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Employment Blog

There's No Such Thing as a Free Lunch - Just Ask the Department of Labor

Authored by Ruder Ware Attorneys
Posted on April 12, 2013
Filed under Employment

A few days ago I was reading the Wall Street Journal and came across an interesting article about whether daily, fringe-benefit meals are taxable - a watered-down version of the article may be accessed here. Apparently (and probably not too surprising to most), the IRS is considering whether these free lunches are fringe benefits on which employees should pay additional tax. The article is interesting, but it doesn't address a related concern whether such meals must also be included in an employee's wages for purposes of calculating overtime compensation.

Significantly, according to the federal Department of Labor, "[u]nder the FLSA [federal Fair Labor Standards Act], board [meals] customarily [regularly] furnished by the employer to his or her employees are considered wages under certain circumstances. The payment of wages as goods or services is allowed under the FLSA and applies to situations where board [is] furnished by the employer to the employee in addition to stipulated wages." In these circumstances, the reasonable cost or the fair value of the goods, or of furnishing the facilities must be added to the employee's cash wages before determining the regular rate of pay.

The requirement to include the reasonable cost/fair value of employer-furnished meals in an employee's "regular rate of pay" is often missed by employers when calculating overtime compensation. Employers who are aware of the requirement often have difficulty wading through the regulations governing the proper calculation. I guess it's true, it is becoming more difficult to find a good, inexpensive meal!