and could prompt administrative guidance or litigation about how to value and document such benefits.
Amend Section 7(e) of the Fair Labor Standards Act (29 U.S.C. 207(e)).
In paragraph (2), by inserting after ; (text in the file shows this insertion action but does not provide the inserted text).
In paragraph (7), by striking "or" at the end.
In paragraph (8)(D)(ii), by striking the period at the end and inserting ; and (a punctuation/text formatting change).
Add at the end a new paragraph (9): "the value of any child or dependent care services provided by an employer.." — meaning that such value is excluded in computing overtime compensation.
Who is affected and how:
Employees who receive employer‑provided child or dependent care: Their overtime cash pay may be lower because the in‑kind care value will not increase the regular rate used to compute overtime; the effect size depends on the value of the benefit relative to cash wages and the amount of overtime worked. Low‑wage, overtime‑eligible workers who rely on overtime pay could see the biggest dollar impact.
Employers offering dependent‑care benefits: Employers will generally see lower overtime cost exposure when they provide child/dependent care rather than equivalent cash compensation. That creates an incentive to offer in‑kind care or child‑care subsidies. Employers must update payroll practices to implement the exclusion and maintain documentation showing the benefit is employer‑provided and excluded.
Payroll, HR, and benefits administrators: Must change regular‑rate computations and payroll systems, inform employees about how overtime is computed, and maintain records to support the exclusion. Additional administrative work may be needed to value noncash care benefits for other reporting or tax purposes (even if excluded for overtime).
Child care providers and contracted care vendors: Demand could shift if employers decide to expand employer‑provided care as a cost‑management strategy, but outcomes will vary. If employers substitute in‑kind benefits for cash, providers contracted by employers could see increased business; if employers shift toward smaller cash allowances instead, demand patterns may differ.
Government enforcement and courts: The Department of Labor may need to issue clarifying guidance on what counts as "employer‑provided" care and how to document or value it. Disputes and litigation are possible, especially where valuation or classification is ambiguous (e.g., vouchers, third‑party reimbursements, or flexible‑spending arrangements).
Net effect: The change simplifies (for employers) the regular‑rate calculation by removing one benefit category, lowers employer overtime costs tied to dependent‑care benefits, and transfers some monetary value from overtime cash pay into in‑kind benefits for affected employees — with distributional tradeoffs and potential administrative and legal questions.